TWO RECENT High Court rulings have left employers breathing a sigh of relief following fears they could face huge liabilities
TWO RECENT High Court rulings have left employers breathing a sigh of relief following fears they could face huge liabilities.
The High Court ruled earlier this month that packaging giant Amcor was not liable for severance payments to employees following the sale of its paper mills to Paper Australia in 1998. Following the sale of the mills, Amcor wrote to mill employees advising that their employment would be terminated but included an employment offer from Paper Australia on the same terms and conditions of employment with Amcor.
However, the certified agreement governing the terms and conditions of Amcor employees’ contracts provided for severance pay when an employee’s position became redundant and the employee was retrenched.
The Full Bench of the Federal Court had upheld an original decision on appeal and stated that Amcor breached the certified agreement by failing to provide employees with severance pay. However, on appeal to the High Court, the verdict was overturned.
“The High Court held that the employees were not entitled to severance pay because their positions had not become redundant,” said Sally Woodward, a senior associate in workplace relations at Deacons lawyers. “That is, although the particular employer, Amcor, no longer required the position to be filled, the business still required the position to be filled.”
The decision saved Amcor several million dollars in liabilities, and should allow employers to sell their businesses and restructure internally without fear of incurring liability for redundancy payments.
But, Woodward added, employers should still be careful in terms of disposal of businesses. “The High Court noted that the position was not redundant because the new employer required the position to be filled in the new business on identical terms,” she said.
“If as a result of the transfer, there are any changes to the position, or to the terms and conditions attached to the position, there may be some argument that the specific position has not continued and is redundant, as a result of which the employees would be entitled to severance pay.”
Meanwhile, the High Court also recently overturned a Full Bench of the Federal Court decision regarding transfer of industrial instruments in outsourcing contracts.
After Medical Diagnostic Imaging Group (MDIG) ceased providing radiology services to a medical clinic operated by Region Dell, the clinic immediately entered into a contract with Gribbles Radiology to replace the lost services. Gribbles offered employment to a number of MDIG radiographers to perform the same work they had for MDIG.
However, just under a year later, Gribbles terminated the former MDIG radiographers’ employment on redundancy grounds. The employees sought severance pay on the basis that their Awards, to which MDIG was a named party, had been transferred to Gribbles.
While there was no direct legal relationship between MDIG and Gribbles, the Full Federal Court held that Gribbles was a successor to MDIG in business and by failing to provide severance pay, had breached the Award.
The High Court upheld Gribbles’appeal on the grounds that the firm was not a successor to any part of MDIG’s business because it did not enjoy any asset of MDIG which MDIG had used in the pursuit of its business activities.
“The decision continues the approach of the High Court, set down in PP Consultants, of focusing on the commercial nature of the employer’s business rather than the nature of the activities undertaken in that business, in deciding whether there has been an assignment, transmission or succession under the Workplace Relations Act,” said Neil Napper, workplace relations partner at Deacons.
