‘Obtaining acceptable employment’ for employees upon redundancy

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The Full Federal Court recently handed down an important decision on the interpretation of s.120 of the Fair Work Act. This section enables an employer to apply to the Fair Work Commission (FWC) for an order reducing the amount of redundancy pay to which an employee is entitled because the employer “obtains other acceptable employment for the employee”.

In FBIS International Protective Services (Aust) Pty Ltd v MUA, the Court considered circumstances involving a contracting firm which lost a contract with a client. The employees of the outgoing contracting firm were made redundant but were hired by the incoming contractor. The issue at hand was: had the outgoing contractor done enough to meet the test that it had obtained other acceptable employment for the redundant employees with the incoming contractor?

In earlier Court and Commission decisions, the test that had been applied was whether the outgoing contracting firm was “a strong moving force” behind its employees obtaining employment with the incoming contracting firm. However, in its FBIS decision, the Court held that the former “strong moving force test” was an unnecessary distraction.

The Court cited the following definition of “obtain” in the Shorter Oxford Dictionary: “To come into the possession or enjoyment of (something) by one’s own effort, or by request; to procure or gain, as the result of purpose and effort; hence, generally, to acquire, get.”

The Court then stated that “the possession must be the result of the conscious, intended, acts of the person concerned, as distinct from, for example, coming into possession of something by gift or inheritance”.

The Court decided that FBIS had not done enough to obtain employment for its redundant employees with the incoming contractor. However, importantly the Court has not ruled out applications by other outgoing contractors being successful if they do more than FBIS to obtain employment for their employees with the incoming contractor.

Any members faced with redundancy, outsourcing or transfer of business situations are urged to contact Ai Group for assistance or advice on: 1300 78 38 44.

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Stephen Smith
Ai Group's Head of National Workplace Relations Policy, Stephen Smith is responsible for workplace relations policy development and advocacy. He regularly represents industry’s views to governments and opposition parties, and in numerous inquiries and major cases. He is Special Counsel for, and Chairman of the Board of, Ai Group Workplace Lawyers, a national law firm operated by Ai Group.

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