1
Fair Work Act 2009
s.739 - Application to deal with a dispute
Mr Edward Kilsby
v
MSS Security Pty Ltd T/A MSS Security
(C2014/1286)
COMMISSIONER SPENCER BRISBANE, 21 NOVEMBER 2014
Alleged dispute about any matters arising under the enterprise agreement and the NES;
clause 2.7(b)(iii) and s.119(1)(a) - redundancy - loss of contract - when ordinary and
customary turnover of labour - no redundancy payment
Introduction
[1] Mr Edward Kilsby (the Applicant) made an application pursuant to section 739 of the
Fair Work Act 2009 (the Act) claiming that he was entitled to redundancy payment (4 weeks
severance) as a result of the termination of his employment by MSS Security Pty Ltd (the
Respondent). The Applicant argued that his job had been made redundant and therefore he
was entitled to redundancy pay.
[2] The Respondent relied on clause 2.7 - Change of Contract in the MSS Security
Enterprise Agreement (QLD) 2011-2014 (the Agreement), clause 12.5 - Change of contract in
the Security Services Industry Award 2010 MA000016 (the Award) and section 119(1)(a) of
the Act, to argue that no redundancy payment was due, given that the Applicant’s termination
of employment occurred as a result of the Respondent not being successful in attaining the
new security contract at the Mackay Airport. The Respondent argued that the dismissal was
due to the loss of the contract and therefore, the “ordinary and customary turnover of labour”
as per the exception in s.119(1)(a) was applicable. The Respondent submitted it operated in an
industry that relied upon periodically rotating contracts, and in such circumstances, the
Respondent submitted, it was exempt from the obligation to make redundancy payments in
relation to the Applicant’s case.
[3] A conference was held and the Applicant sought a determination of the matter.
Directions were set for the provision of materials. A further conference was held and the
parties consented to the matter being determined on the papers.
Relevant legislative and agreement provisions
[4] Section 739 of the Act is as follows:
“739 Disputes dealt with by the FWC
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DECISION
E AUSTRALIA FairWork Commission
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(1) This section applies if a term referred to in section 738 requires or allows the FWC
to deal with a dispute.
(2) The FWC must not deal with a dispute to the extent that the dispute is about
whether an employer had reasonable business grounds under subsection 65(5) or
76(4), unless:
(a) the parties have agreed in a contract of employment, enterprise agreement
or other written agreement to the FWC dealing with the matter; or
(b) a determination under the Public Service Act 1999 authorises the FWC to
deal with the matter.
Note: This does not prevent the FWC from dealing with a dispute relating to a term of
an enterprise agreement that has the same (or substantially the same) effect as
subsection 65(5) or 76(4) (see also subsection 55(5)).
(3) In dealing with a dispute, the FWC must not exercise any powers limited by the
term.
(4) If, in accordance with the term, the parties have agreed that the FWC may
arbitrate (however described) the dispute, the FWC may do so.
Note: The FWC may also deal with a dispute by mediation or conciliation, or by
making a recommendation or expressing an opinion (see subsection 595(2)).
(5) Despite subsection (4), the FWC must not make a decision that is inconsistent with
this Act, or a fair work instrument that applies to the parties.
(6) The FWC may deal with a dispute only on application by a party to the dispute.”
[5] Section 119 of the Act, relating to redundancy pay, is relevantly extracted as follows:
“119 Redundancy pay
Entitlement to redundancy pay
(1) An employee is entitled to be paid redundancy pay by the employer if the
employee’s employment is terminated:
(a) at the employer’s initiative because the employer no longer requires the job
done by the employee to be done by anyone, except where this is due to the
ordinary and customary turnover of labour; or
(b) because of the insolvency or bankruptcy of the employer.
Note: Sections 121, 122 and 123 describe situations in which the employee does not
have this entitlement.
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Amount of redundancy pay
(2) ...”
(emphasis added).
[6] Section 121 provides for situations where an employee is not entitled to redundancy
pay as follows:
“121 Exclusions from obligation to pay redundancy pay
(1) Section 119 does not apply to the termination of an employee’s employment if,
immediately before the time of the termination, or at the time when the person was
given notice of the termination as described in subsection 117(1) (whichever happened
first):
(a) the employee’s period of continuous service with the employer is less than
12 months; or
(b) the employer is a small business employer.
(2) A modern award may include a term specifying other situations in which
section 119 does not apply to the termination of an employee’s employment.
(3) If a modern award that is in operation includes such a term (the award term), an
enterprise agreement may:
(a) incorporate the award term by reference (and as in force from time to time)
into the enterprise agreement; and
(b) provide that the incorporated term covers some or all of the employees who
are also covered by the award term.”
[7] Clause 2.7 of the Agreement, relating to changes of contract, is as follows:
“2.7 Change of Contract
(a) This clause applies in addition to clause 6.11 of this agreement and s.120(1)(b)(i)
of the NES, and applies on the change of contractor who provides security services to
a particular client from one security contractor (the outgoing contractor) to another
(the incoming contractor).
(b) Section 119 of the NES does not apply to an employee of the outgoing contractor
where;
i. The employee of the outgoing contractor agrees to other acceptable
employment with the incoming contractor.
ii. The outgoing contractor has paid to the employee all the employee’s
accrued statutory entitlements on termination of the employee’s employment.
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iii. To avoid doubt, s.119 of the NES does not apply to an employee of an
outgoing contractor where the employee is not offered acceptable employment
with either the outgoing contractor or the incoming contractor,”
[8] The above clause was the subject of an undertaking for the approval of the agreement.
Attached to the Agreement, in the form of a letter dated 29 July 2011, the relevant
undertaking provides as follows:
“Clause 2.7(b)(iii) Change of Contract
To avoid doubt, s.119 of the NES does apply to an employee of an outgoing contractor
where the employee is not offered acceptable employment with either the outgoing
contractor or the incoming contractor.”
(emphasis added).
[9] The undertaking operates to provide clarity, such that clause 2.7 of the Agreement
mirrors clause 12.5 of the Security Services Industry Award 2010 MA000016 (the Award) (via
the addition in the undertaking of the same provision as clause 12.5(c)) as follows:
“12.5 Change of contract
[12.5 varied by PR994514 from 01Jan10]
(a) This clause applies in addition to clause 8—Consultation of this award and
s.120(1)(b)(i) of the Act, and applies on the change to the contractor who provides
security services to a particular client from one security contractor (the outgoing
contractor) to another (the incoming contractor).
(b) Section 119 of the Act does not apply to an employee of the outgoing contractor
where:
(i) the employee of the outgoing contractor agrees to other acceptable
employment with the incoming contractor; and
(ii) the outgoing contractor has paid to the employee all of the employee’s
accrued statutory and award entitlements on termination of the employee’s
employment.
(c) To avoid doubt, s.119 of the Act does apply to an employee of an outgoing
contractor where the employee is not offered acceptable employment with either the
outgoing contractor or the incoming contractor.”
Background and Summary of Submissions
[10] The Applicant was employed on 1 February 2013 by the Respondent at Mackay
Airport (on a part-time basis at Level 2), this being the only contract held by the Respondent
in Mackay. The Applicant was notified on 23 April 2014 that the Respondent had been
unsuccessful on re-tendering for the new contract.
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[11] The Respondent argued that these circumstances, whereby the redundancy resulted
from the loss of the contract, clearly fell within the definition of the “ordinary and customary
turnover of labour”, as per s.119(1)(a) of the Act; and as reinforced by clause 2.7 Change of
Contract, in the Agreement.
[12] The Respondent relied on a previous “Investigation and Finalisation” report made by
the Fair Work Ombudsman (FWO), provided as evidence in this matter. The Respondent
explained that the investigation was into similar circumstances by the FWO. In those
circumstances, MSS Security had also lost a contract and it was determined by FWO that the
employees' employment was terminated due to the “ordinary and customary turnover of
labour” (as per s.119(1)(a)) and that in those circumstances redundancy entitlements were not
payable (as per s.119(2)).
[13] The Respondent stated that they had offered the only alternative positions available to
the Applicant and submitted that acceptable employment was offered to the Applicant. These
positions were on similar duties and included permanent and casual roles, two of which were
paid at a higher rate of remuneration, but located outside Mackay, where the Respondent had
other contracts.
[14] The Applicant, in his submissions, provided a list of alternative sites which were
available for him to be redeployed to. This included:
“a) Rolleston – Level 4: $33.42/hour
b) Gladstone – Levels 1 – 3: $18.60 - $19.47
c) Proserpine Airport – Level 2: $19.12
d) Brisbane Airport – Level 2: $19.12
e) Rockhampton Airport – Level 2: $19.12”
[15] The Applicant argued that, given that the alternative positions available to him on
suitable duties were a significant geographical distance from his residence and that this would
unreasonably impact on his domestic and residential situation, the alternative positions were
unsuitable.
[16] The Respondent submitted that the Rolleston position offered to the Applicant was a
drive in, drive out position, based on a seven days on, seven days off roster, which would not
have required relocation. However, it is recognised, as the Applicant argued, that there would
be significant periods of driving involved.
[17] The Respondent submitted that the Applicant was aware that his employment was
dependent upon the retention of the Mackay Airport contract, by the Respondent. Further, it
was submitted that the Applicant was aware of the nature of the industry and of the Mackay
Airport contract, via his employment with the previous outgoing contractor (ISS Security) at
the time of the February 2013 contract transition, when he then gained employment with MSS
Security.
[18] The Respondent submitted that events leading up to the contract commencement by
MSS Security, resulted in it being common knowledge that the contract would go out to
tender again due to the screening authority changing in the future. It was submitted that the
Respondent’s representatives; the General Manager Aviation, the Qantas Contract Manager
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and the Aviation Services Manager QLD & NT, visited Mackay airport shortly after the
contract commenced and engaged in discussions with employees (including the Applicant) to
update them that the contract would be re-tendered for.
[19] It was submitted by the Respondent that the Applicant’s contract of employment
clearly outlined that the Act does not provide an entitlement to redundancy pay if employment
ends because of the loss of contract. The Letter of Appointment filed with the application and
signed by the Applicant on 10 January 2013 states:
“…Your employment with the Company in a part-time position will be dependent upon
the Company retaining the contract with its client to provide security services at the
site where you work.
In the event that the Company loses a contract to provide security services where you
are working and has no comparable position to transfer you to, your position with the
Company will be terminated in accordance with provisions set out in the Security
Service Industry Award 2010 or applicable Industrial Instrument.
Job losses due to loss of contract are part of the ordinary and customary turnover of
labour in the Company’s business. The Fair Work Act does not provide an entitlement
to redundancy pay if your employment ends because of loss of contract.
By signing this agreement you specifically acknowledge that you understand this, and
accept this as a term of your contract of employment…”
[20] The Applicant was also issued (on engagement) with the company policy “Employee
Standing Instructions”, which sets out that, where a loss of contract leads to termination, this
is ordinary and customary turnover of labour within the Respondent’s business and there is no
entitlement to redundancy pay. The Respondent provided the following extract from the MSS
Security - Employee Standing Instructions - 2012:
“7.5.2 Transfer, Location and Classification
As an employee of MSS Security, you are employed as a condition of employment to
perform a wide range of duties (such as crowd control, guarding, concierge, events
etc.) at any site (except employees on fixed contracts of employment) at which MSS
Security has a contract to provide services. The business of MSS Security depends on
the holding and performance of such contracts.
In the event that MSS Security loses a contract to provide services where you are
working and has no comparable position to transfer you to, your position with the
Company will be terminated in accordance with provisions set out in the Security
Services Industry Award 2010 or applicable Industrial Instrument.
In the circumstances of this ordinary and customary turnover of labour within the
MSS Security business, where your employment ends because of the loss of a contract;
you will not be entitled to redundancy pay, as per Section 119 of the Fair Work Act
2009.
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Your rate of pay and conditions as an employee shall be those applying to the duties
you perform from time to time and may change according to your new assignments.”
(emphasis added).
Consideration
[21] The undertaking in clause 2.7(b)(iii) of the Agreement states that s.119 of the Act does
apply to an employee of an outgoing contractor where the employee is not offered acceptable
employment, with either the outgoing contractor or the incoming contractor (emphasis added).
This undertaking reflects clause 12.5(c) of the Security Services Industry Award 2010.
[22] The Applicant submitted he was not offered acceptable alternative employment. On
the material provided, it is accepted that the Applicant was not offered acceptable
employment.
[23] In accordance with clause 2.7 of the Agreement (as amended by the undertaking),
s.119 of the Act does apply to the Applicant. As stated, section 119 provides that redundancy
pay is not payable where the termination of employment is due to the ordinary and customary
turnover of labour. It is noted that there is a tension between the legislative provisions
providing severance payments for those employees who have been made redundant, but not
providing such for those employees caught by the exception, where the redundancy is due to
the “ordinary and customary turnover of labour”. This term “ordinary and customary turnover
of labour” in the exception is not separately defined in the Act.
[24] There is also a minimum of case law arising from the Federal Commission on the
application of the exception in s.119(1)(a) of the Act. The State Tribunals have provided some
consideration of the same term of “ordinary and customary turnover of labour” in relation to
severance payments.
[25] In terms of the ordinary and customary turnover of labour and the impact on
redundancy payments, the following extract from the Queensland Industrial Relations
Commission (QIRC) decision Automotive, Metals, Engineering, Printing and Kindred
Industries Industrial Union of Employees, Queensland AND James Engineering Pty Limited
(Nos. W141, W142 and W144 of 2000)i cited the origins of the term as per the 1984
Termination, Change and Redundancy Case in the federal jurisdictionii as follows:
“In the Supplementary Test Case decision (9 IR 115 at 128) a Full Bench of the
Australian Industrial Relations Commission explains the reasons for including the
expression “ordinary and customary turnover of labour” in the original Test Case
decision. In so doing, they expressly adopted the words of the Fisher J., the President
of the Industrial Commission of New South Wales, which were formulated and
explained in SDEA (NSW) v Countdown Stores (1983) 7 IR 273 at 277-278, as
follows:–
“There is of course in industry and always has been a general turnover of
labour. It has been customary for employees’ services to be dispensed with
because it is the view of management that they are in some way less than
satisfactory employees, not appropriately skilled, not appropriately motivated,
unreliable or exhibiting other forms of unhelpful conduct in an industrial
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context, but not amounting to misconduct. Many employees, particularly in the
building construction, contracting and sub-contracting industries are employed
on terms which contemplate intermittency in employment. Provisions for
compensating for holidays and annual leave by making an allowance in the
calculation of hourly or weekly rates of pay are often made. Many awards
contain a specific factor to compensate for ‘following the job’, ie., for
intermittency in employment when one job cuts out and another has to be
obtained. Payments on severance would appear to be inappropriate to these
circumstances and may contain an element of double counting. (See Australian
Workers’ Union v. Victorian Employers Federation (Print D6429).)
Similarly employees have at the height of economic prosperity been dismissed
because of seasonal shifts in markets, loss of contracts or changes in contracts
not relating to recession, changes in model or product, shifts in marketing
emphasis and many other day to day causes removed from the present
recession and its mounting toll of unemployment. All these employees are
dismissed, almost invariably upon notice. If redundancy or severance payments
applied generally to them a significant charge would apply to the turnover of
labour generally. This would involve a major shift in the principles normally
applied by this and other industrial tribunals to retrenchment situations. These
types of dismissals contrast with dismissals which do not arise in any way from
the behaviour of the employee or from ordinary changes in the incidents of
employment, but where the employee is dismissed on a collective basis along
with others and where the reason for dismissals lies in the force of adverse
economic circumstances, restricting employment opportunities and resulting in
collective redundancies. Dismissals arising out of technological change or out
of major company restructuring have similar characteristics.”
(emphasis added).
[26] The applicable provision under consideration at the time, including the term “ordinary
and customary turnover of labour” was contained in the declaration of policy of Termination
of Employment, Introduction of Changes, Redundancy contained in a Full Bench Decision of
the Industrial Conciliation and Arbitration Commission of Queensland (ICACQ)iii. It was also
observediv that the ICACQ adopted the reasons and decision of the 1984 Termination, Change
and Redundancy Casev. The ICACQ declaration provided in clause C(6), that “an employee
whose employment is terminated for reasons set out in subclause 1 hereof shall be entitled to
the following amounts of severance pay...”vi. Clause C(1)(a) contains the exception as follows:
“...Where an Employer has made a definite decision that he/she no longer wishes the
job the employee has been doing to be done by anyone, and this is not due to the
ordinary and customary turnover of labour, and that decision may lead to termination
of employment, the Employer shall hold discussions with the employees directly
affected and where relevant, their Union or Unions.”vii
(emphasis added).
[27] The Full Bench in the 1984 Termination, Change and Redundancy Case
Supplementary Decisionviii further stated that severance was not applicable, in relation to
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circumstances of “ordinary and customary turnover of labour” where it was a ‘normal feature
of business’, as follows:
“The employers submitted that the redundancy provisions should not apply to
termination of employment "associated with the general turnover of labour or a
seasonal downturn within the industry or reclassification or alteration of working
conditions." All these expressions were opposed by the ACTU because they would cut
down unreasonably the redundancy provisions, they were uncertain as to meaning and
they were not justified by the argument.
In our decision at 556 we made reference to a number of definitions of redundancy
and our draft order was based on the definition of the Chief Justice, Mr Justice Bray,
in the South Australian Supreme Court. Further, at page 33 of the decision we decided
that there should not be any fundamental distinction, in principle, based on the causes
of redundancy. Nevertheless, it was not our intention that the redundancy provisions
should apply to the "ordinary and customary turnover of labour"; an expression used
by Mr Justice Fisher in his decision related to the Employment Protection Act in New
South Wales (1983) 7 IR 273
However, notwithstanding the helpful submissions of the parties in these proceedings,
we have some difficulty in finding a suitable expression to make our intention clear.
There is no doubt that we did not intend the redundancy provisions to apply where an
employee is dismissed for reasons relating to his/her performance, or where
termination is due to a normal feature of a business.
Furthermore, there is an overlap between the definition of redundancy for the purposes
of any award and the categories of employees exempted from severance pay. To some
extent the same can be said for the provisions relating to the introduction of change.
In the circumstances, we are prepared to provide that the redundancy provisions shall
not apply where the termination of employment is "due to the ordinary and customary
turnover of labour" but we will not include the other categories referred to by the
employers.”
(emphasis added).
[28] The 2004 Australian Industrial Relations Commission (AIRC) Redundancy Caseix did
not deal with the exception to pay redundancy in terms of “ordinary and customary turnover
of labour”.
[29] Whilst there is limited case authority on the exception to redundancy payments based
on the “ordinary and customary turnover of labour”, the following decisions have dealt with
the issue and are relevant to the current circumstances.
[30] A Full Bench of the New South Wales Industrial Relations Commission, in Fashion
Fair Pty Ltd v The Department of Industrial Relations (Inspector Rouse)x, stated that the
reason for the loss of the contract was relevant in considering “ordinary and customary
turnover of labour”xi, as follows:
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“The concept of "the ordinary and customary turnover of labour" has been considered
in subsequent cases. It has frequently been observed that whether an entitlement to
redundancy or severance pay accrues upon termination depends upon whether there
was "settled" expectation of continued employment or whether the employees were
aware that their employment was for a specified period or task...
It is necessary to examine the circumstances of each case and the course of the
dismissals (and also the cause of any loss of contract) to determine if the dismissals
were truly part of the ordinary and customary turnover of labour.”
[31] The Respondent stated that it was a common feature of their work in the security
services industry that the regular turnover of business contracts required the Respondent to
terminate staff on the basis of winning and losing such business contracts. The Applicant
submitted that mismanagement of MSS Security at Mackay Airport may have “played a large
part” in the Respondent not retaining the contract, and as such, the loss of contract was in
their control. There was no evidence of such. The Respondent submitted that the loss of
contract was not related to contractual performance or deficiencies and the new contract was
awarded to another company on the basis of cost, as the incoming contractor was able to
provide a “bundle” of security services.
[32] In relation to the information provided to the Applicant on engagement, the
Respondent submitted that company representatives of the Respondent engaged in general
discussion with employees, shortly after the contract at Mackay Airport commenced and
indicated that the contract would be re-tendered for. The intention of the Respondent to
maintain the contract is evidenced by such. I am satisfied that the loss of contract was not in
the control of or caused by the Respondent.
[33] In further examining the term “ordinary and customary turnover of labour” in DIR v
Delaware North (Australia) Pty Ltdxii, Commissioner Bloomfield (as he then was), of the
QIRC, held that it was relevant that the employees in that case understood that their continued
employment was dependent upon their employer retaining a contract.
[34] The Applicant was aware at the commencement of employment, as per his Letter of
Appointment (as previously set out), that, should the Respondent lose the contract at Mackay
Airport and an alternative or “comparable” position not be available, his employment would
be terminated and he would not be entitled to a redundancy payment. It is clear from the
Letter, and also the “Employee Standing Instructions”, that the Applicant was aware his
employment was dependent upon the Respondent retaining the contract.
[35] The Applicant had been employed by the Respondent for just less than 15 months
when he was notified that the Respondent had lost the Mackay Airport contract. The
Applicant was aware of the operation of the Mackay Airport contract, due to his previous
employment with ISS Security (the outgoing contractor) at Mackay Airport, following which
his employment with MSS Security commenced.
[36] Commissioner Lawson in A Garcia, J Mukevski and D Petreski v Limro Pty Ltdxiii
dealt with the termination of three employees; “The circumstances surrounding the respective
terminations arise from a single event - the loss by the Respondent of part of a cleaning
contract”xiv.
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[37] Commissioner Lawson referred to the issue of “ordinary and customary turnover of
labour” in this matter, where each of the employees was long serving and the employer had
failed to provide any evidence of efforts made to redeploy the applicants, within its total
workforce, via alternative contracts it held. As to the entitlements of employees to severance
payments, in these circumstances, Lawson C stated as followsxv:
“The second issue of relevance under s.170CE(3)(e) is the entitlement of the
applicants to award severance pay. There is so (sic) disagreement that each of the
applicants were long-serving full-time employees, each with 12-13 years of service
with the employer, and that their employment was governed by the Cleaning (Building
and Property Services)(ACT) Award 1998 [Print Q2605]. The relevant redundancy
clause provides:
“19.1 Definition
“Redundancy occurs when an employer decides that the employer no longer
wishes the job the employee has been doing to be done by anyone and this is
not due to the ordinary and customary turnover of labour.”
What is in dispute in the current matter is the interpretation to be given to the words
“... and this is not due to the ordinary and customary turnover of labour”. The
Commission was made aware of the history of a disagreement between the union and
the relevant industry organisation - the “Australian Building Services Association”
(ABSA) - since 2001 over the meaning and application of the disputed words. The
union’s views were adequately spelt out in its correspondence to the ABSA dated 25
September 2001 (attachment B to Ms Berry’s statement; Ex W4) in which the union
gave a number of examples of the application of clause 19 of the award, including “....
where a cleaning contract is lost and employees are terminated as a result.” In a
reply dated 18 October 2001, ABSA (attachment C to Ex W4) notified the union of its
view “.. where an employer does not have a contract renewed and is unable to place
the employees associated with the contract in other employment, the termination of the
employment of those people is clearly part of “ordinary and customary turnover ...”.
ABSA went on to give as an example of that situation “.... where a client terminates a
contract.”
To the Commission’s knowledge the interpretative impasse remains. I was not taken
to any authorities which gave clarity to the impasse. In those circumstances I consider
the view of DP Sams in Huseyin Arslan to be apposite: in a contemporary industrial
environment employees with many years service with the same employer should not
be denied the same rights as other employees which are guaranteed through test case
standards. In my view clause 19 of the award obliged the respondent to make certain
payments in the event of redundancy. The respondent failed to do so. When applied
to the circumstances of the current applications, the terminations of employment -
while for a valid reason in each case as discussed above - were harsh, unjust and
unreasonable because of unfair treatment meted out to them as a consequence of the
loss of part of a contract; the failure to explore genuine alternative employment; and
failure to provide reasonable standards of redundancy benefits.
I do not regard these terminations as falling within the definition of “ordinary and
customary turnover of labour”.”
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(emphasis added).
[38] Justice Haylen of the Industrial Court of New South Wales considered the exception in
s.119(1)(a) of the Act in the matter of Transport Workers' Union v Veolia Environmental
Service (Australia) Pty Ltdxvi as follows:
“80 Senior counsel for the respondent accepted that, generally, the contract of
employment might be determinative of the issue of eligibility for redundancy. A
contract that was for a specified term without any provision for renewal or a contract
to perform work until a specific task was completed would not qualify. What then can
be said about Mr Latai's contract? There was no written contract and on the evidence it
cannot be accepted that the employment contract initially offered to him was limited to
the time that the Warringah contract held by the respondent expired. It is significant
that, during his employment, Mr Latai performed some work (although the extent of
that work is difficult to establish from the evidence) on other contracts for Hornsby
and Kuringgai. The performance of that work undermines the respondent's contention
that he was employed to work only on the Warringah contract and could not expect to
have a job at the end of that contract. Indeed, the respondent's own policy was to place
people in other work held by the company if they declined or were unsuccessful in
obtaining employment with a successor to a contract they had previously held. These
matters strongly suggest that the contract of employment taken up by Mr Latai was not
one limited in its term to work on the Warringah contract or limited by any notion of
the respondent successfully renewing that contract. Clearly, it was not a contract for
the performance of a specific task. From the available evidence it was, therefore, a
contract, ongoing in nature. Such a contract appears to be fundamentally inconsistent
with the class of work excluded from redundancy pay.
81 If the analysis looks more broadly and beyond establishing the terms of the
contract of employment (as do the employment protection cases generally), there are
aspects of Mr Roberts' evidence that are relevant as dealt with in [78].. It was the
respondent's practice to offer whatever employment was available to employees. In Mr
Latai's case that is exactly what happened with him performing work on the
Warringah, then Hornsby and Kuringgai and finally the Sydney City Council
contracts. The reason he was terminated when the City of Sydney contract ceased was
that, over a period of time, the company had experienced a falling away in the number
of contracts it held: where it had once held eight contracts operating at the same time,
when the Sydney City Council contract was lost the respondent company had only
three remaining continuing contracts. Mr Roberts said that if this diminution in overall
contracts had not occurred, Mr Latai would still be employed.
82 From this history, the Court is satisfied that over a period of 12 years (itself a
relevant and material consideration), Mr Latai was entitled to have a settled
expectation that his employment would be continuing and he had no reason to believe
that, simply because a Council contract was not renewed, he would thereby lose his
position with the respondent if working under that contract. The nature of the industry,
as demonstrated by the respondent's evidence, was that of gaining and losing contracts
and when Mr Latai was employed there was every prospect that, although one contract
may not be retained, other contracts may well be picked up in the tender process. Until
the respondent company began to lose the total number of contracts it held over the
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entirety of Mr Latai's employment, there was always an ability to place an employee
somewhere else within the respondent's business even though the contract on which
that person was working had been lost. That history tells strongly against this
employment being regarded as subject to a regular turnover such that an employee like
Mr Latai could not have any reasonable or settled expectation of continuing
employment. Indeed, in his working experience, it was quite to the contrary. Mr
Latai's employment history does not establish cyclical employment - a person entering
the employment of the respondent would not assume that employment was, to some
major degree, essentially short term or less secure than employment in industry
generally. Here, it was simply not customary to dismiss employees upon the loss of
contracts having regard to their service history. To use another word adopted by Fisher
P, here there was no obvious intermittency of employment.
83 In short, the following conclusions may be reached:
(a) Mr Latai was entitled to have a settled expectation of continuing employment and
that expectation increased with the length of his employment and his engagement on
other contract work held by the respondent;
(b) Mr Latai's employment was not seasonal or casual and he was not engaged for a
specific term or for a specific task. His rate of pay was not loaded for these elements
or in recognition of the intermittency of the employment;
(c) it was not customary for the respondent to dismiss people upon the loss of a
contract indeed, there was no evidence of employees being dismissed in such
circumstances.”
(emphasis added).
[39] This contrasts to the circumstances of the Applicant in the current matter, where the
Applicant’s employment was not lengthy (just over a year) and for the term of one contract;
and his employment was clearly subject to the turnover of the contract.
[40] In the DIR v Delaware North (Australia) Pty Ltd, Commissioner Bloomfield of the
QIRC further observed as follows:
“…The decisions of Fisher P in Walter Burnett, Glynn J in Spotless Catering and
Miller CIM in Spiljar v Chubb are to the effect that employees terminated upon the
loss of a periodically rotating contract (such as advertising, catering and security
contracts) are terminations within the ordinary and customary turnover of labour…
… the underlying and, in my view, critical, aspect is that AFS/Delaware is in the
contract catering business and its ability to engage and retain labour is always
dependent upon its ability to win or to hold catering contracts. If they lose a particular
contract, and are unable to relocate employees to another of their contracts, they must,
regrettably, terminate such employees. Termination in such circumstances is part of
the ordinary and customary turnover of its labour.”xvii
[41] In similar terms, the Respondent in the current matter operates in the security services
industry and lost the contract to provide services at Mackay Airport. The security services
[2014] FWC 7475
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industry was identified in DIR v Delaware North (Australia) Pty Ltd as an industry (similar
to the catering business) involving periodically rotating contracts, and one where terminations
due to the loss of such a contract, fall within the “ordinary and customary turnover of labour”.
In that decision, it was held to be important that employees had (as in the current matter) been
informed of the insecurity of their positions as linked to the renewal of contractsxviii.
[42] From the case law considered, the question of whether an employer will be exempt
from the redundancy provisions of an Award or Agreement, on the ground that the
termination is due to the “ordinary and customary turnover of labour”, turns on the facts and
circumstances of each case. The determination of each matter as to whether it represented an
“ordinary and customary turnover of labour” is reliant on the particular circumstances. This
case by case approach was reinforced by the Full Bench of the AIRC in Tempo Services
Limited v TM Klooger and othersxix. In terms of the facts and circumstances to be taken into
account in this decision, the length of the contract and employees’ service, and how the
contract came to an end were relevant as follows:
“[16] For the purposes of this matter, it is neither necessary nor appropriate that we
determine in any definitive way the meaning and effect of the expression “ordinary
and customary turnover of labour”. Each case depends upon its own circumstances.
It is sufficient that, in the particular circumstances of these applications, this was not
the cause of the terminations. The terminations were due to the fact that the appellant
handed in its cleaning contract. Bearing in mind the length of time that it had held that
contract and the length of service of each of the respondents, we cannot agree that the
Commissioner’s conclusion was not one that was open to him. It follows that we are
not able to discern any error in this respect that should be reviewed upon appeal.”
(emphasis added).
[43] In the first instance decision of the above Appeal casexx, Commissioner Redmond
found that the termination of employees was harsh, unjust or unreasonable based upon the
finding that the terminations were not due to the ordinary and customary turnover of labour
and that the employees were entitled to redundancy payments under the relevant Awardxxi.
The employees were terminated when the employer decided to ‘turn in’ (rather than a
situation of losing) the contract (underpinning their employment), and no longer required their
services or had an alternative job for the employees.
[44] In the matter currently before the Commission (as presently constituted), it has been
established that the Applicant’s employment was linked to the Respondent’s contract. The
Applicant had been employed on the Respondent’s only contract in Mackay. He had been
employed to undertake work in relation to this contract with the Respondent and had been
employed for just over one year. The Applicant was also aware that the contract was up for
renewal, the contract was not renewed and he was aware from the commencement of his
employment that his employment was dependent on the contract continuing. The
circumstances of the dismissal were related to the loss of the contract and not the “turning in”
of the contract nor due to a general economic downturn. It is also relevant that the Respondent
endeavoured to redeploy the Applicant. It is accepted that the alternative contracts (and hence
positions for the Applicant) were a significant distance away and would require the Applicant
to relocate or to spend a significant amount of time driving or living away from his domestic
situation.
[2014] FWC 7475
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Conclusion
[45] The case authorities state that a case by case approach, in terms of the application of
the exception in s.119(1)(a), is required. In this case, the circumstances of the Respondent’s
loss of contract accords with the exception in s.119(1)(a) of the Act, clause 2.7 of the
Agreement (and the associated undertaking), and the case law as discussed above. In
accordance with such, due to the ordinary and customary turnover of labour, the Respondent
is exempt on this basis, from the requirement to make redundancy payments.
[46] On the specific facts and circumstances of this matter including (but not exhaustively),
where:
the Applicant has been made aware in writing on engagement that his employment
was linked to the Respondent’s contract;
the Applicant had been advised of the insecurity of his employment, as linked to the
continuation of the contract;
when the Respondent confirmed to employees the contract was up for re-tender, they
confirmed the vulnerability of ongoing employment, as tied to the renewal of the
contract;
the ability of the Respondent to engage and retain labour was dependent upon its
ability to win or hold the contract;
the loss of the contract was not due to the Respondent turning it in or a general
economic downturn;
the period of employment was for just over a year; and
the Respondent offered alternative employment, however, no suitable alternative job
was available,
the Applicant is not entitled to a redundancy payment as per s.119(1)(a). These specific
circumstances represented the “ordinary and customary turnover of labour” as per the
exception to the payment of redundancy payment in s.119(1)(a). For the aforementioned
reasons, the application made pursuant to section 739 seeking redundancy payment is
dismissed.
[47] I Order accordingly.
FAIR WORK CO 1 SSION AUSTRALIA THE SEAS
[2014] FWC 7475
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COMMISSIONER
Printed by authority of the Commonwealth Government Printer
Price code C, PR556873
i Asbury C (as at that time) in Automotive, Metals, Engineering, Printing and Kindred Industries Industrial Union of
Employees, Queensland v James Engineering Pty Ltd [2000] QIRComm 163; 165 QGIG 279 (14 November 2000) at
page 280 - 281 (whilst this quote refers to the Australian Industrial Relations Commission, the 1984 Termination, Change
and Redundancy Case was decided by the Australian Conciliation and Arbitration Commission)
ii Termination, Change and Redundancy Case (1984) 8 IR 34 (2 August 1984) and the Supplementary Decision in
Termination, Change and Redundancy Case (1984) 9 IR 115 (14 December 1984)
iii (1987) 125 QGIG 1119-1121
iv Asbury C (as at that time) in Automotive, Metals, Engineering, Printing and Kindred Industries Industrial Union of
Employees, Queensland v James Engineering Pty Ltd [2000] QIRComm 163; 165 QGIG 279 (14 November 2000) at
page 280
v Termination, Change and Redundancy Case (1984) 9 IR 115 at page 128
vi (1987) 125 QGIG 1119-1121 at page 1121
vii (1987) 125 QGIG 1119-1121 at page 1120
viii Termination, Change and Redundancy Case (1984) 9 IR 115 at page 128
ix Giudice J, Ross VP, Smith C and Deegan C, Redundancy Case, PR032004, 26 March 2004.
x Fashion Fair Pty Ltd v The Department of Industrial Relations (Inspector Rouse) (1999) 92 IR 271 at page 280 - 281
xi As per cl 2(iv) of the Retail Industry (State) Redundancy Award 1995
xii Powell for the Department of Industrial Relations v Delaware North (Australia) Pty Ltd and Another [2002] QIRComm
180; 171 QGIG 395 (1 November 2002) at page 399
xiii A Garcia, J Mukevski and D Petreski v Limro Pty Ltd PR933625 [2003] AIRC 726 (27 June 2003)
xiv Ibid. at [1]
xv Ibid. at [29] - [32]
xvi Transport Workers' Union v Veolia Environmental Service (Australia) Pty Ltd [2013] NSWIRComm 22 at [80] - [83]
xvii Powell for the Department of Industrial Relations v Delaware North (Australia) Pty Ltd and Another [2002] QIRComm
180; 171 QGIG 395 (1 November 2002), at page 399
xviii Ibid.
xix Tempo Services Limited v TM Klooger and others PR953337 [2004] AIRC 1150 (19 November 2004) at [16]
xx T M Klooger, R L Klooger, B C Hutchison, L G Carling and J Velis v Tempo Services Limited - PR950776 [2004] AIRC
788 (12 August 2004)
xxi Cleaning (Building and Property Services) (ACT) Award 1998 [Print Q2605]
