What happens to redundancy rights when employees accept jobs with a new contractor?
The Fair Work Commission (FWC) recently dealt with a dispute over whether workers were entitled to redundancy payments after their employer lost a major retail service contract and they took up employment with the new contractor.
The union representing 25 transport drivers argued their positions became redundant when their employer decided not to renew its contract with a major retailer.
While the drivers had started new jobs with the incoming contractor, the union sought redundancy payments because the new employer didn't recognise their previous service.
The case focused on whether the employer's decision not to renew its retail contract triggered redundancy entitlements under the enterprise agreement, and whether the employer met its consultation obligations during this transition.
The Transport Workers' Union applied to the FWC under section 739 of the Fair Work Act 2009, citing the enterprise agreement's dispute resolution procedure.
The agreement defined redundancy as occurring when the employer "decides that it no longer requires the position" of an employee, and that decision "leads to the termination" of employment.
By mid-February 2024, all 25 drivers had accepted employment with the new contractor. The employer's operations manager showed evidence of upcoming work opportunities, including nine roles under a current fuels contract and several others under gas, chemicals and plastics contracts. A new retail contract was also due to start in July 2024.
The human resources vice president testified about workplace communication, saying: "On 27 February 2024, there was work available for all of [the affected workers]." The company had arranged for employees to do online training at an alternative site.
The company's human resources vice president gave evidence that the drivers' employment contracts identified them as "Driver Grade 6" positions. These contracts enabled reasonable changes to work location and allowed related entities to be the employing entity.
The union organiser provided evidence that "[The employer] then proceeded to make 16 of the 20 employees redundant and directed the other 4 to take up the redeployment positions." The union argued this showed there was no work available.
The Commission found: "The positions of the Relevant Employees under their contracts of employment were general grade 6 driver positions. They were of wide scope. It is very clear that these positions were not ones that were linked to [the retail] contract or to any of the distribution centres."
In its decision, the Commission explained: "Even if there had been no work available for [the workers] on 27 February 2024, that would not mean that [the employer] must be taken to have decided that it did not require their positions. [The employer] could legitimately have continued to require the positions while it worked out what to do with the employees."
The Commission determined that employment ended when the drivers started their new jobs: "An employee who does not turn up for work and instead goes to work for a new employer thereby ends one employment and starts another. It is the exemplar of an employee's termination of employment by conduct."
The FWC ultimately determined that no redundancy occurred within the meaning of the enterprise agreement, and therefore the drivers were not entitled to severance payments. It found that the employer had not failed to observe its consultation obligations under the agreement.
The Commission noted that "The evidence shows that the contract with [the retailer] ended, that [the workers'] contracts of employment were not tied to the [retail] contract but to the work of a grade 6 driver, that [the employer] is a large logistics company, and that it wanted to identify, and had identified, work that [the workers] could do."