Blackheath and Thornburgh College v Julieta De Luque

[2021] FWC 3062

[2021] FWC 3062

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.120—Redundancy pay

Blackheath and Thornburgh College
v
Julieta De Luque; Alma Thompson; Nenita Richter
(C2021/1641)

COMMISSIONER SIMPSON BRISBANE, 28 MAY 2021

Application to vary redundancy pay for other employment - Jurisdictional objection that s.120 does not apply because redundancy amounts arise under an enterprise agreement –– Agreement prevails to the extent of inconsistency with incorporated terms - Agreement incorporates Award clause that provides for the application of the NES.

[1] Blackheath and Thornburgh College (the Applicant/the College) has made an application pursuant to s.120 of the Fair Work Act 2009 (the Act) to have the Fair Work Commission (the Commission) vary the redundancy entitlement of Ms Julieta De Luque, Ms Alma Thompson and Ms Nenita Richter, former employees of the Applicant, on the basis that suitable employment was found for the employees.

BACKGROUND

[2] The Applicant submitted in its Form F45A – Application to vary redundancy pay, that Ms Richter declined the alternative position offered on the basis of relocating and Ms De Luque also declined the offered position. The Applicant also submitted that Ms Thompson declined the offered position before finding out the terms and had later contacted the incoming contractor to accept the position, however the original position was offered to another person and currently there were only casual positions available.

[3] Ms De Luque and Ms Thompson were represented by the Independent Education Union (IEU) in this matter, while Ms Richter represented herself.

[4] Mr John Spriggs from the IEU sent correspondence to the Applicant on 23 March 2021 which noted that the subject employees are not entitled to redundancy pay under section 119 of the Act, but rather, they are entitled to redundancy pay by virtue of clause 1.7.2 of the Blackheath & Thornburgh College Enterprise Agreement 2018 (the Agreement). Mr Spriggs said that consequently, the exclusions in s122(3) of the Act do not apply to the subject employees.

[5] The matter was allocated to me on 24 March 2021, and I subsequently listed it for a Conference on 6 April 2021. I determined that I would hear the jurisdictional objection raised by the IEU first and issued directions for filing of submissions. Following the filing of submissions, both parties consented to the jurisdictional objection being determined on the papers.

[6] The Applicant sent correspondence to the Commission advising that the three employees ceased working for the Applicant on 4 April 2021.

LEGISLATION

[7] Section 119 of the Act provides 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.

Amount of redundancy pay

(2) The amount of the redundancy pay equals the total amount payable to the employee for the redundancy pay period worked out using the following table at the employee’s base rate of pay for his or her ordinary hours of work:

Redundancy pay period
Employee’s period of continuous service with the employer on termination	Redundancy pay period
1	At least 1 year but less than 2 years	4 weeks
2	At least 2 years but less than 3 years	6 weeks
3	At least 3 years but less than 4 years	7 weeks
4	At least 4 years but less than 5 years	8 weeks
5	At least 5 years but less than 6 years	10 weeks
6	At least 6 years but less than 7 years	11 weeks
7	At least 7 years but less than 8 years	13 weeks
8	At least 8 years but less than 9 years	14 weeks
9	At least 9 years but less than 10 years	16 weeks
10	At least 10 years	12 weeks

[8] Section 120 of the Act further provides:

“Variation of Redundancy Pay for Other Employment or Incapacity to Pay

(1) This section applies if:

(a) an employee is entitled to be paid an amount of redundancy pay by the employer because of section 119; and

(b) the employer:

(i) obtains other acceptable employment for the employee; or

(ii) cannot pay the amount.

(3) On application by the employer, the FWC may determine that the amount of redundancy pay is reduced to a specified amount (which may be nil) that the FWC considers appropriate.”

THE RESPONDENTS’ SUBMISSIONS

[9] Mr Spriggs submitted material on behalf of Ms De Luque and Ms Thompson, while Mr Richter failed to submit material.

[10] Mr Spriggs submitted that s.120(1) of the Act unambiguously states that the section applies if “an employee is entitled to be paid an amount of redundancy pay by the employer because of section 119”. Mr Spriggs stated that the consequence is that s.120 only applies where the employee is entitled to redundancy pay because of section 119.

[11] Mr Spriggs’ argument was that the subject employees are not entitled to redundancy pay because of section 119 of the Act but are covered by the Agreement.

[12] In Mr Spriggs’ submission he stated that that Agreement contains a more beneficial redundancy provision, which notes:

“1.7. Redundancy

1.7.1 Redundancy entitlements shall be in accordance with the National Employment Standards for Employees who commence employment from 30 November 2013, provided that an Employee’s entitlement to severance shall not reduce from 16 weeks to 12 weeks after 9 years’ service; rather, an Employee’s entitlement shall remain at 16 weeks after 9 years of service.

1.7.2 For Employees already employed with the School prior to 30 November 2013 and who are made redundant, they shall receive a severance pay in accordance with the following scale:

Period of Continuous Service	Severance Pay (weeks’ pay)
Less than 1 year	nil
1 year but not more than 2 years	4 weeks’ pay
More than 2 years but not more than 3 years	6 weeks’ pay
For each additional completed year of service	2 additional weeks’ pay

Provided, however, that the total severance payment shall not exceed a maximum payment of 52 weeks.”

[13] Mr Spriggs noted that Ms De Luque and Ms Thompson both fall within the provisions of clause 1.7.2 of the Agreement and neither of the employees represented by the IEU are entitled to redundancy pay because of section 119, however, both of these employees are entitled to redundancy pay because of clause 1.7.2 of the Agreement. Consequently, the application as currently filed is incompetent and must be dismissed.

[14] Mr Spriggs stated that the submissions are supported by the decision of the Full Bench in Cameron Fraser; Construction, Forestry, Maritime, Mining and Energy Union v JFM Civil Contracting Pty Ltd 1 4866, where at [25] it was stated:

“The Commission’s power to reduce redundancy entitlements arises under s 120 of the FW Act. Section 120 only applies if the employee is entitled to be paid redundancy pay under s 119 of the FW Act. If s 119 is not the source of an employee’s redundancy entitlement, then there is no power under s 120 to reduce that entitlement.”

[15] Mr Spriggs submitted that notwithstanding that the application has been filed under s.120, the Applicant makes reference to s. 122 (3) in support of its case. Therefore, in the alternative, and without prejudice to his earlier submission, he provides the following.

“Section 122 (3) is as follows:

“Employee not entitled to redundancy pay if refuses employment in certain circumstances

(1) An employee is not entitled to redundancy pay under section 119 in relation to the termination of his or her employment with an employer (the first employer) if:

(a) the employee rejects an offer of employment made by another employer (the second employer) that:

(i) is on terms and conditions substantially similar to, and, considered on an overall basis, no less favourable than, the employee’s terms and conditions of employment with the first employer immediately before the termination; and

(ii) recognises the employee’s service with the first employer, for the purpose of this Subdivision; and

(b) had the employee accepted the offer, there would have been a transfer of employment in relation to the employee.

[16] Mr Spriggs said that the plain (and clear) words of the Act are telling. Section 122(3) only provides that “An employee is not entitled to redundancy pay under section 119” in certain circumstances. That is, an employee is not entitled to redundancy pay under the Act if those identified circumstances apply. He stated that this is not the circumstances of the subject case.

[17] Mr Spriggs’ submission noted that the entitlement of the employees represented by the IEU which the Respondents are arguing in the current case, is not an entitlement to redundancy pay under s.119. It is an entitlement under clause 1.7.2 of the Agreement.

[18] Mr Spriggs stated that the parties to the Agreement had the opportunity to add clauses which reflect ss. 120 and 122 to the Agreement, but the parties did not include such provisions. Therefore, it is argued that a conscious choice was made not to include such a facility into the Agreement.

[19] Mr Spriggs further added that Parliament had intended s.122 (3) to apply to all redundancy entitlements, then that section would have been worded differently. For example, the words “under section 119” would be meaningless if it was the intention for s. 122 (3) to apply to all redundancy entitlements. The inclusion of such words only makes sense if they have work to do. The work performed by the inclusion of such words is to limit the scope of s. 122 (3).

[20] Mr Spriggs also added that the submissions above deliberately do not address the content of either ss. 122 (3)(a)(i) or 122 (4). Those are matters to be addressed if the jurisdictional objection is not accepted.

THE APPLICANT’S SUBMISSIONS

[21] The Applicant agreed the employees are covered by the current Agreement, and as such the document needs to be read in its entirety not a section of the document to form a decision. Reference was made to section 1.4 which specifically relates to relationship of the awards with reference to clause 1.4.1 and 1.4.2 which state:

“1.4.1 This Agreement is deemed to incorporate only the following specific terms of the Educational Services (Schools) General Staff Award 2010:

a) Part 3 - Types of Employment and Termination of Employment.

b) Clause 16 Allowances.

c) Part 5 - Hours of work and related matters.

d) Part 6 - Leave and public holidays.

e) Schedule B - Classifications.

1.4.2 The incorporated award terms are contained in Schedule 5 of this agreement.”

[22] The Applicant submitted that Schedule 5 - Non-Teacher Staff Schedule, section 13 which related to redundancies for employees under this classification specifically, reads as follows:

“13. Redundancy

13.1 Redundancy pay is provided for in the National Employment Standard (NES).”

[23] The Applicant stated that in this point and as per the Agreement, the College rebuts the Respondent’s submission that "the subject employees are not entitled to redundancy pay because of section 119 of the Act", as this clause refers redundancies to the National Employment Standards (NES) and as such the conditions in the Act do apply.

[24] The Applicant noted that the IEU stated in its submissions that "Neither of the employees we represent are entitled to redundancy pay because of section 119. Both employees are entitled to redundancy pay because of clause 1.7.2 of their Enterprise Agreement,” to which the Applicant replied that this clause is the result of what is to be paid to an employee if a redundancy was applicable.

[25] The Applicant maintains that the employees were not made redundant. The College organised 'acceptable alternative employment' with the incoming contractor, maintaining leave entitlements, pay conditions, location of work and employment security.

[26] The Applicant submitted it is not disputing what will be paid to the employee if a redundancy does apply. The Applicant submitted it has always maintained that if this is classified as a true redundancy, that the employees will be paid as per section 1.7.2.

[27] The Applicant argues that following the guidelines in the Agreement and in reviewing the NES, that the Commission does have jurisdiction to apply a ruling on the submitted request referring to s.120 of the Act for a variation of redundancy pay for other employment or incapacity to pay.

[28] The Applicant takes the stand that clause 1.7.2 only refers to if a redundancy applies and outlines what the organisation will pay if a redundancy applies. It submitted it is approaching the Commission to decide under s.120 of the Act as with regards to varying redundancy pay for other employment and if a redundancy does apply.

[29] The Applicant submitted that in the circumstances of this matter s.120 does apply as:

•  In accordance with section 120(1)(a) there was a potential for a redundancy as per section 119 of the Act. The College no longer provides catering service in house and chose to outsource this service to an external contractor; and

•  In accordance with section 120(1)(b) the employer did obtain acceptable alternative employment for the employee and the employee rejected the employment offer.

[30] The Applicant referred to the alternative submission filed by the IEU. The Applicant noted that the Union is arguing that s.119 of the Act does not apply and that clearly the College disagrees with this claim as s.119 of the Act clearly identifies the why and when a redundancy is to occur. As there is no reference to this in the Agreement, there is nothing but the Act to refer to. Without these guidelines there is no case for a redundancy.

[31] The College submitted that in accordance with the Agreement, specifically s.13.1, that the Commission does have the jurisdiction to rule on this application under the Act specifically sections 119 - 122.

[32] The College agreed with the IEU that if a redundancy is to be paid it is in accordance with section 1.7.2 of the Agreement, but this application is to decide if this situation is a redundancy under the Act.

[33] The College also submitted that the employees were not terminated but ‘acceptable alternative employment' with the incoming contractor, maintaining leave entitlements, pay conditions, location of work and employment security were provided.

RELEVANT CASE LAW

The Full Bench Decision

[34] The situation of s.120 of the Act not authorising the Commission to reduce redundancy entitlements conferred by the Award due to the operation of s.119 was considered in the Full Bench Decision of Cameron Fraser; Construction, Forestry, Maritime, Mining and Energy Union v JFM Civil Contracting Pty Ltd (JFM). 2

[35] In this case, the CFMMEU’s argument was that:

“… the decision incorrectly identified the source of Mr Fraser’s redundancy entitlement as s 119 of the FW Act rather than clause 17 of the Award. As a result, the Commissioner erroneously treated s 120 as applicable to Mr Fraser’s entitlement. Section 120, it was submitted, was not available to reduce redundancy entitlements arising under a modern award because s 123(4)(b) excludes its operation, as well of that of s 119, where an industry-specific redundancy applies to an employee.” 3

[36] Relevantly, the Full Bench in JFM noted that:

“[25] The Commission’s power to reduce redundancy entitlements arises under s 120 of the FW Act. Section 120 only applies if the employee is entitled to be paid redundancy pay under s 119 of the FW Act. If s 119 is not the source of an employee’s redundancy entitlement, then there is no power under s 120 to reduce that entitlement.

[26] ….

This involved a failure to recognise that the relevant effect of s. 123(4)(b) is that, where an employee is entitled to redundancy pay under an industry-specific redundancy scheme in a modern award, the redundancy entitlements provided for in s. 119 do not apply.

[28] The effect of the error described was that the Commissioner acted beyond power in reducing Mr Fraser’s redundancy entitlement under clause 17 of the Award pursuant to s 120 of the FW Act. JFM has not identified any alternate source of power for the order made by the Commissioner. Clause 17 of the Award does not itself contain any provision analogous to s 120 which would empower the Commission to reduce the entitlements arising under the provision.”

Effect of the Full Bench Decision in this matter

[37] If the source of the redundancy entitlement is the Agreement, then the Commission does not have the power conveyed under s.120 to reduce the entitlement due to the operation of s.119. Therefore, it is necessary for me to consider the source of the redundancy pay in this matter.

[38] Due to the Agreement dealing with redundancy pay entitlements, the provisions of s.55 of the Act are also relevant. 4 This section states:

“55 Interaction between the National Employment Standards and a modern award or enterprise agreement

National Employment Standards must not be excluded

(1) A modern award or enterprise agreement must not exclude the National Employment Standards or any provision of the National Employment Standards.

Terms expressly permitted by Part 2 2 or regulations may be included

(2) A modern award or enterprise agreement may include any terms that the award or agreement is expressly permitted to include:

(a) by a provision of Part 2 2 (which deals with the National Employment Standards); or

(b) by regulations made for the purposes of section 127.

Note: In determining what is permitted to be included in a modern award or enterprise agreement by a provision referred to in paragraph (a), any regulations made for the purpose of section 127 that expressly prohibit certain terms must be taken into account.

(3) The National Employment Standards have effect subject to terms included in a modern award or enterprise agreement as referred to in subsection (2).

Note: See also the note to section 63 (which deals with the effect of averaging arrangements).

Ancillary and supplementary terms may be included

(4) A modern award or enterprise agreement may also include the following kinds of terms:

(a) terms that are ancillary or incidental to the operation of an entitlement of an employee under the National Employment Standards;

(b) terms that supplement the National Employment Standards;

but only to the extent that the effect of those terms is not detrimental to an employee in any respect, when compared to the National Employment Standards.

Note 1: Ancillary or incidental terms permitted by paragraph (a) include (for example) terms:

(a) under which, instead of taking paid annual leave at the rate of pay required by section 90, an employee may take twice as much leave at half that rate of pay; or

(b) that specify when payment under section 90 for paid annual leave must be made.

Note 2: Supplementary terms permitted by paragraph (b) include (for example) terms:

(a) that increase the amount of paid annual leave to which an employee is entitled beyond the number of weeks that applies under section 87; or

(b) that provide for an employee to be paid for taking a period of paid annual leave or paid/personal carer’s leave at a rate of pay that is higher than the employee’s base rate of pay (which is the rate required by sections 90 and 99).

Note 3: Terms that would not be permitted by paragraph (a) or (b) include (for example) terms requiring an employee to give more notice of the taking of unpaid parental leave than is required by section 74.

Enterprise agreements may include terms that have the same effect as provisions of the National Employment Standards

(5) An enterprise agreement may include terms that have the same (or substantially the same) effect as provisions of the National Employment Standards, whether or not ancillary or supplementary terms are included as referred to in subsection (4).

Effect of terms that give an employee the same entitlement as under the National Employment Standards

(6) To avoid doubt, if a modern award includes terms permitted by subsection (4), or an enterprise agreement includes terms permitted by subsection (4) or (5), then, to the extent that the terms give an employee an entitlement (the award or agreement entitlement) that is the same as an entitlement (the NES entitlement) of the employee under the National Employment Standards:

(a) those terms operate in parallel with the employee’s NES entitlement, but not so as to give the employee a double benefit; and

(b) the provisions of the National Employment Standards relating to the NES entitlement apply, as a minimum standard, to the award or agreement entitlement.

Note: For example, if the award or agreement entitlement is to 6 weeks of paid annual leave per year, the provisions of the National Employment Standards relating to the accrual and taking of paid annual leave will apply, as a minimum standard, to 4 weeks of that leave.

Terms permitted by subsection (4) or (5) do not contravene subsection (1)

(7) To the extent that a term of a modern award or enterprise agreement is permitted by subsection (4) or (5), the term does not contravene subsection (1).

Note: A term of a modern award has no effect to the extent that it contravenes this section (see section 56). An enterprise agreement that includes a term that contravenes this section must not be approved (see section 186) and a term of an enterprise agreement has no effect to the extent that it contravenes this section (see section 56).”

[39] In South East Conveyors Pty Ltd T/A South East Conveyors & Engineering 5, Senior Deputy President O’Callaghan noted that:

“[15] If a redundancy entitlement arises from the provisions of an agreement, I do not consider that s.120 of the FW Act provides the Commission with the jurisdiction to vary that redundancy entitlement. An agreement redundancy provision, provided it does not offend the provisions of s.55, must establish an entitlement in accordance with the agreement terms.”

[40] The Applicant’s submission that it is yet to be determined whether redundancies have occurred can be readily dismissed. It is clear the three employees ceased to be employed from 4 April on the basis that their jobs had been outsourced. That is sufficient to establish that the positions previously held by the three respondents to the application have been made redundant. The question is not whether the roles have been made redundant, but whether there exists a power for the Applicant to seek to have the three respondent’s redundancy entitlements reduced.

[41] The Applicant accepts that the amount of redundancy pay for the three employees arises from the Agreement and not s.119(2).

[42] When clause 1.4.1, and 1.4.2 of the Agreement, and clause 13.1 of Schedule 5 of the Agreement are read together it is clear that the Agreement intended to incorporate Part 3 of the Educational Services (Schools) General Staff Award 2010, which was a predecessor of the current Award.

[43] The language of the 2010 Award relied on the NES for the purposes of describing redundancy pay entitlement for employees covered by the Award. I accept, although it is not expressly stated in the Agreement, as it is the case in the current Award, that the language incorporated from the 2010 Award is intended to be a reference section 119 to 123 of the Act.

[44] As this reference is included in Schedule 5 of the Agreement it seems this case is distinguishable from the circumstances in JMF. Firstly, because the exclusion that applied in JMF because of s.123(4)(b) does not apply here, but also more relevantly because in JMF the employer could not identify an alternative source of power to seek to apply s.120 of the Act, whereas here it seems the Agreement provides the alternative source of power.

[45] I agree with the IEU’s submission to the extent that the amount of redundancy pay does not arise from s.119, however that is so because the severance pay in clause 1.7 is superior to s.119.

[46] Importantly Clause 1.4.5 of the Agreement reads as follows:

“1.4.5 Where there is inconsistency between the express terms of the Agreement and the incorporated terms of the Awards as contained in Schedule 5 and Schedule 6 of the Agreement, the express terms the (sic) Agreement will prevail to the extent of the inconsistency.”

[47] From these words it is apparent that the Agreement is intended to be applied such that the superior terms in clause 1.7 are to prevail over incorporated Award terms with regard to redundancy pay. Understood that way, it is logical to interpret the Agreement such that the Award term at clause 13.1 of Schedule 5 of the Agreement was intended to have the effect that either sections 119 to 123 of the NES are incorporated as part of the Agreement, or alternatively if they are not incorporated, that the parties agreed that sections 119 to 123 of the NES would apply but would have effect subject to the terms in the Agreement as contemplated in s.55(3) of the Act. Incorporation of NES terms is permissible in accordance with s.55(5) of the Act, and has the effect that where they are the same as the NES, in accordance with s.55(6) those terms operate in parallel with the NES, however in accordance with clause 1.4.5 of the Agreement, where the Agreement terms are superior the Agreement terms apply.

[48] Whether it be that the correct interpretation of the Agreement is that the NES terms are incorporated into the Agreement by force of clause 13.1 in Schedule 5, or alternatively that the effect of 13.1 is that the Agreement provides that the NES (and specifically s.119 to 123) will apply in the case of redundancy pay, the effect is the same. That being the fact of the redundancy amounts not arising from s.119 is not intended under this Agreement to extinguish the ability of the employer to seek to argue that it has obtained other acceptable employment. That is so because the parties have agreed the provisions contained in ss.119 to 123 of the Act will have application under this Agreement where the Agreement is silent or does not prevail. It is therefore a sensible interpretation of the Agreement that the parties intended with particular reference to s.120(1)(a) that the superior redundancy amounts in clause 1.7 are to prevail over the words from s.120(1)(a) of the NES and specifically prevail over the amount of redundancy pay in section 119 referred to in s.120(1)(a), but the parties did not intend to exclude the ability of the employer to apply to the Commission to reduce the amount of redundancy pay under the Agreement.

CONCLUSION

[49] It is apparent given my conclusion that the application cannot proceed in its current form because as was submitted by the IEU the application seeks a remedy to order the reduction of redundancy pay amounts under s.119 when the amounts of redundancy pay do not arise from s.119. Despite that deficiency in the application the Commission does have power to deal with the dispute regarding the redundancy pay amounts under the Agreement. The matter will be listed for mention to give the parties an opportunity to be heard on how the matter should proceed including whether the application can be amended.

COMMISSIONER

Printed by authority of the Commonwealth Government Printer

<PR730237>

 1   [2020] FWCFB 4866.

 2   [2020] FWCFB 4866 (‘JFM’).

 3 Ibid [18].

 4   South East Conveyors Pty Ltd T/A South East Conveyors & Engineering[2017] FWC 77, [14].

 5   [2017] FWC 77.