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Not Spotless on severance pay – the gathering storm for casuals

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Not Spotless on severance pay – the gathering storm for casuals

6 July 2020 by Andrew Douglas

What is a casual in respect of permanent employees’ entitlements is become clearer every day following the two Workpac cases and now Berkeley v Uniting Voice.

In a series of cases involving Spotless and its subsidiary, Berkeley (who provide security, cleaning and catering on long-term contracts to organisations like Lend Lease and shopping centres), long-term casuals were held to be entitled to severance pay.

Key facts

  1. Employees were casuals and most contracts did not say employment would end at end of the contract with host (e.g. Lend Lease at the Sunshine Plaza);
  2. Spotless or its subsidiary commonly had long standing contracts that were repeatedly renewed;
  3. Employees did not know continuity of employment was linked to the existence of a contract with host at time of employment and
  4. Employees had a reasonable expectation of continuing employment.

When Spotless/or subsidiary Berkeley lost the contract with its host, most employees lost their job and couldn’t be transferred to the new contractor. Uniting Voice said they had entitlement to severance pay under s.119. Spotless and Berkeley said it was part of ‘ordinary and usual’ turnover’, a phrase drawn from the TCR case now found in the FWA, and no severance pay was payable.

The Full Federal Court said that Spotless had the onus to prove the s.119 exception (ordinary and usual turnover of business-s.119(1)(a)) to avoid paying redundancy. The exception under the old TCR case had been held to mean where a business has an intermittency of employment, for example a genuine casual, seasonal and fixed contract employment. But in the FWA, it means more. It requires the employer to show that turnover is “habitual or a matter of long standing practice’ for the specific business, not for the Group of businesses. In Berkeley’s case,  history reveals there had been little or no turnover for a long time. As a result, it was reasonable for employees to enjoy an expectation of continuing employment, and severance payment was ordered.

Lessons

  1. Where you employ people for fixed contracts, make sure the employee knows this and that the contract refers to employment ending at the conclusion of the contract;
  2. Provision for severance payments in future contracts where renewal is likely;
  3. Beware of the current move with our Federal Court to grant permanent employment benefits to long-term casual employees following the two Workpac cases and now Berkeley and
  4. The over-riding test in severance pay cases is whether the employee has a reasonable expectation of continuing employment. For an employer to prove the exception of usual and customary turnover to avoid severance pay, they will need compelling historical evidence that proves a history of high turnover.

Have a question or need advice?

Our team is available to clarify any questions you have and provide the right advice for your business and workforce. Contact Andrew Douglas at andrew.douglas@fcwlawyers.com.au or on 0488 151 503.

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