Redundancy and Reasonable Notice

Two recent cases deal with

1. redundancy and

2. the concept of "reasonable notice" of termination.

Redundancy - Symons v Paperless Warehousing Pty Ltd [2022] FedCFamC2G 93

The question before the Court was whether Symons, the previous General Manager of Paperless Warehousing, had been terminated as a result of his underperformance and the breakdown of his relationship with his employer, or due to Paperless Warehousing no longer requiring the functions of Symons’ role to be performed by anyone. If the latter was established, Symons would be entitled to redundancy pay under section 119 of the Fair Work Act 2009 (Cth) (FW Act).

Section 119 sets out minimum redundancy pay entitlements for employees based on the employee’s period of continuous service.

The Court helpfully distilled the requirements to be satisfied to give rise to a redundancy payment under the FW Act as follows: [77] Whether an employer’s termination of an employee’s employment gives rise to an employee’s becoming entitled under s 119(1)(a) of the FW Act to a “redundancy payment” provided for by s 119(2), therefore, depends on whether the person claiming the employee became so entitled proves the following:

1. The employer had required the employee to do a job (job in question). Proof of this element requires the identification of the functions, duties, and responsibilities the employer had entrusted, as part of the scheme of the employer’s organisation, to the employee.

2. The employer had knowledge of the functions, duties, and responsibilities that comprised the job in question. Without such knowledge, it would not be possible to prove the employer terminated the employment of the person who did the job in question because the employer no longer required the job be done by anyone.

3. By the time the employer decided to terminate the employee’s employment, the employer formed the view that he or she no longer required anyone to do the job in question.

4. The employer terminated the employee’s employment for the reason that the employer no longer required anyone to do the job in question, or for reasons that included as a substantial and operative factor the employer’s no longer requiring anyone to do the job in question.

In finding that Symons was entitled to redundancy pay, the Court noted that Paperless Warehousing had no intention to hire a new employee to replace Symons, nor intended to redistribute Symons’ responsibilities to other employees.

Reasonable Notice - Ostle v Wilson Mining Pty Ltd [2022] FedCFamC2G 109

Ostle commenced employment with Wilson Mining in 1995.

Ostle’s employment agreement was verbal; he never signed a written employment contract.

In 2019, after 24 years of service, Ostle accepted a redundancy of his position, receiving 8 weeks’ pay in lieu of notice and a redundancy payment of 12 weeks. The legality of the redundancy was not in dispute.

Ostle argued that it was an implied term in his undocumented employment contract of employment that he was entitled to ‘reasonable notice’ of 12 months.

In response, Wilson Mining contended that section 117 of the FW Act excludes or displaces the implied term of reasonable notice.

Section 117 sets out sets out minimum notice of termination entitlements for employees based on the employee’s period of continuous service.

The Court included the following extract from McAlister v Yarra Australia Pty Ltd [2021] FCCA 1409, which it described as a “very well researched and reasoned judgement that canvasses the relevant principles and decisions”, in setting out what it considered to be the correct approach regarding reasonable notice:

“[205] The Court respectfully agrees with the comments in McGowan and Guthrie, that it is doubtful that Parliament intended that employees who served vastly different periods, such as 5 years as opposed to 20 years, would, by the enactment of s.117(2) be confined to receiving the exact same period of notice of termination, despite their widely different circumstances. (See also for example Stewart v Nickles [1999] FCA 888 where it was held that the then equivalent of s.117 (albeit couched in different terms) did not displace the more generous express contractual provision for termination by notice, nor an implied contractual provision for termination by reasonable notice. ….

……

[207] As such, s.117 of the FWA does not displace the common law term of reasonable notice, such term being implied by law.”

Following this reasoning, the Court held:

“Accordingly, s 117 of the Act did not replace the implied condition of reasonable notice in the oral contract of employment between the applicant and the respondent. Rather, s 117 of the Act is a safety net for contractual employment and creates a minimum entitlement under the Act.”

In determining the quantum of reasonable notice which was payable to Ostle, the Court considered his extended period of employment, high salary, and the absence of any evidence that he performed his duties poorly. The Court ultimately determined that ‘reasonable notice’ was 6 months.

This decision confirms the importance of ensuring employees are subject to written employment contracts which include an agreed notice of termination period.