ISS Facility Services Australia Limited

[2013] FWC 5396

[2013] FWC 5396

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.120 - Application to vary redundancy pay for other employment or incapacity to pay

ISS Facility Services Australia Limited
(C2013/988)

COMMISSIONER SPENCER BRISBANE, 6 NOVEMBER 2013

Variation of redundancy pay.

[1] This decision relates to an application filed on 28 June 2013 pursuant to s.120 of the Fair Work Act 2009 (Cth) (the Act). The Application has been made by ISS Facility Services Australia Limited (the Applicant).

[2] The Applicant has applied to the Fair Work Commission (the Commission) seeking that the redundancy entitlement of Ms Coral Cooper (the Respondent) be reduced to six weeks. The Applicant has made the claim on that basis that the Applicant obtained other acceptable employment for the Respondent, with a third party Springmount Services Pty Ltd (the new employer) following a change of contract. The Applicant has already paid the Respondent 6 weeks severance payment. Her full entitlement was 12 weeks.

[3] Directions were issued for the filing of material in the application. The parties were directed to ensure that their submissions included submissions in relation to whether the matter should proceed by way of formal hearing or determination on the papers. Neither party requested a formal hearing in the matter. On the basis of the nature of the application, the material filed in the matter and the views of the party the Commission determined that the matter could efficiently be determined on the papers.

[4] While not all submissions and evidence filed in this matter have been referred to, all of such have been considered.

[5] This matter was considered at the same time as an application in matter C2013/1087 which arises from the same change of contract. The Commission has issued a separate decision on the basis that the parties approached the application separately. However, there is a significant overlap in the circumstances and consideration in both matters. The decisions reflect these similarities however each matter has been considered on the basis of the submissions and evidence of the parties as well as the findings and consideration of the Commission in each matter.

Background

[6] The Applicant is a service provider in various areas, but primarily in contract cleaning and security. The Applicant has held the contract for the provision of such services at Rose City Shopping World (the Centre) in Warwick.

[7] The Respondent was employed by the Applicant as a part-time Cleaner to provide those services at the Centre pursuant to the Applicant’s obligations under the contract.

[8] The Applicant ceased to provide the contracted services at the Centre as of 30 June 2013. The new employer commenced providing services at the Centre from 1 July 2013.

[9] The Respondent commenced employment with the Applicant on 10 May 1999 and ceased to be employed by the Applicant on 29 June 2013. The Applicant was offered and accepted employment with the new employer at the Centre. The employment of the Respondent with the new employer is not on identical terms and conditions to that as undertaken by the Respondent while employed by the Applicant. The difference in conditions is discussed further below.

Relevant legislation and award clauses

[10] The National Employment Standards (NES) prescribe the minimum entitlements to redundancy pay pursuant to s.119 of the Act:

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

[11] It is common ground between the parties that the various exceptions to the redundancy entitlements pursuant to ss.121, 122 and 123 of the Act are not applicable in this case. This is discussed later in this decision. The Applicant does not dispute, that absent an Order of the Commission pursuant to s.120 of the Act the Respondent has an entitlement to redundancy pay. 1 However this is subject to the operation of the award provisions, discussed further below.

[12] The application has been made pursuant to s.120 of the Act which provides:

120 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.

(2) 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.

(3) The amount of redundancy pay to which the employee is entitled under section 119 is the reduced amount specified in the determination.

[13] The Applicant specifically relies upon s.120(1)(b)(i).

[14] The Applicant submitted that the Respondent was covered, and had applied to her employment, the Cleaning Services Award 2010 (the Award). 2 The Respondent accepted that her employment was subject to the Award.3

[15] The Award provides that redundancy pay is provided for in the NES. 4 Given the Respondent’s length of service, being greater than 10 years, the Respondent’s entitlement to redundancy pay pursuant to the Award and the NES is, absent an Order of the Commission, 12 weeks pay.

[16] The Award however provides for situations concerning a change of contract where clause 14.5 of the Award provides:

“Change of contract

(a) This clause applies in addition to clause 9 - Consultation and section 120(1)(b)(i) of the Act and applies on the change of a cleaning contract from one cleaning contractor (the outgoing contractor) to another (the incoming contractor).

(b) Section 119 of the Act does not apply to an employee of the outgoing contractor where:

(i) the employee of the outgoing contractor agrees to other acceptable employment with the incoming contractor, and

(ii) the outgoing contractor has paid to the employee all of the employee’s accrued statutory and award entitlements on termination of the employee’s employment.

(c) To avoid doubt, section 119 of the Act does apply to an employee of an outgoing contractor where the employee is not offered acceptable employment with either the outgoing contractor or the incoming contractor.”

Applicant submissions and evidence

[17] The Applicant submitted that the matter of Australian Chamber of Manufacturers v Derole Nominees Pty Ltd 5(1990) (Derole) where the Full Bench found:

“What constitutes “acceptable alternative employment” is a matter to be determined, as we have said, on an objective basis. Alternative employment accepted by the employee (and its corollary, alternative employment acceptable to the employee) cannot be an appropriate application of the words because that meaning would give an employee an unreasonable and uncontrollable opportunity to reject the new employment in order to receive redundancy pay; the exemption provision would be without practical effect.

Yet, the use of the qualification “acceptable” is a clear indication that it is not any employment which complies but that which meets the relevant standard. In our opinion there are obvious elements of such a standard including the work being of a like nature, the location being not unreasonably distant; the pay arrangements complying with award requirements. There will probably be others.”

[18] The Applicant further relied upon Clothing and Allied Trade Union of Australia v Hot Tuna Pty Ltd 6(Hot Tuna).

[19] Arising from these two authorities the Applicant submitted that the matters to be taking into account include the work being of like nature; the location being not unreasonably distant; the pay arrangements complying with award requirements; pay levels; hours of work; seniority; fringe benefits; workload and speed; job security and travelling time. The Applicant submitted that all factors, excluding the number of hours being worked should satisfy the Commission that the alternate employment was “acceptable”.

[20] Specifically the Applicant submitted that the nature of the work, the location and pay arrangements were identical in respect of the Respondent’s employment with the Applicant and the new employer.

[21] Further the Applicant submitted that the span of hours was the same between two employers with the difference being the Applicant was employment for an average weekly hours of 21 hours with the Applicant and with the new employer of 10.5 hours. In this regard the Applicant submitted a statement of Ms Janette Ellis who is the Site Supervisor at the Centre and was also employed in that position for the Applicant. Ms Ellis’ evidence is that the Applicant was offered and accepted employment as a part-time cleaner on the basis of 21 hours per fortnight. 7

[22] The Applicant submitted that seniority has been affected as the new employer did not recognise the Respondent’s service with the Applicant.

[23] The Applicant submitted that the Respondent has been paid all award and statutory entitlements upon termination include accrues annual leave and long service leave.

[24] The Applicant also filed a statement of Ms Kim Van look, the Regional General Manager for Queensland for the Applicant. It is Ms Van Look’s evidence that the management of the Centre advised the Applicant that they would no longer be providing cleaning services at the Centre. The Centre management sought the consent of the Applicant’s employees to provide their details to the new employer.

[25] Ms Van Look stated that this request was advised to “staff” by correspondence on 29 May 2013. A copy of this letter was marked as KLV2 to the statement of Ms Van Look. The relevant part of the correspondence stated:

“...Could you please advise in writing to XXXX if you wish for ISS to pass your contact details on to the incoming contract, or would like ISS to look for suitable alternative employment opportunities.”

[26] The Respondent authorised the Applicant to provide her details to the new employer. Attached to the statement of Ms Van Look was the letter from the Respondent authorising such. The letter also relevantly stated:

“As suggested in the letter I would appreciate it if ISS would assist me with Suitable (sic) employment opportunities if that should be required and is appropriate.”

[27] Ms Van Look stated that the Applicant “liaised” 8 with the new employer to “secure acceptable employment”9.

[28] Ms Van Look stated that the Applicant was paid her statutory and award entitlements including 6 weeks redundancy pay.

[29] The Applicant submitted that a reduction of 50% should be ordered to the Respondent’s redundancy pay although it is noted that the Applicant has already made the reduced redundancy payment to the Applicant.

Respondent’s submissions and evidence

[30] The Respondent concedes that the Applicant “assisted” the Respondent to obtain employment with the new employer. 10

[31] The Respondent referred to the Commission to the case authority of Vicstaff Pty Ltd T/A Stratco 11(Stratco). The Respondent submitted that while the Applicant relies upon the case authorities of Derole and Hot Tuna, the determination Stratco holds that the matters raised in Derole and Hot Tuna do not necessarily need to be considered in every matter, but that they depend upon the facts of the case.12

[32] The Respondent relied upon the concession of the Applicant in relation to the number of hours of work. It was submitted by the Respondent that this element requires a greater consideation in this matter upon “considering the full impact on the Respondent in this case” 13.

[33] The Respondent’s evidence is that her hours with the new employer are more than 50% less, than what she was receiving with the Applicant. It is also the Respondent’s evidence that the change has caused a “substantial” disparity in pay.

[34] The Respondent relied upon Stratco where the Commission found that “on the basis of the information” it could not be found that there would be no reduction in wages. This submission is discussed in further detail below.

[35] The Respondent submitted that the Applicant has not demonstrated that the employment offered to the Respondent is “other acceptable employment” and therefore no Order to reduce redundancy entitlements should follow.

Consideration

[36] The Applicant had not originally relied upon clause 14.5 of the Award as disentitling the Applicant to redundancy pay pursuant to s.119 of the Act.

[37] The parties were further issued directions by the Commission to file further submissions, in regards to the operation of clause 14.5 of the Award.

[38] The Applicant submitted that a finding by the Commission that the employment is “acceptable employment” would bring the operation of clause 14.5 into effect and accordingly there would be no entitlement to redundancy under s.119 of the Act. The Applicant submitted that the test under clause 14.5 of the Award, was the same as the test, to be applied in considering s.120(1)(b)(i) of the Act.

[39] The Respondent did not file further submissions but confirmed that the submissions filed in response to the substantive Directions, are relied upon.

[40] Clause 14.5(b) of the Award provides that s.119 (redundancy pay) of the Act “does not apply” where the employee of the outgoing contractor (in this case the Applicant) agrees to other “acceptable employment” with the incoming contractor (in this case the new employer) and the outgoing contractor has paid all accrued statutory and award entitlements on termination of the employee’s employment.

[41] Section 121(2) of the Act provides:

“121 Exclusions from obligation to pay redundancy pay

(2) A modern award may include a term specifying other situations in which section 119 does not apply to the termination of an employee’s employment.

[42] By operation of s.121(2) of the Act a Modern Award may include a term specifying situations, above and beyond s.121, which limit the operation of s.119 to the termination of an employee’s employment.

[43] Clause 14.5 of the Act is expressed as being “in addition” to s.120(1)(b)(i) of the Act.

[44] Fair Work Australia (FWA) has previously held that in order for s.120 of the Act to have any application there must first be an entitlement to redundancy pay pursuant to s.119 of the Act. 14 Further it was held in that matter that where there is no entitlement under s.119 there can be no order to reduce the “entitlement” pursuant to s.120.15

[45] The parties agree that the base hourly rate of the Respondent prior to dismissal was $19.61. It is the Applicant’s evidence that the Respondent is currently receiving a base hourly rate of $20.11 being the same rate, taking into account the effect of the annual wage review increase which took effect on 1 July 2013. The Respondent has not challenged this evidence. The Commission finds that in so far as the base hourly rate is concerned there has been no relevant change.

[46] As to the Respondent’s submission that there has been a “substantial” decrease in take home pay, the Respondent initially lead no evidence of this. The Respondent initially filed a sample roster performed while working for the Applicant and a “draft” roster prepared by the new employer.

[47] In response to the further Directions of the Commission the Respondent filed payslips from the new employer for the periods commencing immediately upon her time with the Respondent. These payslips confirm that the hourly rate is the same the employee was entitled to during her time with the Applicant. They further confirm the Respondent’s evidence that the Respondent in the new position works a minimum of 18 hours per fortnight with earnings of $414.48 for that fortnight. This figure was consistent with the payslips in evidence.

[48] There was no payslip in evidence prior to the change. However the Respondent and Applicant’s evidence is that the Respondent received a six week redundancy payment of $2148.30. This equates to $716.10 per fortnight (on the basis of three fortnights). The Respondent has therefore taken a reduction in pay of approximately 50% (taking into account that a pay increase took effect in the intervening period).

[49] The Respondent was a part-time employee both prior to redundancy and subsequently. The other terms of the employment; location and duties, are the same as is the remuneration rate. Only the hours vary but this situation may change by agreement between the Applicant and the Respondent.

[50] The alternative employment, when viewed as a whole, is deemed to be acceptable and accordingly, as clause 14.5(b)(i) and (ii) of the Award are met, clause 14.5(c) is therefore invoked. That is, s.119 of the Act does not apply and the payment of redundancy is not applicable as the Respondent has been offered acceptable employment (although only half the income will be received) with the incoming contractor.

[51] However in the circumstances the current application, the Applicant sought that the redundancy by, thought to be otherwise due to the Respondent, be reduced by 50%. It has already been noted in the decision that an amount of redundancy has already been paid to the Respondent. Whilst on the strict interpretation of the circumstances on this matter, on considering clause 14.5 of the Award, with s.119 of the Act, the Respondent was not entitled to a redundancy payment. Whilst the resulting employment was lead to a reduction in the earnings of the Respondent to leave the 6 week payment, being half the redundancy entitlement that would have otherwise applied (which has already been paid) in place in these circumstances seems reasonable, taking into account that in any event this is what the Applicant sought that the redundancy payment be reduced to.

[52] Had clause 14.5 of the Award not been applicable, a determination in accordance with s.120 of the Act, and on the terms sought by the Applicant, would have been issued on the basis that the Commission determines that the employer has obtained other acceptable employment for the Respondent.

[53] However, the Commission finds that clause 14.5 of the Award applies and therefore s.119 of the Act does not apply. The Respondent does not have an entitlement to redundancy. Section 120(1)(a) of the Act is not satisfied. The application is dismissed.

[54] I Order accordingly.

COMMISSIONER

 1   Applicant submissions at 9.

 2   Applicant submissions at 10.

 3   Respondent submissions at 1.

 4   Cleaning Services Award 2010 [MA000022]at cl 14.1.

 5 (1990) 140 IR 123.

 6 (1988) 27 IR 226.

 7   Statement of Ms Janette Ellis at 4.

 8   Statement of Kim Van Look at 7.

 9   Ibid.

 10   Respondent submissions at 9.

 11   [2010] FWA 3141 per Bissett C.

 12 Ibid at [26].

 13   Respondent submissions at 17.

 14   Application by CAE Australia Pty Ltd [2012] FWA 7992 per Watson VP at [13].

 15   Ibid.

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