The Full Bench of the Fair Work Commission has overturned an earlier decision regarding the definition of “ordinary and customary turnover of labour”, finding that a group of workers were not entitled to receive redundancy pay.
The Full Bench of the Fair Work Commission has overturned an earlier decision regarding the definition of “ordinary and customary turnover of labour”, finding that a group of workers were not entitled to receive redundancy pay.
Compass Group held contracts with the Department of Defence to provide catering and hospitality work for a number of years, with workers being specifically employed to work on particular contracts.
After deciding not to tender for replacement contracts with the Department of Defence, Compass Group terminated the employment of the employees who worked on those contracts. Compass Group refused to pay the employees redundancy pay as it argued that it was entitled to rely on a clause in the Enterprise Agreement which removed the requirement to pay redundancy entitlements where the end of employment is due to the “ordinary and customary turnover of labour”, which reflected section 119 of the Fair Work Act 2009 (Cth).
The National Union of Workers and the United Firefighters’ Union challenged Compass Group’s decision in the Fair Work Commission on behalf of eight workers who were refused redundancy pay. Commissioner Roe found that the employee’s contracts had been extended on a number of occasions and there was no provision which tied the duration of their employment to the duration of a particular Department of Defence contract. The Commissioner found that they therefore had a reasonable expectation of continuing employment and ordered Compass Group to make redundancy payments to the employees in accordance with the National Employment Standards.
Compass Group appealed the decision to the Full Bench of the Fair Work Commission as it routinely terminated the employment of employees in circumstances where the contract they were working on concluded. Compass Group produced evidence that in the past 12 months, 54% of its employees were dismissed at the end of the contract they were working on. As such, a requirement to make redundancy payments to these employees would represent a significant financial burden for Compass Group.
Decision
The Full Bench disagreed with Commissioner Roe’s decision and found that previous case law expressly stated that redundancy provisions were not to apply in the case of “ordinary and customary turnover of labour”. Whether a particular situation fell into this category was to be determined on the circumstances of each termination and each business.
It was found that it was Compass Group’s common practice to terminate the employment of employees when a contract is lost, especially Department of Defence contracts. Indeed, this was expressly stated in the employees’ contracts. The Full Bench said:
“The notion of employing employees for a particular contract implies a link between the contract and the employment. It carries with it the understanding that loss of the contract could lead to termination of the employment.”
The Full Bench therefore found that the employees’ termination was due to the “ordinary and customary turnover of labour”. As such, the employees were not entitled to redundancy pay.
