Maurice Blackburn

Redundancy law can be very confusing.

Redundancy law has recently changed as a result of the new provisions of the Fair Work Act. It remains a complex area. Maurice Blackburn conducted the leading redundancy pay case in Australia in recent years, Riverwood International Australia v McCormick, successfully proving that an employee could recover redundancy pay contained in a company policy.

What should you do if you are made redundant?

If you have been made redundant or are facing redundancy, you should seek the advice of a lawyer.  You may have rights to challenge the decision by the employer to declare your position redundant, or a right to refuse a position that is offered to you.  You should ensure that you receive all your statutory and contractual entitlements to notice, leave and redundancy pay.

The basis for the payments that the employer propose to make to you should be checked to ensure that you are paid the correct amount and that any non salary rights (such as bonuses or share options) are paid.

Maurice Blackburn has won significant redundancy payments for many workers. We successfully conducted the leading Australian case about redundancy pay under employment contracts.

If you are facing a redundancy you can contact Maurice Blackburn immediately on 1800 810 856. Our specialist redundancy lawyers are able to guide you through the redundancy process to ensure your rights are protected.

What is a redundancy?

An employee is said to be "redundant" when an employer decides that it no longer want the employee's job to be done by anyone. The key to a redundancy is the job not the individual employee.

A redundancy may occur for a number of reasons such as-

• closure of a business
• introduction of new technology
• an internal re-structure
• outsourcing, or
• sale or merger of business.

Who is entitled to redundancy pay?

With the introduction on 1 January 2010 of the National Employment Standards (NES) under the Fair Work Act 2009, most employees will have an entitlement to a redundancy payment.

Many employees may also have an entitlement to redundancy pay arising out of the terms of:

• an award
• an enterprise agreement
• an Australian Workplace Agreement (AWA) or other statutory agreement
• a contract of employment, or
• a company policy.

If you are employed by a partnership or a state government department, you may also have a right to redundancy pay under state legislation.

Who is not entitled to redundancy pay?

Under the NES, the following persons are not entitled to redundancy pay:

• employees of a business which has fewer than 15 employees
• people employed on a casual basis
• people employed on a fixed term contract
• where the termination results from the 'ordinary and customary turnover of labour', and
• apprentices.

What entitlements does an employee who is made redundant have?

Redundancy pay comprises notice and redundancy pay.

Notice

The NES sets out the minimum amount of notice to be given to an employee if they have been made redundant:

If you are over 45 with a minimum of 2 years service, the period is increased by 1 week.

A contract, employer policy, award or industrial agreement may give a longer period of notice.

The employer may elect to pay the employee instead of asking them to work the period of notice.

Redundancy pay

The purpose of redundancy pay (also called 'severance pay') is to compensate an employee whose job has become redundant for things such as lost personal leave (including sick and carer's leave) and long service leave, as well as for the inconvenience and hardship imposed on the employee.  This may include compensating for things such as loss of seniority, loss of security of employment and other kinds of losses.

Where an employee is entitled to redundancy pay, it should be paid in addition to notice of termination or pay in lieu of notice.

The NES sets out the minimum amount of redundancy pay to be paid to an employee who is made redundant-

However, the length of service of an employee is calculated from 1 January 2010, unless the employee had an existing right to redundancy before 1 January 2010.

Example- John commenced worked for Acme Tools in June 2006.  He was not covered by an award or an industrial agreement.  His contract did not give him a right to redundancy payments.  He is therefore only entitled to redundancy pay from 1 January 2010.  John is made redundant by Acme in August 2012. , He receives 6 weeks redundancy pay, for the 2 years and 8 months service from 1 January 2010 to August 2012.

A contract, company policy, award or industrial agreement may give a greater amount of redundancy pay.

Other payments

An employee who is made redundant is also entitled to receive a payment equivalent to any accrued annual leave.  Some employees may also be entitled to long service leave and sick leave.

Transfer of business

There are complex laws that govern the situation where a business is sold.

In most circumstances, if an employee accepts a job with the new employer, the employee is not entitled to redundancy payments from the old employer. Service with the old employer may be recognised for the purpose of long service and other entitlements.

However each situation is different and employees should seek the advice of a lawyer if faced with a transfer of employment from one business to another.