[2015] FWC 6055 [Note: An appeal pursuant to s.604 (C2015/6206) was lodged against this decision - refer to Full Bench decision dated 1 December 2015 [[2015] FWCFB 8040] for result of appeal.]

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.739 - Application to deal with a dispute

National Union of Workers; United Firefighters' Union of Australia
v
Compass Group Pty Ltd
(C2014/6798 and C2014/6819)

COMMISSIONER ROE

MELBOURNE, 3 SEPTEMBER 2015

Dispute concerning decision not to pay redundancy pay due to ordinary and customary turnover of labour.

[1] The Compass Group held contracts with the Department of Defence for the provision of Garrison Support Services in the Riverina Murray Valley region (RMV) for many years. Compass Group successfully tendered for a replacement contract for the same or similar work in respect to catering and hospitality work. Compass Group did not tender for a replacement contract for the same or similar work in respect to fire rescue services and stores and transport services. The Department of Defence made a number of changes to the specifications in the 2014 tender process including changes to the geographic coverage of some of the work. Compass held contracts for the stores and transport services from April 2005 until 31 October 2014 and contracts for the fire and rescue services from May 2006 until 31 December 2014. The contracts were renewed or extended on a number of occasions during that period.

[2] A number of employees were made redundant on 31 October 2014 or on 31 December 2014. Compass Group determined not to pay redundancy or severance pay to the fire rescue services, stores and transport employees who were made redundant. Compass relied upon the provisions in the relevant enterprise agreements which exempted employees from redundancy entitlements where the termination is due to the ordinary and customary turnover of labour. The National Union of Workers and the United Firefighters Union of Australia challenged that decision and argue that the terminations are not due to the ordinary and customary turnover of labour. They notified a dispute under the disputes settlement clauses of the relevant agreements.

[3] The parties agree and I am satisfied that the dispute over the decision not to pay redundancy entitlements due to the ordinary and customary turnover of labour is one which falls within the scope of the disputes settlement clauses of the relevant agreements. I am satisfied that the required steps of the disputes settlement procedure have been followed and that conciliation has been exhausted and that I am authorised by the agreements to resolve the dispute about the decision not to pay redundancy entitlements by arbitration. The parties agreed that in the first instance the dispute would be arbitrated in respect to five former employees of Compass who were covered by the Compass Group (ESS RMV Fire and Rescue) Enterprise Agreement 2013 and who are represented by the UFU and three former employees of Compass who were covered by the Compass Group (ESS Riverina Murray Valley) Enterprise Agreement 2011 and who are represented by the NUW.

[4] Employment in that part of the contract which covered fire and rescue services was covered by the Compass Group (ESS RMV Fire and Rescue) Enterprise Agreement 2013. Clause 3.4.1 of that Fire and Rescue Agreement provides as follows:

“3.4.1 Definition

Redundancy pay is provided for in the NES. An Employee is entitled to be paid redundancy pay if the Employee's employment is terminated 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.”

[5] Employment in that part of the contract which covered stores and transport employees was covered by the Compass Group (ESS Riverina Murray Valley) Enterprise Agreement 2011. Clause 18.1 of that Stores and Transport Agreement provides as follows:

“18.1 Redundancy pay is provided for in the NES. An employee, other than a casual employee, is entitled to be paid redundancy pay if the employee's employment is terminated at the Company's initiative because the Company 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.”

[6] The employees who were the subject of the hearing and this decision are Troy Klasups, Gavin Chambers and David Sheath from the NUW and stores and transport and Graeme Thompson, Peter Heydon, Scott Gill, Andrew Yates and Stephen Kohlhagen from the UFU and firefighting.

[7] I will deal first with the proper interpretation of the Agreements and then with the facts concerning Compass, the contracts and the employees.

Interpretation of the redundancy provision of the Agreements

[8] I am satisfied that there is no material difference between the two Agreements in respect to the definition of redundancy and the exemption.

[9] There is no dispute that in the circumstances of this case the terminations of employment were at the initiative of the employer and for the reason that the company no longer requires the job done by the employees to be done by anyone. That is the employees positions were made redundant. The issue in dispute is whether or not this as due to the ordinary and customary turnover of labour.

[10] The hearing of this matter was delayed as the parties agreed that they should await the Full Bench decision in a matter involving Compass’ competitor Spotless. That decision 1 concerned the applicability of the concept of ordinary and customary turnover of labour to collective agreements covering Spotless and their Department of Defence contract work. The Full Bench found that the abolition of a position as a result of ordinary and customary turnover of labour is a redundancy. However, under the NES a redundancy of this sort does not lead to an entitlement to redundancy pay. The Full Bench found that the unexpressed exclusion of ordinary and customary turnover of labour did not apply in the case of the Spotless agreement. The exclusion is expressed in the relevant agreements in this case.

[11] The proper interpretation of the Agreements is relatively simple. Both clauses say that “Redundancy pay is provided for in the NES”. Both clauses include a definition of redundancy largely indistinguishable from that in the NES. Both clauses include an exemption from redundancy pay where the redundancy is due to the ordinary and customary turnover of labour. The NES (Section 119(1)(a)) includes the same exemption. There is no dispute that the origin of both the definition of redundancy and the exemption is the TCR cases of 1984. I am satisfied that it is the mutual intention of the parties in reaching the agreements that the exemption should have the same meaning as in Section 119(1)(a). The meaning of that can best be gleaned from the TCR cases.

[12] Ms Holmes for Compass gave evidence to the effect that in bargaining for the Agreements the unions raised claims concerning redundancy which were rejected by Compass. Ms Holmes and Mr Farthing say that in rejecting the union claims in the fire services negotiations Compass stated its position that termination at the end of a contract was ordinary and customary turnover of labour. The unions say that their claims were for increased redundancy pay and that claim was rejected by Compass. The unions say that the issue of ordinary and customary turnover of labour was not a matter of contention in the negotiations. I am satisfied that the evidence does not contribute to any finding concerning the mutual intention of the parties in the Agreements. What happened in the negotiations is not evidence in this case of the proper meaning of the Agreements which were finally reached. I also accept the evidence of the employees in the proceedings that they had no knowledge or recollection of any statements by Compass during the negotiations for the Agreements about the issue of ordinary and customary turnover of labour.

[13] There is no basis to conclude that the mutual intention of the parties was that Compass is a business where redundancy due to a loss of contract or failure to bid for a contract is a redundancy due to the ordinary and customary turnover of labour. I am satisfied that the mutual intention of the parties was nothing more and nothing less than to include the exemption provided for in Section 119(1)(a) as a term of the Agreements. As the decision in the Spotless case demonstrates, if the parties had not done so then the exemption provided for in Section 119(1)(a) may not have applied to those covered by the Agreements.

The meaning of the “ordinary and customary turnover of labour” exemption in Section 119(1)(a) and the Termination Change and Redundancy Test Case.

[14] In the TCR case 2 the ACTU sought to cover all employees with a reasonable expectation of continuous employment excluding seasonal employees and fixed term contracts.3 The Full Bench in the TCR case adopted an approach to redundancy which focused on the job not the individual. They adopted the approach that redundancy occurs when the employer no longer requires the work to be done by any one. In the case the ACTU opposed any distinction between redundancy due to employer policy and redundancy due to financial stringency. The Full Bench rejected the approach taken by the NSW Commission under the Employment Protection Act (NSW) which made such a distinction. The Full Bench agreed with the ACTU submission and determined that “in these circumstances we do not believe that there should be any fundamental distinction, in principle, based on the causes of redundancy.”4 The Full Bench also determined that the primary reason for severance pay does not relate to the need to search for another job or to tide a worker over in a period of unemployment. Instead the focus was on compensation for the loss of non-transferable credits and the inconvenience and hardship caused by the termination of employment.

[15] The TCR case had several aspects. It dealt with the issue of protection from unfair dismissal, notice of termination of employment, and consultation and information concerning introduction of change. The case also dealt with redundancy including consultation, selection, notice, assistance in seeking alternative employment, severance or redundancy pay, leave entitlements and income maintenance. In considering what exemptions may be appropriate from an entitlement to severance or redundancy pay the Full Bench stated:

“In particular, we have had regard to the:

(a) Milk Processing and Cheese Manufacturing Etc. (Appeal) case ((1978) 45 SAIR 902) redundancy clause;
(b) decision of Mr Justice Fisher Re Employment Protection Act;
(c) decision of Mr Commissioner Neyland in the Trustee Officers Award case which was confirmed in substance on appeal by the Full Bench; and
(e) decision of Mr Commissioner Cox in the Clothing Trades Award case.

All of these awards have restrictions placed on their applicability either by the terms of the legislation in accordance with which the decision was made or as a result of the decision.

The decision of the Full Bench in the Milk Processing and Cheese Manufacturing Etc. (Appeal) case did not grant severance pay to seasonal or casual employees.

The decision of Mr Justice Fisher was made in the context of the Employment Protection Act which requires notice and/or reasons for termination to be given to the Registrar in certain instances. In addition to an exemption from notification and the giving of reasons for termination where severance payments are made at the rate prescribed by Mr Justice Fisher in his decision of 29 July 1983, there are either exemptions from, or limitations on the Act's application to:

(a) employers who employ less than fifteen employees;
(b) terminations made in consequence of misconduct on the part of the employee;
(c) casual employment;
(d) employees not continually employed by the employer for at least twelve months;
(e) persons who remain employees when a business undertaking or establishment, or part thereof, is transmitted from one employer to another;
(f) employees covered by an award or agreement which already includes a provision for severance pay;
(g) employees engaged for a specified period or task;
(h) employees engaged for a trial period; and
(i) where termination is pursuant to a policy which requires retirement at a specified date, where the policy has been in existence for at least twelve months and where the employee has been appropriately notified of the policy.

Furthermore, the decision of Mr Justice Fisher applies only to terminations due to economic grounds. Terminations due to “seasonal shifts in markets, loss of contracts or changes in contracts not relating to recession, changes in model or product, shifts in marketing emphasis” and the like are not included and cases involving “retrenchments due to technological change” and “retrenchments due to company reconstruction, mergers and takeovers” are expected to be dealt with “on the particular merits of the case rather than by way of broad prescription”. Further, the decision would not automatically apply in industries which contemplate intermittency in employment where the rate includes a specific factor to compensate for following the job.” 5

[16] It should be noted that earlier in the decision the Full Bench specifically rejected many of the limitations and distinctions made by Justice Fisher and the Employment Protection Act. The Full Bench decided that redundancy payments will be applicable “to redundancy whatever the cause”. The Full Bench made the following decision about exemptions after considering the cases:

“We have already decided that our decision will apply to redundancy, whatever be the cause, and we have decided that there should be a right to have the general prescription varied, by order of the Commission, where employers in particular cases argue that they do not have the capacity to pay.

Our reasoning in these proceedings, other decisions of this Commission and various decisions of other industrial authorities, are also inconsistent with the general severance pay prescription being granted where termination is as a consequence of misconduct, where employees have been engaged for a specific job or contract, to seasonal and/or casual employees, or in cases where provision is contained in the calculation of the wage rates for the itinerant nature of the work. In addition, we are of the opinion that where termination is within the context of an employee’s retirement, an employee should not be entitled to more than he/she would have earned if he/she had proceeded to normal retirement.

Furthermore, we believe that an employee should not be entitled to severance pay immediately but that some period of time should elapse before any entitlement accrues. The length of this period is a matter for judgment and has been variously determined as twelve months, two years or five years. All the decisions to which we have particularly referred in this part of our decision require a period of twelve months continuous service to elapse before there is any entitlement to severance pay, except the Milk Processing and Cheese Manufacturing Etc (Appeal) case which required a period of five years continuous service before any severance payment is made. We have decided that for employees with less than one year’s continuous service the general obligation on employers should be no more than to give relevant employees an indication of the impending redundancy at the first reasonable opportunity, and to take such steps as may be reasonable to facilitate the obtaining by the employees of suitable alternative employment.

This restriction will, in most cases, ensure that employees engaged on a trial basis do not become entitled to severance pay.

Two particular instances, which the employers argued might warrant an application for relief from the obligation to pay the general prescription, which were brought to our attention in the proceedings were when an employer obtains acceptable alternative employment for the employee, and where employees receive the benefit of superannuation schemes on retrenchment.

We do not wish to prevent an employer making an application to be exempted from the general prescription pursuant to this decision in cases where an employer obtains acceptable alternative employment for an employee but we would point out that, in our decision, severance payments are not made for the purpose of assisting employees to find alternative employment. Where such an application was made it would be important to consider whether previous service with the previous employer was recognized as service with the new employer. However, we would make it clear that we do not envisage severance payments being made in cases of succession, assignment or transmission of a business. We intend to provide for transmission of employment in terms similar to clause 5(5) of the Metal Industry (Long Service Leave) Award 1976.” 6

[17] The Full Bench made some further decisions in finalising the Award variations arising from its first decision in a 1984 Termination, Change and Redundancy Case Supplementary Decision. 7 That decision did not alter the exemptions for severance pay. However, it did alter the section concerning the requirement for “Consultation and provision of information” in redundancy situations. The Full Bench found:

“The employers submitted that the redundancy provisions should not apply to termination of employment "associated with the general turnover of labour or a seasonal downturn within the industry or reclassification or alteration of working conditions." All these expressions were opposed by the ACTU because they would cut down unreasonably the redundancy provisions, they were uncertain as to meaning and they were not justified by the argument.

In our decision at 55-6 we made reference to a number of definitions of redundancy and our draft order was based on the definition of the Chief Justice, Mr Justice Bray, in the South Australian Supreme Court. Further, at page 33 of the decision we decided that there should not be any fundamental distinction, in principle, based on the causes of redundancy. Nevertheless, it was not our intention that the redundancy provisions should apply to the "ordinary and customary turnover of labour"; an expression used by Mr Justice Fisher in his decision related to the Employment Protection Act in New South Wales (1983) 7 IR 273

However, notwithstanding the helpful submissions of the parties in these proceedings, we have some difficulty in finding a suitable expression to make our intention clear. There is no doubt that we did not intend the redundancy provisions to apply where an employee is dismissed for reasons relating to his/her performance, or where termination is due to a normal feature of a business.

Furthermore, there is an overlap between the definition of redundancy for the purposes of any award and the categories of employees exempted from severance pay. To some extent the same can be said for the provisions relating to the introduction of change.

In the circumstances, we are prepared to provide that the redundancy provisions shall not apply where the termination of employment is "due to the ordinary and customary turnover of labour" but we will not include the other categories referred to by the employers.” 8

[18] It is clear from the above that the exclusion in cases where termination of employment is "due to the ordinary and customary turnover of labour":

● Is a concept which is narrower in scope than the exemptions sought by the employers. The Full Bench did not provide exemption for terminations due to a seasonal downturn within the industry or reclassification or alteration of working conditions.
● Does not otherwise alter the principle adopted by the Bench that there should not be any fundamental distinction in principle based on causes of redundancy.

● Does not mean that the restrictions and exemptions in Justice Fisher’s decision related to the Employment Protections Act in New South Wales were adopted. Rather the concept of “ordinary and customary turnover of labour” is adopted but the Full Bench had difficulty finding a suitable expression to define their intention in adopting this concept.
● Is a concept which is difficult to define but the Full Bench intended that it cover situations where an employee is dismissed for reasons relating to his/her performance, or where termination is due to a normal feature of a business.
● There is an overlap between those excluded from the redundancy provisions created by the TCR decision generally (including for example rights to consultation about redundancy and time off for job search) by the concept of ordinary and customary turnover of labour and those excluded by the specific exemptions applying to redundancy pay in cases of misconduct, engagement for a specific job or contract, seasonal and/or casual employees.

[19] It is in this context that what Justice Fisher said about the concept should be considered. In SDEA (NSW) v Countdown Stores 9 Justice Fisher stated:

“There is of course in industry and always has been a general turnover of labour. It has been customary for employees’ services to be dispensed with because it is the view of management that they are in some way less than satisfactory employees, not appropriately skilled, not appropriately motivated, unreliable or exhibiting other forms of unhelpful conduct in an industrial context, but not amounting to misconduct. Many employees, particularly in the building construction, contracting and sub-contracting industries are employed on terms which contemplate intermittency in employment. Provisions for compensating for holidays and annual leave by making an allowance in the calculation of hourly or weekly rates of pay are often made. Many awards contain a specific factor to compensate for ‘following the job’, ie., for intermittency in employment when one job cuts out and another has to be obtained. Payments on severance would appear to be inappropriate to these circumstances and may contain an element of double counting. (See Australian Workers’ Union v. Victorian Employers Federation (Print D6429).)

Similarly employees have at the height of economic prosperity been dismissed because of seasonal shifts in markets, loss of contracts or changes in contracts not relating to recession, changes in model or product, shifts in marketing emphasis and many other day to day causes removed from the present recession and its mounting toll of unemployment. All these employees are dismissed, almost invariably upon notice. If redundancy or severance payments applied generally to them a significant charge would apply to the turnover of labour generally. This would involve a major shift in the principles normally applied by this and other industrial tribunals to retrenchment situations. These types of dismissals contrast with dismissals which do not arise in any way from the behaviour of the employee or from ordinary changes in the incidents of employment, but where the employee is dismissed on a collective basis along with others and where the reason for dismissals lies in the force of adverse economic circumstances, restricting employment opportunities and resulting in collective redundancies. Dismissals arising out of technological change or out of major company restructuring have similar characteristics.

I am not aware of any system which loads an ordinary and customary turnover of labour with a significant costs burden in relation to severance as such, or where the object of remedial legislation cannot be fairly described within the three classifications of retrenchment to which I have referred. I would therefore require to be affirmatively persuaded by clear language that it is the intention of the statute to impose upon almost all dismissals, regardless of cause, a costs burden in the middle of the worst economic recession in the last 50 years.” 10

[20] A proper reading of the TCR decisions does not suggest that the Full Bench adopted the analysis of Justice Fisher quoted above. Quite the contrary the Full Bench specifically did not restrict severance or redundancy pay to cases of collective dismissal due to adverse economic circumstances, technological change or major company restructuring. For this reason there is no clear link between the expression “ordinary and customary turnover of labour” as adopted by the TCR decision and terminations due to “seasonal shifts in markets, loss of contracts or changes in contracts not relating to recession, changes in model or product, shifts in marketing emphasis and many other day to day causes removed from the present recession and its mounting toll of unemployment.” The concept of “intermittency in employment” or “following the job” is however, directly relevant to the concept of “ordinary and customary turnover of labour.”
[21] I am satisfied that the Full Bench adopted the expression “ordinary and customary turnover of labour” to encapsulate situations where an “employee is dismissed for reasons relating to his/her performance, or where termination is due to a normal feature of a business.” A normal feature of a business is a reference to businesses where there is intermittency in employment because of the nature of the business. These are businesses where employment, or part of it, is seasonal, casual, or linked to the duration of a particular contract or task. These are situations where the employee has no reasonable or settled expectation of continuous or continuing employment. This will often be reflected in the casual, seasonal, or fixed term or fixed task nature of the employment arrangement.

[22] I am satisfied that the Full Bench did not generally exclude those employed by contracting firms from coverage under redundancy provisions by the “ordinary and customary turnover of labour” exemption. The Australian economy has changed and contracting firms have greatly expanded in the decades since the TCR decisions. There is no basis for concluding that the Full Bench intended to encourage a particular employment model by providing contracting firms with the competitive advantage of lower labour costs by excluding them from redundancy provisions.

[23] There are very few decisions of the Australian Industrial Relations Commission (AIRC) or the Fair Work Commission (FWC) which relate to the exemption for ordinary and customary turnover of labour. In my view there are two good reasons for this. Firstly, the NSW Commission and Court operated on the basis of different legislation, the Employment Protection Act, and the different principles established by Justice Fisher. These decisions are of little assistance in this case. Some of the decisions of other State jurisdictions have followed a similar approach to NSW and/or relate to different award or agreement provisions to those that apply in this Commission. 11

[24] Secondly, as implied in the TCR supplementary decision the ordinary and customary exemption from redundancy consultation and related provisions is largely congruent with the specific exemptions from severance pay for seasonal, casual or fixed term or task employment which had already been granted by the Full Bench in the first TCR decision. The Supplementary TCR decision is in this respect largely a clarification that the exemptions from severance pay in those situations where employees do not have a reasonably settled expectation of continuing employment also apply to the redundancy provisions determined by the TCR decision more generally. Of course as matters have developed subsequently the separate obligations about consultation in redundancy situations have been subsumed in the more general consultation provisions in Awards. The exemption in respect to ordinary and customary turnover of labour now only applies to redundancy or severance pay. It applied to a broader range of rights at the time of the TCR decisions.

[25] In 1994 unions in NSW sought to change the restrictive scope of the TCR provisions in NSW State awards to bring them more in line with the Federal TCR provisions. The Full Bench of the NSW Commission in the 1994 case referred to the position of Justice Fisher in Countdown Stores quoted above and observed:

“That view was not adopted by the Australian Commission in the 1984 TCR cases which extended the payments to redundancy by whatever cause. However, we consider that there remains an unaltered validity to that approach.

Taking a balanced view of the case as a whole, it is appropriate that this aspect of terminations, transitional as it is, be distinguished from redundancies arising from economic recession and financial stress, technological change and company reconstruction or restructuring. Terminations in the context of the general turnover of labour are the norm; they are expected: there is no basis for thinking that some ‘settled expectation’ has been lost. The occurrence of this expected event should not bring with it an unnecessary and unwarranted additional burden on the employer and a windfall gain for the employee.” 12

[26] This decision narrowed the differences between the approach of the AIRC and the NSW Commission but the NSW Commission maintained some difference in the scope of situations where redundancy payments are applicable. They reaffirmed the “validity” of the approach in Countdown Stores which had not been adopted in the TCR cases. This means that many of the decisions of the State Commission continue to be of limited assistance in the circumstances of this case. Many of the decisions and those of other State Tribunals which refer to them continue to be influenced by this narrower view of redundancy and correspondingly wider view of the concept of ordinary and customary turnover of labour.

[27] Notwithstanding this narrower view, a Full Bench of the New South Wales Industrial Relations Commission, in Fashion Fair Pty Ltd v DIR, 13stated that the reason for the loss of the contract was relevant in considering “ordinary and customary turnover of labour”, as follows:

“The concept of "the ordinary and customary turnover of labour" has been considered in subsequent cases. It has frequently been observed that whether an entitlement to redundancy or severance pay accrues upon termination depends upon whether there was "settled" expectation of continued employment or whether the employees were aware that their employment was for a specified period or task...

It is necessary to examine the circumstances of each case and the course of the dismissals (and also the cause of any loss of contract) to determine if the dismissals were truly part of the ordinary and customary turnover of labour.” 14

[28] One other decision in the NSW jurisdiction is of relevance. This decision specifically relates to entitlements under Section 119 of the Fair Work Act 2009. Justice Haylen of the Industrial Court of New South Wales considered the exception in Section 119(1)(a) of the Act in the matter of TWU v Veolia Environmental Service (Australia) Pty Ltd 15 as follows:

“80 Senior counsel for the respondent accepted that, generally, the contract of employment might be determinative of the issue of eligibility for redundancy. A contract that was for a specified term without any provision for renewal or a contract to perform work until a specific task was completed would not qualify. What then can be said about Mr Latai's contract? There was no written contract and on the evidence it cannot be accepted that the employment contract initially offered to him was limited to the time that the Warringah contract held by the respondent expired. It is significant that, during his employment, Mr Latai performed some work (although the extent of that work is difficult to establish from the evidence) on other contracts for Hornsby and Kuringgai. The performance of that work undermines the respondent's contention that he was employed to work only on the Warringah contract and could not expect to have a job at the end of that contract. Indeed, the respondent's own policy was to place people in other work held by the company if they declined or were unsuccessful in obtaining employment with a successor to a contract they had previously held. These matters strongly suggest that the contract of employment taken up by Mr Latai was not one limited in its term to work on the Warringah contract or limited by any notion of the respondent successfully renewing that contract. Clearly, it was not a contract for the performance of a specific task. From the available evidence it was, therefore, a contract, ongoing in nature. Such a contract appears to be fundamentally inconsistent with the class of work excluded from redundancy pay.

81 If the analysis looks more broadly and beyond establishing the terms of the contract of employment (as do the employment protection cases generally), there are aspects of Mr Roberts' evidence that are relevant as dealt with in [78].. It was the respondent's practice to offer whatever employment was available to employees. In Mr Latai's case that is exactly what happened with him performing work on the Warringah, then Hornsby and Kuringgai and finally the Sydney City Council contracts. The reason he was terminated when the City of Sydney contract ceased was that, over a period of time, the company had experienced a falling away in the number of contracts it held: where it had once held eight contracts operating at the same time, when the Sydney City Council contract was lost the respondent company had only three remaining continuing contracts. Mr Roberts said that if this diminution in overall contracts had not occurred, Mr Latai would still be employed.

82 From this history, the Court is satisfied that over a period of 12 years (itself a relevant and material consideration), Mr Latai was entitled to have a settled expectation that his employment would be continuing and he had no reason to believe that, simply because a Council contract was not renewed, he would thereby lose his position with the respondent if working under that contract. The nature of the industry, as demonstrated by the respondent's evidence, was that of gaining and losing contracts and when Mr Latai was employed there was every prospect that, although one contract may not be retained, other contracts may well be picked up in the tender process. Until the respondent company began to lose the total number of contracts it held over the entirety of Mr Latai's employment, there was always an ability to place an employee somewhere else within the respondent's business even though the contract on which that person was working had been lost. That history tells strongly against this employment being regarded as subject to a regular turnover such that an employee like Mr Latai could not have any reasonable or settled expectation of continuing employment. Indeed, in his working experience, it was quite to the contrary. Mr Latai's employment history does not establish cyclical employment - a person entering the employment of the respondent would not assume that employment was, to some major degree, essentially short term or less secure than employment in industry generally. Here, it was simply not customary to dismiss employees upon the loss of contracts having regard to their service history. To use another word adopted by Fisher P, here there was no obvious intermittency of employment.

83 In short, the following conclusions may be reached:

(a) Mr Latai was entitled to have a settled expectation of continuing employment and that expectation increased with the length of his employment and his engagement on other contract work held by the respondent;
(b) Mr Latai's employment was not seasonal or casual and he was not engaged for a specific term or for a specific task. His rate of pay was not loaded for these elements or in recognition of the intermittency of the employment;
(c) it was not customary for the respondent to dismiss people upon the loss of a contract indeed, there was no evidence of employees being dismissed in such circumstances.” 16

[29] There are a few decisions of the AIRC which are of assistance. The first is a decision of DP Keogh in KMC Constructors Pty Ltd & Ors v AMWSU. 17 This decision was made only a few years after the TCR test case decisions. The case related to contract maintenance companies which provided services mainly to companies in the Altona petrochemical complex. The employers argued that the workers made redundant were not entitled to redundancy pay due to the ordinary and customary turnover of labour. DP Keogh first referred to an earlier decision of Commissioner Brown:

“In that case Mr Commissioner Brown also stated, in reference to paragraph 42(a)(i) of the Federal Metal Industry Award, that:

"In the event of a dispute about entitlements at dismissal it is therefore necessary to investigate the job the employee has been doing and its future. If an employee has been engaged for work on a given site and the job involved in his employer's contract has been completed, then the dismissal can be regarded as a fixed term contract or part of that employer's ordinary and customary turnover of labour. On the other hand, when adopting that phrase the Commission did not intend the end of the contract to be the occasion for rather than the cause of the dismissal."

The three Companies perform contract services for other employers predominantly but not solely in the Altona area of Victoria. Each terminated the services of a number of employees in either December 1986 or January 1987. Some of those employees had had less than 1 year's service and it is agreed that they are not concerned in the dispute. However, a number had in excess of one year's service: KMC terminated the services of 8 such persons; Robbins terminated 6 with periods of service ranging from 1 year to 8 years 6 months; and WSC terminated 9 with periods of service ranging from 1 year 3 months to 3 years 10 months.

On the evidence presented in the current proceedings, it would appear that the three Companies have pursued what is in effect a dual employment policy. On the one hand they may engage employees so that they may meet the work requirements of a specific contract. On completion of that contract they may dismiss all or most of those employees. On the other hand the Companies may engage employees for work related to a specific contract and either while that work is continuing or on its completion transfer some or all of those employees to work related to other contracts so that the companies can fulfil their general on-going work requirements. With the renewal of contracts and the obtaining of new contracts by the Companies the employees who fall into the second category can and do attain a degree of permanency and expectation quite different to those in the first category and are not, in my view, subject to what otherwise might be the ordinary and customary turnover of labour in the industry.

The employees dismissed by the three Companies, in my view, fall into this second category and therefore should receive the appropriate severance payments as prescribed by subclause 42(c) of the Award.” 18

[30] The second AIRC decision of note is the Full Bench decision in Tempo Services Ltd v T.M. Klooger & Ors. 19 This was an unfair dismissal matter but there was direct consideration of the “ordinary and customary turnover of labour” exemption:

“For the purposes of this matter, it is neither necessary nor appropriate that we determine in any definitive way the meaning and effect of the expression “ordinary and customary turnover of labour”. Each case depends upon its own circumstances. It is sufficient that, in the particular circumstances of these applications, this was not the cause of the terminations. The terminations were due to the fact that the employer had handed in its cleaning contract. Bearing in mind the length of time that it had held the contract and the length of service of the respondents, we cannot agree that the Commissioner’s conclusion was not one that was open to him.” 20

[31] These decisions make it clear that there is no principle or rule that termination due to the end of a contract will mean that the termination is due to the ordinary and customary turnover of labour. It also demonstrates that the length of time contracts are held and the length of service of the employees are relevant considerations. This is reinforced by the decision of Senior Deputy President Cartwright in Australian Liquor Hospitality and Miscellaneous Workers Union re Nationwide/AWU and LHMU Australian Defence Forces Services Consent Award. 21 Senior Deputy President Cartwright in considering the simplification of an award removed an award clause which excluded terminations resulting from the employer’s loss of contract from redundancy payments:

“The question of whether dismissals arising from the loss of a contract are ‘due to the ordinary and customary turnover of labour’ is one of fact and interpretation. In order to assess whether the dismissals are due to the ‘ordinary and customary turnover of labour’, it is necessary to examine the circumstances of the particular case and the ‘normal features of the business’. That is, the redundancy standard is to be applied to the facts of the case. The current exception in the Award circumvents this analysis and automatically provides that dismissals arising from the loss of a contract held by the employer will not be redundancies. It therefore constitutes a variation of the redundancy standard.” 22

[32] The fourth AIRC decision of note is the decision of Commissioner Lawson in Garcia & Ors v Limro Pty Ltd. 23 This decision dealt with the termination of three employees arising from the loss of part of a cleaning contract.Commissioner Lawson referred to the issue of “ordinary and customary turnover of labour” in this matter, where each of the employees was long serving and the employer had failed to provide any evidence of efforts made to redeploy the applicants, within its total workforce, via alternative contracts it held. As to the entitlements of employees to severance payments, in these circumstances, Lawson C stated as follows:

“The second issue of relevance under s.170CE(3)(e) is the entitlement of the applicants to award severance pay. There is so (sic) disagreement that each of the applicants were long-serving full-time employees, each with 12-13 years of service with the employer, and that their employment was governed by the Cleaning (Building and Property Services)(ACT) Award 1998 [Print Q2605]. The relevant redundancy clause provides:

“19.1 Definition

“Redundancy occurs when an employer decides that the employer no longer wishes the job the employee has been doing to be done by anyone and this is not due to the ordinary and customary turnover of labour.”

What is in dispute in the current matter is the interpretation to be given to the words “... and this is not due to the ordinary and customary turnover of labour”. The Commission was made aware of the history of a disagreement between the union and the relevant industry organisation - the “Australian Building Services Association” (ABSA) - since 2001 over the meaning and application of the disputed words. The union’s views were adequately spelt out in its correspondence to the ABSA dated 25 September 2001 (attachment B to Ms Berry’s statement; Ex W4) in which the union gave a number of examples of the application of clause 19 of the award, including “.... where a cleaning contract is lost and employees are terminated as a result.” In a reply dated 18 October 2001, ABSA (attachment C to Ex W4) notified the union of its view “.. where an employer does not have a contract renewed and is unable to place the employees associated with the contract in other employment, the termination of the employment of those people is clearly part of “ordinary and customary turnover ...”. ABSA went on to give as an example of that situation “.... where a client terminates a contract.”

To the Commission’s knowledge the interpretative impasse remains. I was not taken to any authorities which gave clarity to the impasse. In those circumstances I consider the view of DP Sams in Huseyin Arslan to be apposite: in a contemporary industrial environment employees with many years service with the same employer should not be denied the same rights as other employees which are guaranteed through test case standards. In my view clause 19 of the award obliged the respondent to make certain payments in the event of redundancy. The respondent failed to do so. When applied to the circumstances of the current applications, the terminations of employment - while for a valid reason in each case as discussed above - were harsh, unjust and unreasonable because of unfair treatment meted out to them as a consequence of the loss of part of a contract; the failure to explore genuine alternative employment; and failure to provide reasonable standards of redundancy benefits.

I do not regard these terminations as falling within the definition of “ordinary and customary turnover of labour.”” 24

[33] To determine if a redundancy is for reason of “ordinary and customary turnover of labour” it will be relevant to consider:

● Was the “employee dismissed for reasons relating to his/her performance, or where termination is due to a normal feature of a business?”
● Had a reasonable or settled expectation of continuing employment been established? The length of employment and the nature of the contracts and the history will be relevant.
● Is there intermittency in employment because of the nature of the business? Is this reflected in the casual, seasonal, or fixed term or fixed task nature of the employment arrangement?
● What is the reason for the loss of business? The history of the employer’s contracts and the reasons for them ending will be relevant. Was the end of the contract the occasion for rather than the cause of the dismissal? Does employment generally end at the conclusion of the particular task or contract?

Is termination of employment a normal feature of the Compass business?

[34] Compass submits that the normal features of its business are:

(a) It is a contract catering business, which overwhelmingly derives its income from service contracts it holds with its clients.

(b) It employs two different categories of employees: a ‘core’ group, or ‘nucleus’, whose employment is not conditional upon it holding a particular contract with a client (‘above-unit resources’); and another group employed specifically to service the client’s needs in accordance with a contractual arrangement (‘in-unit’ resources) – the employees the subject of this dispute all fall within the latter category.

(c) It is a normal feature of business within the Compass Group that the employment of in-unit resources is terminated at the conclusion of a client contract.

(d) In accordance with that usual practice, Compass Group dismissed the employees when it ceased to provide services to the Department of Defence pursuant to the RMV Contract.

[35] The evidence of Ms Holmes supports this submission to some extent. However, it is common that Compass contracts are renewed or extended and in addition the group who are employed to service client needs are not always terminated by Compass at the conclusion of the client contract. Some employees are moved to work on other contracts and their employment is not terminated. Further, at the end of a contract Compass sometimes elects to tender for a new contract or a revised contract and sometimes, for commercial or other reasons, elects not to tender for a new or a revised contract. At the end of a contract when Compass does tender for a new or revised contract they are sometimes unsuccessful.

[36] Ms Holmes gave evidence that “our recruitment model is therefore wholly based on the premise that employees are engaged to service a particular client contract rather than the Compass Group business as a whole.” 25 As a general practice letters notifying employees and giving notice that they will be terminated are sent prior to the end of contract in a situation where the contract is not being renewed or varied. Following the issuing of these letters Compass then attempts to facilitate redeployment to a different contract within the Compass Group or assist employees to obtain employment with a new service provider or the incoming contractor.26

“We do this firstly in an effort to retain trained and experienced employees to service other Compass Group contracts, and also to avoid unfair dismissal claims (there is no genuine redundancy if it would have been reasonable to redeploy someone elsewhere within the Compass Group).” 27

[37] If the employee could reasonably be redeployed it would also be difficult to argue that the termination of employment was due to the ordinary and customary turnover of labour. The termination could not be said to be because of the nature of the business in circumstances where the employee could be reasonably redeployed.

[38] Ms Holmes says that there is no guarantee of redeployment. I am satisfied that this does not define the nature of the business as there would be very few if any businesses that could guarantee the redeployment of all employees in situations of business change. As Ms Holmes says the geographical location, the skills and qualifications of the employees and the specific requirements of the business will limit the capacity for redeployment. I am satisfied that these factors do not define the nature of the business. They will be common to many if not most businesses undergoing restructuring for whatever reason.

[39] Ms Holmes says that when redeployment does occur the employee is issued with a new contract of employment. The conditions of employment may vary from those of the earlier contract. The employee is able to choose to accept or reject the offer of redeployment. However, redeployment involves recognition of service and transfer of entitlements. The employment of the employee who is redeployed is not terminated. 28

[40] Ms Holmes gave evidence that over the last 12 months 46% of permanent employees who were working on a client contract which ended were successfully redeployed within the Compass Group to work on different client contracts.

[41] Ms Holmes gave evidence that in respect to contracts Compass has held within the defence sector since 1999, 33% of employees have been redeployed within the Compass Group at the conclusion of the contract.
[42] I am satisfied that the ordinary and customary turnover of labour is about termination of employment due to the nature of the business or the normal features of the business. The business is the Compass Group contracting business. I am satisfied by the evidence of Ms Holmes that the group operates in an integrated way and its business model is about servicing, winning, maintaining and turning over a large number of contracts, particularly focused on hospitality and catering. The core workforce of the business is dedicated to managing a range of contracts. The particular contracts in the defence industry are not a separate business. Ms Holmes stated that it is Compass’ position that the nature of its business as a whole is one where it generally terminates its “in unit” employees at the end of the contracts due to the customary and ordinary turnover of labour.

[43] The “in unit” employees of Compass are not like the first group of employees in the KMC Constructors case always dismissed or almost always dismissed at the end of a specific contract. In fact almost half of the employees are able to continue working on other contracts. It is an essential feature of the Compass Group business that they hold a very large number of contracts at the same time. Many of them are in the same skill area of hospitality and catering but there are contracts in a range of other areas.

[44] I am satisfied that the evidence established that there can be no general conclusion that termination of employment by Compass of the “in unit resources” at the end of a contract is due to the nature of the business and is therefore ordinary and customary turnover of labour. It is not a normal feature of business within the Compass Group that the employment of in-unit resources is terminated at the conclusion of a client contract. I am not satisfied that the terminations are due to a normal feature of the business.

[45] However, even though the exemption of ordinary and customary turnover of labour does not apply generally to those in unit employees terminated by Compass Group at the expiry of a contract it may apply to particular contracts or to particular employees employed under particular contracts.

[46] Whether or not the exemption applies to particular contracts or employees will depend upon the circumstances. The most relevant considerations will be the following:

● If the contract is relatively short term and it is clear to the employee that employment is tied to that contract and that termination will occur at the end of the contract, then it may be that the employment is tied to the particular contract and is a fixed term or task and that the terminations are due to the ordinary and customary turnover of labour.
● If the contract is subject to renewal a number of times and the employment continues through these events then this may, depending upon the circumstances, be an indicator of a settled expectation of continuing employment. There may be a reasonable expectation that the company will seek to get further contracts and/or offer redeployment. This may be an indicator that termination is not due to the ordinary and customary turnover of labour.
● If the company fails to bid for an extension or renewal of a contract this may, depending upon the circumstances, be an indicator that the ending of the contract is the occasion for the dismissal not the reason for it.
● What is said in the employment contracts and other communications about the nature of the employment relationship and its linkage to the contract will be a relevant factor in deciding if there is a settled expectation of continuing employment. However, it will not be the only consideration.

Length of employment, duration of contract with Defence and circumstances surrounding the failure to bid for a new contract.

[47] The period of employment of the specific employees in this case extended through more than one extension of the Compass defence contract. I am satisfied that this tends to suggest that there was a settled expectation of continuing employment and that the termination of employment was not due to the ordinary and customary turnover of labour. The TCR decision established the purpose of severance payments is to compensate for the loss of non-transferable credits and for the inconvenience and hardship imposed by the termination of employment through no fault of the employee. The employees concerned in this case lost their transferable credits even if they obtained a job with the incoming contractor. The employees concerned in this case had significant periods of continuous service and as a result suffered significant loss of non-transferable credits and also suffered hardship and inconvenience.

[48] Ms Holmes gave evidence that the average length of a Compass contract is 3 to 3.5 years. Ms Holmes agreed that the duration of the contract relationship with defence which was more than 9 years was a long period by Compass standards.

[49] Most of the employees working under defence contracts with Compass in the RMV region were not dismissed at the end of the contract. Compass was successful in obtaining a new contract with defence for hospitality work. The contract had a different geographical reach and different scope to that which had been in place for the previous 9 years. Almost all the existing hospitality employees were retained to work under the new contract and were not dismissed. It was only the minority of workers who worked in stores, transport and fire fighting who were dismissed.

[50] In the case of the stores and transport employees they were not advised that Compass was not tendering for a new contract to perform the stores and transport work. I accept the evidence of the employees that they were told that Compass would be tendering for the work. Given the history of successful contract renewals they had a reasonable expectation that this would occur and that Compass would be successful. Mr Klasups gave evidence that no effort was made to redeploy him. He says that he was not told that Compass was not bidding for the stores contract. He gave evidence that the operations manager had said that Compass were bidding for the contract and were 99% sure they would win. Mr Klasups says that he specifically asked if Compass was bidding for stores work and was told yes. 29 I accept Mr Klasups evidence. Compass says that it decided not to tender for the work because the Department of Defence reorganised the geographic regions covered by the tenders and that the scope of work for the broader region included bulk fuel storage facilities and Compass did not have experience or expertise in this area. Compass was required to bid for the stores and transport work in the wider southern NSW region rather than the part of that wider region covered by the RMV contract.

[51] Of course it is a matter for Compass, and Compass alone, to make the commercial decision as to whether or not it tenders for work. However, a decision not to tender on commercial grounds is no different from any other decision by a company which can lead to restructuring and redundancy. It is not a normal feature of the business and a decision not to tender on those grounds does not lead to customary and ordinary turnover of labour.

[52] Compass is a large and diversified company which has shown its capacity over many years to manage contracts in a wide range of areas. I accept the submission of the NUW that Compass is quite capable of finding the expertise to handle bulk fuel sites and that expertise is likely to be found in the workforce of the existing contractor. Compass commonly recruits many employees from the existing contractor when taking over a new contract in an area where Compass does not have its own workforce. Ms Holmes gave evidence that Compass Group did not perform stores and transport services of the nature and scale as it did under the defence contracts anywhere else in Australia. Ms Holmes said that generally professional transport workers were not engaged by Compass outside of Defence. However, Ms Holmes accepted that there were persons employed to perform stores work under other contracts. 30 Compass performed stores and transport work under Defence contracts in the Sydney central region and in Tasmania. I am satisfied that the change from servicing the RMV region to servicing the Southern NSW region is mainly a quantitative change. I accept that there is some qualitative change due to the inclusion of bulk fuel sites.

[53] The nature of the skills required in stores and transport is not fundamentally different from that in other areas of the Compass business such as hospitality and catering. There are some obvious differences but the level of specialisation required is not high.

[54] I am satisfied that the decision not to tender for the stores and transport work was primarily a commercial decision and it is an indicator that the end of the contract was the occasion for the dismissal not its cause.

[55] I reach the opposite conclusion in respect to the fire services contract. Compass made a decision not to tender for the work more than a year before the end of the contract and they advised the employees of this decision. Compass does not hold any other fire services contracts. I am satisfied that it is not an area of particular expertise for Compass. I accept the evidence from Compass that the changed tender requirements meant that Compass would need to tender for a much wider scope of fire service work than at present and that the Department of Defence were looking for a more specialist contractor to provide fire services for all its bases throughout Australia.

[56] There is a significant difference in the nature of the skills required in fire services from other areas of the Compass business such as catering and hospitality and stores and transport. I accept that Compass believed it did not have the operational capability necessary to run a national fire fighting contract. I also accept that considerable capital equipment is required for fire fighting and that Compass only had the equipment for one small area of the country. It may have been possible to tender for less than the whole country but I am satisfied by the evidence of Mr Farthing that a tender for a regional area much larger than the current RMV area would have been required. Compass reasonably assessed that Defence were looking for a contractor to operate nationally in this area. The successful contractor bid to operate the service nationally. Compass advised employees more than twelve months prior to the end of the contract of its decision not to tender and the reasons for that decision. This contrasts with the situation in respect to the stores and transport work where employees were not advised. I am satisfied that the changes in the Department of Defence requirements were significant and led to Compass deciding it was not practical for them to tender for the work. Commercial considerations were obviously involved but they were not predominant. In this situation I am satisfied that the end of the contract was the cause of the dismissals not the occasion.

The employment contracts and information provided to employees

[57] Another relevant consideration is the evidence concerning the extent to which there was an expectation of continuing employment including the information provided to employees and the employment contracts.

[58] Mr Farthing gave evidence of induction presentations made to new employees. The presentations varied depending upon the year of induction. The induction presentations did refer to the length of the contract with Defence. One presentation said that it was “at least 5 years” the others said “5 years with four one year extension options”. Most employee witnesses had no recollection of the slide show or if they recollected the induction they, understandably, could not recall its contents. The induction presentations do not say that the term of employment is the duration of the contract.

[59] Ms Holmes agreed that Compass did not instruct managers to tell workers that they would not be entitled to redundancy payments upon conclusion of a contract. I was not convinced by the evidence of Ms Holmes and Mr Farthing that employees were clearly advised that their employment was only for the period of the current RMV defence contract and that their employment would be terminated at the end of the current RMV defence contract period. I was not satisfied that the issue of customary and ordinary turnover of labour was a significant issue in the bargaining for the Agreements. Mr Farthing gave evidence that he was concerned that employees might leave during the period towards the end of the RMV defence contract and that this might make it difficult to fulfil contract obligations. Mr Farthing agreed that if employees had known of the decision not to tender they might have left before the end of the contract. 31 I am satisfied that this made it less likely that employees were given clear advice that their employment would be terminated at the end of the contract period and that they would not be paid redundancy payments due to the ordinary and customary turnover of labour.

[60] I am satisfied by the evidence of the employees in stores and transport area that they were given the impression that their jobs were likely to be secure and they were not told that their employment would definitely end at the end of a particular contract period. In fact the contract periods were extended a number of times. I accept the evidence of Mr Klasups that he was involved in the negotiations for the Agreement and that no indication was given that Compass would not pay redundancy if they lost the contract. There were some minor issues with Mr Chamber’s evidence about his expectations concerning redeployment but otherwise I found the stores and transport employees were convincing witnesses.

[61] I am satisfied that the stores and transport employees understood that their original engagement was due to the requirements Compass had to deliver on the RMV Defence contract. However, they believed that their job security was linked to their performance and the performance of Compass. They were encouraged that if they performed well it was likely that there would be contract extensions. A linkage between the performance of workers and their employer and job security is a common feature of the private sector. The stores and transport employees knew that if the Defence contract was lost at some point that would impact upon their job security. The employees considered that redeployment was a prospect but not a certainty in that circumstance. I cannot distinguish the expectations of continuing employment for these stores and transport employees from those which are commonly associated with private sector businesses generally. Job security in private sector employment is commonly linked to market conditions, the maintenance of contracts the employer has with other suppliers and customers, and the performance of employees and management.

[62] The fire services employees were asked by Mr Wheelahan for Compass questions about the drafting of their witness statements. The following exchange with Mr Heydon was typical:

“Your witness statement, did you draft that witness statement, did you?---Yes.

All right. Entirely?---Yes.

Word for word?---Yes.

Yes. All right. Have you spoken to the other witnesses in this proceeding for the UFU?---No.

No. All right?---Not in any specifics.

No. Not about this case?---In generalisation of we were attending the case, yes.

All right. And you’ve sworn an oath that the statement is true and correct in every particular; correct?---Yes.

And that you drafted the statement?---Yes.

Yes. Would it surprise you if I told you that almost word for word the other witnesses in this proceeding have adopted large slabs of your statement?---Surprise? I guess so.” 32

[63] I am satisfied that the way in which Mr Wheelahan asked the questions led the witnesses to believe that there was something improper in a witness collaborating with their union in the development of their witness statement. This led to defensiveness on the part of the witness and a natural tendency to emphasise their role in the writing of the statement. However, I am satisfied that the statements made by the fire service employee witnesses were not drafted word for word by the employees themselves. The employee’s answers to these questions raise some doubts about the reliability of their witness evidence. I have taken this into account in evaluating their evidence.

[64] I consider that the fire services employees who gave evidence:

● Were aware, or came to be aware, that the Defence contract was for an initial period of five years.
● Were aware, or came to be aware, of the various extensions to the contract when they occurred.
● Were aware, or came to be aware, that Compass did not have other fire services contracts and that there would therefore be doubts about their continuing employment if the fire services contract came to an end.
● Were aware that Compass was not tendering for a further fire services contract at least 12 months prior to the termination of their employment.
● Had some expectation that Compass would make efforts to redeploy them but I am not satisfied that they were optimistic that redeployment would occur.

[65] Mr Farthing gave evidence that forms were sent to employees to allow them to express an interest in maintaining employment with Compass Group through either relocation or alternative job roles. I accept the evidence of the employees that generally they did not receive such a form. A form was provided to Mr Chambers and I accept that the form was completed, but not signed, by him. Mr Klasups saw the form but it was in the last few weeks prior to the termination of his employment. I accept the evidence of Mr Farthing that employees received a notice about five weeks prior to the termination date which suggested that employees contact management if they wish to be considered for redeployment. The employees gave evidence that they expected Compass to make efforts to redeploy them. Most of the employees gave evidence that they would have considered different jobs to the ones that they were currently performing. Although the letters sent to employees shortly before their termination said that Compass would actively seek redeployment I am satisfied that the evidence of Mr Farthing and of the employees concerned demonstrates that Compass did not make significant efforts to redeploy the employees. I am not satisfied that Compass made significant efforts to redeploy the stores, transport and fire services employees. However, I accept the evidence of Compass that there were limited opportunities in the Southern NSW region.

[66] The TCR decisions identify that where compensation is paid for the finite or intermittent nature of employment this may mean that severance pay is not appropriate. No compensation for the finite nature of the employment was paid to employees engaged under the Agreements.

[67] Most of the employment contracts have the following provision:

“Term of employment - As the Company is a contractor, your employment is subject to operational demands, requirements of the client and tenure of the contract which the Company has with its clients. Continuous employment, salary, working hours and/or conditions cannot be guaranteed during quiet periods in the business, eg semester breaks, sporting calendars and/or if village numbers fluctuate (less or more.

As a result of changes in operational demands, requirements of the client and tenure of the contract, you may be given the opportunity or required to transfer to another location. If this occurs, your salary, terms and conditions may be varied. These changes will be discussed with you and confirmed in writing. Please be aware that if the alternate position offered is not accepted by you then the Company may be unable to continue to employ you further in which case your employment will be terminated by Company giving notice in accordance with the provisions of this contract.

This offer of employment is made on the basis that you may be required to work at different sites, depending on the Company and the Client’s needs.”

[68] I refer to this as the “standard form” contract. Ms Holmes agreed that this was a standard form of contract used by Compass in a range of situations. It is not a contract which was specifically developed for those engaged under the RMV defence contracts. The expression “semester breaks, sporting calendars and/or if village numbers fluctuate” has no relevance to employment under the RMV contracts. The expression “tenure of the contract which the Company has with its clients”clearly encompasses a situation where there is more than one client. The standard form contract suggests that the tenure of Compass’ contracts may affect the duration of employment but the employment contract does not limit the duration of the employment to a particular contract with a particular client. The second and third paragraphs of the contract clause quoted above make it clear that employment is with Compass Group and it may continue with other Compass Group contracts and in other locations.

[69] I am not satisfied that the standard form contract limits the duration of the employment contract to the duration of a particular contract Compass has with defence in the RMV region. Having considered the evidence of the employees I am not satisfied that the employees understood that the contract meant that the duration of their employment was limited to the duration of a particular contract Compass had with Defence in the RMV region. The standard form contracts are consistent with the category of employees described by DP Keogh in KMC Contractors 33 who are employed for a particular contract but who are advised that they may be redeployed to other contracts.

[70] The first employment contract signed by Mr Yates in 2007 is in the standard form. However, he then signed an Australian Workplace Agreement (AWA). That AWA included a provision that “to avoid doubt termination of employment due to a change or loss of contract between Company and a client is a usual reason for change in the workforce.” Another employment contract was signed in 2008 in the standard form. In 2010 he signed a contract which included a provision which said that the period of employment was the duration of the specific RMV contract with defence and that his employment would expire on the date that contract “GSS RMV 01/05” expired. In 2013 he signed a contract which said that “termination of employment due to a change or loss of contract between the Company and a client is a usual reason for a change in the Company’s workforce and is a part of the ordinary and customary turnover of labour within the Company.”

[71] Mr Yates had a number of promotions during the period since 2008. He was given a number of different contracts. Considering his evidence as a whole I am not satisfied that he was conscious of the changes to the words in the various employment contracts. He was aware of ordinary and customary turnover words in the Agreement. The reality that his employment was continuing despite various promotions and that it continued through a number of defence contract extensions was more important and significant.

[72] I am satisfied that the existence of a number of different employment contracts, AWAs and the Agreement all of which purport to describe the nature of the employment relationship was confusing. The attempts to redefine the nature of an ongoing employment relationship after it has already been established in reality many years previously are not particularly helpful to the task of determining if a termination is due to the ordinary and customary turnover of labour.

[73] Mr Kohlhagen had been employed by Compass since 2007. A contract of employment was signed in 2010, more than three years after he had commenced employment. The contract said that his employment with Compass was from a “start date” of 23 August 2010. This was not the start date of the continuing employment relationship. The contract described the “term of employment” in the same terms as in the Yates 2010 contract. I am not satisfied that Mr Kohlhagen understood or could have been reasonably expected to understand that his expectations about the nature of the employment relationship were changed by the 2010 contract.

[74] AWAs and ITEAs for Mr Haydon, Mr Thompson and Mr Sheath contained the same provision that termination due to loss of contract is a usual reason for change in the workforce as found in the Yates 2008 AWA. Mr Haydon’s AWA also says that his employment is subject to the continuation of the contract.

[75] I am satisfied that there is no reason why Mr Sheath would have paid any particular attention to the difference between the wording in his 2008 AWA and that in his various contracts of employment. Mr Sheath had four different contracts. Most were in the standard form. The existence of a number of different contracts, AWAs and the Agreement all of which purport to describe the nature of the employment relationship was confusing. The attempts to redefine the nature of an ongoing employment relationship after it has already been established in reality many years previously are not particularly helpful to the task of determining if a termination is due to the ordinary and customary turnover of labour. Mr Sheath started his work for Compass performing catering and hospitality work for the Defence RMV contract. Mr Sheath’s situation reinforces my conclusion that there is no gulf between the catering and hospitality work and the stores and transport work. Given Mr Sheath’s earlier experience his expectation that Compass would actively seek redeployment including in areas of catering and hospitality was reasonable.

[76] Mr Farthing gives evidence, which I accept, that Mr Haydon was employed under various employment contracts. Mr Haydon’s 2006 AWA was replaced by the Agreement or its predecessor. I am satisfied that Mr Haydon’s AWA was entered into early in the period of his employment with Compass. The applicable definition of ordinary and customary turnover of labour is that contained in the Agreement and not that contained in the AWA.

[77] After signing an AWA Mr Thompson had two standard form contracts. There is no reason why Mr Thompson would have identified the differences in the wording concerning the term of employment or have considered that the wording in the AWA had priority over the wording in the standard form contracts. The AWA was replaced by the Agreement. I am satisfied that the existence of a number of different employment contracts, the AWA and the Agreement all of which purport to describe the nature of the employment relationship was confusing. I am not satisfied that the wording in the AWA is helpful to the task of determining if the termination is due to the ordinary and customary turnover of labour.

[78] Ms Holmes accepted that progression of firefighters is governed by the Agreement based upon qualifications and experience. The firefighters who gave evidence were asked to sign new contracts of employment upon progression. 34 In these circumstances I doubt the firefighters could be expected to pay much attention to subtle changes in the wording of changed employment contracts.

Conclusion and Determination

[79] I have found that:

● The general nature of the Compass business and its practice of redeploying close to half of its in-unit employees at the end of a contract does not support a conclusion that the terminations were a normal feature of the business and due to the ordinary and customary turnover of labour.

● The fact that the employment of the particular employees selected extended for more than six years in each case and continued through more than one extension of the Defence RMV contract is an indicator that the termination of these particular employees was not due to the ordinary and customary turnover of labour. Of course this does not apply to employees with shorter periods of service.

● The failure to bid for a further stores and transport contract was primarily but not exclusively a commercial decision. The ending of the contract was the occasion for the dismissal of the employees not the reason for the dismissal. This is an indicator that the stores and transport employees were not dismissed due to the ordinary and customary turnover of labour.

● The failure to bid for a further fire services contract was not primarily a commercial decision but due to the decision of the Department of Defence to change its requirements. If the duration of the employees’ employment is clearly tied to the duration of the particular defence contract, this is an indicator that the terminations were due to a normal feature of the business.

● The employment contracts and advice given to these particular employees did not clearly tie the duration of the employment to the duration of a particular defence contract. I am not satisfied that employees were aware or should have been aware that their employment would be automatically or naturally terminated at the end of a particular defence contract. There were some AWAs or ITEAs and there were a small minority of employment contracts which did use clear language that the duration of the employment would end when the particular named contract ended. However, the employees who signed these documents also signed other documents during the period of their employment which did not include such a clear specification. I am not satisfied that these employees were aware or should have been aware that their employment would be automatically or naturally terminated at the end of a particular defence contract.

● The employees selected in this case knew that the contract with Defence was the reason they were engaged. They believed that if they performed well it was likely that the Defence contract would be retained. This was reinforced by their experience of continuing employment and extensions of the Defence contract. They were apprehensive when the time for new contract tenders approached. However, this is no different to the situation of an employee in a food manufacturing company where the product space in Coles and Woolworths is under review. I am not satisfied that the employment of these employees was intermittent or limited to the fixed term of a particular contract.

● The employees selected in this case had a reasonably settled expectation of continuing employment.

[80] Taking all these matters into consideration I am satisfied that the particular employees selected were not terminated due to the ordinary and customary turnover of labour. The resolution of the dispute as it relates to these particular employees is that finding and a determination that they should be paid redundancy or severance payments based upon their years of service as per the NES scale.

[81] As agreed as part of the setting of directions in this matter the parties should meet within the next seven days to seek to resolve the issue of the implications of this decision for other affected employees. In the event that the parties do not reach resolution a further conference will be convened by the Fair Work Commission and if necessary this may result in further proceedings and further decisions.

COMMISSIONER

Appearances:

Mr P Wheelahan appeared for Compass.

Mr J Murphy appeared for the UFU.

Mr A Snowball appeared for the NUW.

Hearing details:

2014

Melbourne

November 21

2015
Melbourne

August 10 and 11

1 Construction, Forestry, Mining and Energy Union & Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia and Another v Spotless Facility Services Pty Ltd T/A Spotless[2015] FWCFB 1162.

2 Termination, Change and Redundancy Case No 1 (1984) 8 IR 34.

3 Ibid at page 54.

4 Ibid at page 62.

5 Ibid at page 74.

6 Ibid at page 75.

7 Supplementary TCR Case (1984) 9 IR 115.

8 Ibid at page 128.

9 Shop, Distributive and Allied Employees Association (NSW) and Ors v Countdown Stores and Ors [1983] 7 IR 273.

10 Ibid at 277-278.

11 The following decisions referred to by the parties are examples: DIR v Delaware North (Australia) Pty Ltd (2002) 171 QGIG 395; Lawrence Burnett Pty Ltd v Robinson (1984) 26 AILR 216; Re Nixon Cowra Pty Ltd (1984) 7 IR 451; AMWSUWA v Grant Electrical Industries (1989) 69 WAIG 1019; Ralph M Lee Pty Ltd v Electrical Trades Union of Australia [1995] NSWIRComm 280; Spotless Catering Services Limited v Daley & Ors [1993] 49 IR 434.

12 Re Application for Redundancy Awards (1994) 53 IR 419 at 444.

13 Fashion Fair Pty Ltd v DIR (1999) 92 IR 271.

14 Ibid at 280.

15 TWU v Veolia Environmental Service (Australia) Pty Ltd [2013] NSWIR Comm 22.

16 Ibid at 80.

17 KMC Constructors Pty Ltd & Ors v AMWSU [1987] AIRC 92.

18 Ibid.

19 Tempo Services Ltd v T.M. Klooger & Ors (2004) 136 IR 358.

20 Ibid at 16.

21 Australian Liquor Hospitality and Miscellaneous Workers Union re Nationwide/AWU and LHMU Australian Defence Forces Services Consent Award [2001] AIRC 542.

22 Ibid at 26.

23 Garcia & Ors v Limro Pty Ltd [2003] AIRC 726.

24 Ibid at [29]-[32].

25 Exhibit Compass 2 at para 25.

26 Exhibit Compass 2 at paras 30 and 31.

27 Exhibit Compass 2 at para 31.

28 Exhibit Compass 2 at paras 33 and 34 and PN1115 and PN1135.

29 PN24 to PN28.

30 Exhibit Compass 2 at para 41.

31 PN1387.

32 PN590 to PN598.

33 KMC Constructors Pty Ltd & Ors v AMWSU [1987] AIRC 92.

34 PN1246 to PN1248.

Printed by authority of the Commonwealth Government Printer

United Firefighters' Union of Australia v Compass Group Pty Ltd

[2015] FWC 6055

3 SEPTEMBER 2015