Redundancy Law in Victoria Introduction

Redundancy Law in Victoria
Introduction
Often, when an employee is informed that they are being made redundant, is to ask the question, “What is redundancy?” Most
employees have heard the term, but don’t understand the implications and furthermore, want to know, “What are my workplace
rights?”
What is Redundancy?
Redundancy is used to describe a “category of cessation or termination of employment” which is recognised as being quite
different from that of a termination of contract of employment in the normal and usual course of events.
A redundancy occurs when an employer terminates the employment because the employer:
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Does not require that job done by anyone; or
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Needs fewer people to do that type of job.
A dismissal for redundancy is not the result of any personal act or default of the employee dismissed or any consideration
peculiar to the employee, but because the employer no longer requires the job the employee has been doing to be continued.
Redundancies occur for a number of reasons, including:
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Closing all or part the business;
Selling the business;
Restructuring the business;
Outsourcing the relevant part of the business;
Reducing the number of employees; or
Introducing technological or organisational change.
Employer’s Obligations in Redundancy and Unfair Dismissal Matters Victoria
A range of legal obligations exist in the process of redundancy and these obligations vary from case to case and may be
contained in awards, agreements, employment contracts and other unfair dismissal legislation. However, employees do not
have any right to a redundancy payment. In Victoria, in order for an employee to have an entitlement to redundancy, the
employee must be subject to an Australian Workplace Agreement, a Certified Agreement, a Federal Award, an Industry Sector
Award, or a Victorian Common Rule Award.
If there is no award, agreement or written contractual term providing for redundancy, an employee may seek to rely on an
implied term in the contract of employment that incorporates a redundancy clause into his/her contract. This is usually
contained in the letter of appointment.
Who is entitled to Redundancy Payments?
Most employees will have an entitlement to a redundancy payment as set out by the National Employment Standard (NES)
provisions of the Fair Work Act 2009 (Cth). Many employees may also have an entitlement to redundancy pay arising out of the
terms of:
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An award;
An enterprise agreement;
An Australian Workplace Agreement (AWA) or other statutory agreement;
A contract of employment; and
A company policy.
Employees of the government or a partnership may also have a right to redundancy pay under the Fair Work Act 2009 (Cth).
Who is NOT entitled to a Redundancy Payment?
The following class of employees are not entitled to a redundancy payment:
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Employees of a business which has fewer than 15 employees;
Casual employees;
Employees on a fixed-term contract;
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Where the termination results from the ‘ordinary and customary turnover and labour; and
Apprentices.
Redundancy Payments
An employee’s rights and obligations may also extend to final redundancy payments, including:
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Consultation requirements with employee(s) and the Association;
Notice periods;
Unused annual leave;
Redundancy pay entitlements;
Additional termination pay;
Superannuation implications;
Severance pay (‘compensation for the loss of a job, the corresponding loss of opportunity to earn an income, and the
associated trauma’);
Unused rostered days off or time in lieu (if any);
Payment in lieu if the employee is not going to work through the normal notice period to their official last day.
Remember to calculate (and pay) the employee's superannuation to the end of the notice period;
Pro-rata long service leave (usually only after seven years), but carries over if they move to another part of the
organisation;
Unused sick leave if an agreement or contract specifies it;
Any other entitlement specified under an award, agreement or common law contract; and
Other payments sometimes made to soften the blow (‘golden handshake’). When making payments above what an
employee is legally entitled to receive.
Notice periods that must be given to an employee made redundant:
An employee will be entitled to the following period of notice or pay in lieu of an employer’s intention to terminate his or her
employment:
Length of service
Period
Not more than 1 year
More than 1 year but not more than 3 years
1 week
2 weeks
More than 3 years but not more than 5 years
More than 5 years
3 weeks
4 weeks
An employee who is more than 45 years old and who has completed a minimum of 2 years’ continuous service is entitled to an
additional week’s notice.
Employees will be entitled to payment in lieu of notice calculated upon the employee’s full rate of pay reflecting the earnings
that he or she would have received for the period if his or her employment had not been terminated, which may be inclusive of
loadings, penalties, overtime payments and allowances. The employer may also elect to pay the employee out instead of
requiring the employee to work the full length of the notice period.
Redundancy Pay Periods for Continuous Service
If an employee’s employment is terminated in one of those circumstances, he or she may be entitled to the following amounts
of redundancy pay:
Employee’s period of continuous service with the employer on termination
Redundancy pay period
At least 1 year but less than 2 years
At least 2 years but less than 3 years
4 weeks
6 weeks
At least 3 years but less than 4 years
At least 4 years but less than 5 years
7 weeks
8 weeks
At least 5 years but less than 6 years
10 weeks
At least 6 years but less than 7 years
At least 7 years but less than 8 years
11 weeks
13 weeks
At least 8 years but less than 9 years
At least 9 years but less than 10 years
14 weeks
16 weeks
At least 10 years
12 weeks
However, where an employee is award or agreement free and his or her terms and conditions of employment do not already
provide for redundancy pay immediately before 1 January 2010, an employee’s service with an employer before that date will
not be taken in to account for the purpose of calculating an employee’s entitlement to redundancy pay.
Redundancy pay will only be based on an employee’s base rate of pay for his or her ordinary hours of work.
In the event of a transfer of employment from one employer to another, employees will not be entitled to redundancy pay
where:
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The employee’s prior service is recognised; or
The employee rejects an offer of employment on substantially similar terms and conditions.
If an employer obtains acceptable employment for the employee elsewhere or cannot pay the amount required for redundancy,
the employer may apply to Fair Work Australia to reduce the amount.
Redundancy Clauses in Employment Contracts
Many redundancy clauses require an employee to accept any role at an equivalent salary which is suitable to the employee’s
skills and experience. Generally, only where an equivalent position cannot be found will the employee be entitled to
the redundancy package.
Redundancy and Unfair dismissal in Victoria
It is important to note that employees whose employment has been terminated due to redundancy no longer have unfair
dismissal rights under the Workplace Relations Acct 1995 (C’th).
Further Employment & Workplace Law Advice
If you have been made redundant or are facing redundancy or would like more information about your employment or your
rights as an employee you should contact Paul Horvath Solicitors on 03 9642 0435 to ensure your rights and entitlements
are protected, and one of our employment lawyers will assist with your enquiry.