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The Australian Industrial Relations Commission recently found that employees were not entitled to severance payments on redundancy when they were offered acceptable alternative employment with a new employer.

Background

Boeing Constructors, Inc. (Boeing) provided operations and maintenance services under a contract with the United States Government at Pine Gap in the Northern Territory.

The contract expired in 2004 and the US Government invited tenders for a new contract for these services. Boeing tendered for the job but was unsuccessful, with the contract instead being let to Raytheon Australia Pty Ltd (Raytheon).

Boeing worked closely with Raytheon and ensured that all of its employees were offered comparable employment with Raytheon when the new contract commenced.

Redundancy triggered?

Boeing's certified agreement provided that redundancy entitlements were triggered when 'a position occupied by an employee is no longer required' by Boeing and when that decision led to the termination of employment.

The question for the Australian Industrial Relations Commission (AIRC) was whether the employees, having secured a comparable offer of employment with Raytheon, were entitled to the severance payments specified in Boeing's certified agreement.[1]

AIRC consideration

Boeing submitted that the focus in the redundancy clause on 'a position' suggested that redundancy did not arise simply because of a change in the employing entity. In support of this, Boeing referred to the recent decision in Amcor,[2] which accepted that a position can continue even if the employer changes. However, the AIRC did not accept this submission, determining that the identity of the employer was a relevant consideration under the specific clause of the certified agreement.

The next matter considered by the AIRC was the effect of Boeing employees being offered alternative employment with Raytheon. The clause in Boeing's certified agreement did not except the situation when offers of acceptable alternative employment are made, as is usually the case in redundancy clauses. Boeing argued that the certified agreement could be read in tandem with the Space Tracking Industry Award 1998 (the award). The award redundancy clause allows an employer to apply to the AIRC to have the general severance pay prescription varied when the employer obtains acceptable alternative employment for a particular employee.

The AIRC then considered whether the two redundancy clauses could work together. It determined that the redundancy clause in the agreement was not intended to cover the field, and therefore the award provision allowed for the AIRC to grant Boeing an exemption. It held that there had been an offer of acceptable alternative employment by Raytheon, and granted the variation requested by Boeing so that it was able to avoid redundancy payments under the certified agreement. The outcome can be contrasted with a decision of the New South Wales Industrial Relations Commission, taking the opposite view in similar circumstances.[3]

Lesson for employers

Even after the Amcor decision, it remains preferable to deal with the issue of redundancy in agreements by including a provision that no entitlement accrues where acceptable alternative employment is obtained for the employee with a new employer. As this case demonstrates, there may be scope to refer to a provision in the relevant Award to recover the oversight when acceptable alternative employment is secured. However, much depends on the words used in the certified agreement and it is preferable to avoid the risk and include the exemption in clear and express terms. Footnotes [1]Boeing Constructors, Inc: Space Tracking Industry Award 1998, 16 June 2005, SDP Cartwright, PR958319. [2]Amcor Limited v Construction, Forestry, Mining and Energy Union [2005] HCA 10 (9 March 2005). [3]Unilever Australia Limited v The Australian Workers' Union, New South Wales and Another [2005] NSWIRComm 2. >/font>