RUBBER, PLASTIC AND CABLE MAKING INDUSTRY - GENERAL - AWARD 1998

Shop, Distributive and Allied Employees Association

RETAIL AND WHOLESALE INDUSTRY - SHOP EMPLOYEES - AUSTRALIAN CAPITAL TERRITORY - AWARD 2000

Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union

AWARD, 1998 - PART I**

Australian Municipal, Administrative, Clerical and Services Union

RUBBER, PLASTIC AND CABLE MAKING INDUSTRY - GENERAL - AWARD 1998

INFORMATION TECHNOLOGY INDUSTRY (PROFESSIONAL EMPLOYEES) AWARD 2001

AWARD, 1998 - PART I**

The Australian Retailers Association (Victoria)

Victorian Employers' Chamber of Commerce and Industry

BUSINESS EQUIPMENT INDUSTRY - TECHNICAL SERVICE - AWARD 1999

RUBBER, PLASTIC AND CABLE MAKING INDUSTRY - GENERAL - AWARD 1998

LIQUOR AND ACCOMMODATION INDUSTRY - RESTAURANTS - VICTORIA - AWARD 1998

RETAIL AND WHOLESALE INDUSTRY - SHOP EMPLOYEES - AUSTRALIAN CAPITAL TERRITORY - AWARD 2000

AWARD, 1998 - PART I**

The Restaurant and Catering Association of Victoria

LIQUOR AND ACCOMMODATION INDUSTRY - RESTAURANTS - VICTORIA - AWARD 1998

s.170FB applications for employment termination orders

Victorian Employers' Chamber of Commerce and Industry and others

Shop, Distributive and Allied Employees Association

Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union

Printing Industries Association of Australia and others

Australian Municipal, Administrative, Clerical and Services Union

Victorian Employers' Chamber of Commerce and Industry and others

[1] In our decision of 26 March 2004 we made provision for the filing of draft orders to vary the awards before us to give effect to our decision.[1] It has since emerged that there is disagreement about the form the orders should take. For that reason we listed the applications for further hearing on 22 April 2004. On that day we made provision for further written submissions. Those submissions have now been made. In this decision we deal with all of the outstanding issues.

(a) whether the severance pay scale applying to employers, other than employers of fewer than 15 employees, should be modified to take into account State and Territory long service leave legislation;

(b) the commencement date of service for the purpose of the severance pay scale to apply in businesses which employ fewer than 15 employees;

(e) a number of matters arising in relation to particular awards.

[3] Our decision of 26 March 2004 (the March decision) introduced a new severance pay scale for employers other than those employing fewer than 15 employees. The scale is as follows:

[Source: Redundancy Case - March 2004 decision, PR032004, para [153].]

[4] In arriving at a scale which extended the earlier scale we indicated that we had taken into account the standard federal long service leave provision. Pursuant to that provision employees have a right to a pro rata long service leave payment on termination of employment for redundancy after 10 years of service. The payment is based on 13 weeks' leave after 15 years' service. We also indicated that application might be made for an adjustment in the scale in the case of employees accruing a right to pro rata long service leave on termination for redundancy with less than 10 years of service.

"[155] It should be clear that our decision in relation to the new severance pay scale is based on the standard federal long service leave provision. Not all employees under federal awards are covered by the standard federal long service leave provision. In some cases employees under federal awards whose employment is terminated by reason of redundancy may be entitled to a pro rata payment for long service leave even though they have less than 10 years' service. While the Commonwealth provided material illustrating the position in relation to the standard long service leave provision, insufficient material was advanced to enable us to form a conclusion about the extent to which employees covered by federal awards accrue a right to pro rata long service leave on being made redundant with less than 10 years of service. For that reason we shall provide for applications to be made to vary the severance pay amounts to take such situations into account. Whether an adjustment should be made in the scale, and if so of what kind, are matters which could only be decided in the circumstances of the particular case."[2]

[5] The Australian Chamber of Commerce and Industry (ACCI) and the Australian Industry Group (AiG), supported by the Commonwealth, have now submitted that in accordance with the principles outlined in our decision the new severance scale should be modified to reflect the differences in the various State and Territory long service leave schemes. The scales proposed (for employers of at least 15 employees) are as follows:

[6] ACCI provided us with the following summary of the long service leave legislation in the States and Territories:

[7] The Australian Council of Trade Unions (ACTU) submitted that any variation should be considered on a case by case basis. It drew our attention to the concluding sentence of paragraph 155 of the March decision, namely: "Whether an adjustment should be made in the scale, and if so of what kind, are matters which could only be decided in the circumstances of the particular case."[3] The ACTU submitted that we should include in the awards only the scale set out in our March decision, reserving leave for application to be made in specific cases of termination for redundancy in which long service leave provisions other than those applying federally might be relevant.

[8] While the ACTU opposed the prescription of any severance pay scale other than the one in the March decision, it nevertheless put forward the scales it submitted should be adopted if the Commission decides to differentiate on the basis of the State long service leave provisions. The ACTU proposed that the scale in the March decision should only be applied in Victoria and Western Australia. In the other States and in the Territories it proposed the following scales:

[Source: ACTU Written Submission Re Orders Redundancy Case, April 2004, extracted from tables 2-4.]

[9] In approaching this issue long service leave must be seen in its proper context. Our decision to increase severance pay for employees with 5 years' service or more was reached after considering a range of factors. Those factors were the inconvenience and hardship associated with redundancy, including the trauma of dismissal; loss of non-transferable credits, such as sick and long service leave; loss of employment security, inferior conditions, loss of seniority, lower job satisfaction or diminished job status.[4] It is obvious that loss of non-transferable credits is only one of a number of relevant factors. Our decision also makes it clear that in our view it is not appropriate to fully compensate employees for loss of non-transferable credits.[5] Finally, long service leave is not the only non-transferable credit. Against that background we turn to the two issues which differentiate the long service leave arrangements throughout the Commonwealth. The first issue is the number of years continuous service required in order to qualify for a pro rata payment on termination of employment for redundancy. The second issue is the rate at which long service leave accrues.

[10] In relation to the first issue, the number of years continuous service required in order to qualify for a pro rata payment on termination of employment for redundancy, we have set out the features of the legislation applying in each State and Territory earlier. In New South Wales and the Australian Capital Territory there is a pro rata entitlement after 5 years' service. In Queensland, South Australia, Tasmania and the Northern Territory there is a pro rata entitlement after 7 years' service. In Victoria and Western Australia 10 years' service is necessary, the standard upon which the scale in our March decision is based. It is clear that at least three different scales would be required if we decided to fix severance pay by reference to pro rata long service leave accruals.

[11] Turning to the second issue, the rate at which the leave entitlement accrues, in the Australian Capital Territory and in all States except South Australia the pro rata entitlement is based on 13 weeks' leave after 15 years of service. In South Australia and the Northern Territory the pro rata entitlement is based on 13 weeks' leave after 10 years of service. The rate of accrual is different. For this reason the ACTU submitted that the scale for employees in South Australia and the Northern Territory should differ from the scale for employees in Queensland and Tasmania. It was submitted in particular that there should be an increase in the amount of severance pay for years of service below 7. ACCI provided a further proposal which it submitted took account of the different accrual rates. We note in passing that if the ACTU approach were to be adopted consistency might require that there be a commensurate reduction in the level of severance pay after the accrual. It is not necessary that we express any concluded view about the effect of differing accrual rates. It is sufficient that we indicate that if differing accrual rates were taken into account a further layer of complexity would need to be dealt with in establishing severance pay levels.

[12] We have also considered the ACTU's submissions concerning the alleged differing probability of employees reaching 5, 7 and 10 years of service. If accepted as relevant this consideration would have the potential to lead to a general reopening of the level of severance pay.

[13] While there is some merit in the proposals of the employers and the ACTU respectively, the proposals differ. And they differ because of the weighting given to various factors. This shows the inherent difficulty of developing a national standard which satisfies all interests. We think, however, that differentiation on a State basis will lead to more problems than it will solve. It would require the adoption of a range of different scales with the potential for confusion, disharmony and further argument. Having carefully considered the submissions of the employers and the Commonwealth we remain of the view that there should be a single national minimum standard for severance pay in the Commission's awards. While this means that the issue must be dealt with at a certain level of generality, the alternative is a multiplicity of scales based on a variety of different circumstances, including, but not limited to, long service leave provisions. Indeed, once the concept of one Federal standard is abandoned in favour of differentiation on a State and Territory basis, real issues might arise concerning the adoption of the severance pay scales of the various State industrial authorities.

[14] In this area the exercise of broad judgment based on principle is likely to produce more practical outcomes than fine calculations based to a large extent on contingencies. Furthermore, as we indicated earlier, loss of non-transferable long service leave credits should be seen in context. It is one element, certainly an important element, but only one element of the overall rationale for severance pay. It seems to us that the submissions of all parties give long service leave a greater significance than it should be given.

[15] It was submitted by the employers, supported by the Commonwealth, that unless we decide upon the appropriate level of severance pay in each State there will inevitably be a number of test cases at Full Bench level to resolve the situation State by State. For the reasons given we do not contemplate that occurring. As we indicated in the March decision, variations to the severance pay scale should only occur in particular redundancy situations on the basis of all of the relevant circumstances. Given the desirability of one national standard for severance pay we would expect such variations to be rare. A provision permitting applications for variation has been included in our orders and in the model termination and redundancy clauses. We add that any departure from the standard should be consistent with the reasons for our March decision and with these reasons.

[16] We turn to the second major issue, the commencement date of service for the purpose of the severance pay scale to apply in businesses which employ fewer than 15 employees. For simplicity we shall refer to such businesses as small businesses.

[17] ACCI contended that service for the calculation of the new severance pay obligation for small business should operate prospectively. It submitted that it is not clear from the March decision what the Bench intended in relation to the commencement date of service and that ACCI's approach is consistent with the findings in the decision with respect to the capacity of small business to make severance payments, including those awarded.

[18] ACCI submitted that it would be unfair to impose a contingent liability in relation to prior service because the employers have not had the opportunity to make provision for it. It further submitted that "the unique considerations of small businesses" should be taken into account. The retrospective element completely changes the economic and financial assessment for small business and significantly affects the basis upon which earlier business decisions, including decisions about employment, have been made. In this respect it was submitted that small businesses do not have the financial capacity to fund such obligations when faced with financial difficulties. Reference was made also to s.146 of the Workplace Relations Act 1996, to Commission decisions and to long service leave legislation said to support ACCI's approach.

[19] The AiG and the Commonwealth supported ACCI's submissions.

[20] The ACTU opposed ACCI's proposal on the basis that no submissions were made about the issue during the substantive hearings. It pointed out that the nature of the claim was clear and the opponents of the claim should have advanced the proposal during the case, not after the decision. It also submitted that the incapacity to pay provision is available to small businesses and that should alleviate any problems of financial incapacity. We were reminded of the finding in the March decision that 70 per cent of small businesses which reduce employment are profitable at the time. The ACTU also raised the possibility of employers reducing the number of employees in stages so that the employer becomes a small business whereupon the remaining employees have no entitlement to severance pay. Finally the ACTU submitted that the claim for severance pay for employees of small businesses had been lodged in August 2002 and accordingly small businesses had ample notice of the possibility the claim would be granted.

[21] It is unfortunate that this issue has been raised at this late stage in the proceedings. Nevertheless we think there is some merit in the proposal advanced by ACCI. In particular, we accept that small business employers may not have the financial reserves necessary to meet a redundancy situation immediately, even though currently trading profitably. For these reasons, notwithstanding its lateness, we have some sympathy for the submission. The reasons which have already lead us to adopt a less onerous severance pay scale for small business also support the submission. We have decided that the severance pay scale to apply to small business should not take into account service rendered prior to the operative date of any order giving effect to the March decision.

[22] As we pointed out in the March decision, the incapacity to pay provision in the standard severance pay clause is available to businesses which cannot meet the obligations of the new scale. It provides employers which cannot afford to pay with an opportunity to seek relief from their severance pay obligations so that such employers do not go out of business simply because of those obligations.

[23] So as to leave no room for doubt, we note that no submission was made that the extension to the severance pay scale for employers of 15 or more employees should not apply to service prior to the date of operation of the orders. Prior service will be taken into account in the case of employees of those employers.

[24] We turn now to the operative date of the variations. We have considered all of the submissions. In the March decision we provided for an operative date 28 days from the date of the decision. It is apparent that 28 days is well past. It has not been possible to finalise the orders within the 28 days initially allowed. It was necessary to hear the parties on the form of the orders, to consider their submissions and then to finalise our decision and the orders themselves. Because of the delay and bearing in mind the nature and extent of the changes which these orders bring about, the orders should operate from today. We do not think the case for further delay in operation has been made out.

[25] Two issues have arisen concerning the implementation of some terms of the clauses which the major parties have agreed upon. In each case the issue relates to the desire of a party to retain a particular award provision rather than adopt a term of one of the agreed clauses.

[26] The first issue was raised by the Liquor, Hospitality and Miscellaneous Union (LHMU) and it concerns the Liquor and Accommodation Industry - Restaurants - Victoria - Award 1998 (the restaurants award).[6] The LHMU objected to the definition of redundancy in the generally agreed redundancy disputes procedure. On that aspect the LHMU prefers the wording which was arrived at through the award simplification process and which now appears in the restaurants award. We were told that the objection was made clear to the employer parties at the time the redundancy disputes procedure was agreed to by the ACTU. ACCI submitted that the agreed definition should be adopted for all awards, including those to which the LHMU is a party.

[27] The second issue was raised by ACCI in relation to the Storage Services - General - Award 1999,[7] the restaurants award and potentially a number of other awards. ACCI objected to the implementation of the description of serious misconduct which appears in the agreed clause. It submitted that the description of serious misconduct in those awards, which includes references to malingering and inefficiency, should remain as currently drafted. On this issue the ACTU submitted that the terms of the agreed clause should be applied.

[28] We can deal with both issues together. The LHMU's objection was known to the parties at the time agreement was reached on the terms of the new redundancy disputes procedure clause. ACCI's objection to the application of the description of serious misconduct in a number of awards was not made clear in the same way. Despite this difference, we do not think that in the circumstances it is appropriate to force the agreed changes on unwilling parties. We have decided that in relation to both matters the wording of the current clauses should be retained. If any party to the affected awards seeks to vary the relevant clause to fully reflect the wording of the agreed clause this should be the subject of a separate application.

[29] There is disagreement between the parties concerning the format of the severance pay clause. The disagreement primarily concerns the manner in which the severance pay obligation of employers of fewer than 15 employees is to be expressed. We prefer the format proposed by ACCI and we have adopted it in our orders.

[30] We agree with the proposal jointly put forward that we should publish model termination and redundancy clauses which incorporates the agreed and arbitrated changes resulting from the proceedings. It should be understood that variations in the model clauses are permissible but generally only when the variation is necessary in order to accommodate the individual circumstances of particular industries or for drafting clarity in a particular award context. The model termination and redundancy clauses are in Appendix A to this decision.

[31] The ACTU submitted that it is not necessary that the model clauses should include the redundancy disputes procedure which is set out in the March decision.[8] We did not understand ACCI to have a different view although it was suggested that there should be some reference in this decision to each of the provisions introduced by the March decision. We shall not include the redundancy disputes procedure in the model clauses, but we think it is desirable to set it out in this decision. The redundancy disputes procedure, in its final form, is as follows:

1. Sub-clauses 2 and 3 impose additional obligations on an employer where an employer contemplates termination of employment due to redundancy and a dispute arises (`a redundancy dispute'). These additional obligations do not apply to employers who employ fewer than 15 employees.

2. Where a redundancy dispute arises, and if it has not already done so, an employer must provide affected employees and the relevant union or unions (if requested by an affected employee) in good time, with relevant information including:

(b) the number and categories of workers likely to be affected; and

(c) the period over which any proposed redundancies are intended to be carried out.

3. Where a redundancy dispute arises and discussions occur in accordance with this clause the employer will, as early as possible, consult on measures taken to avert or to minimise any proposed redundancies and measures to mitigate the adverse affects of any proposed redundancies on the employees concerned."

[32] The orders varying each of the awards are published at the same time as this decision.

N.1.1 In order to terminate the employment of an employee the employer must give to the employee the period of notice specified in the table below:

N.1.2 In addition to the notice in N.1.1, employees over 45 years of age at the time of the giving of the notice with not less than two years continuous service, are entitled to an additional week's notice.

N.1.3 Payment in lieu of the prescribed notice in N.1.1 and N.1.2 must be made if the appropriate notice period is not required to be worked. Provided that employment may be terminated by the employee working part of the required period of notice and by the employer making payment for the remainder of the period of notice.

N.1.4 The required amount of payment in lieu of notice must equal or exceed the total of all amounts that, if the employee's employment had continued until the end of the required period of notice, the employer would have become liable to pay to the employee because of the employment continuing during that period. That total must be calculated on the basis of:

N.1.4(a) the employee's ordinary hours of work (even if not standard hours); and

N.1.4(b) the amounts ordinarily payable to the employee in respect of those hours, including (for example) allowances, loading and penalties; and

N.1.4(c) any other amounts payable under the employee's contract of employment.

N.1.5 The period of notice in this clause does not apply:

N.1.5(a) in the case of dismissal for serious misconduct;

N.1.5(c) to employees engaged for a specific period of time or for a specific task or tasks;

N.1.5(d) to trainees whose employment under a traineeship agreement or an approved traineeship is for a specified period or is, for any other reason, limited to the duration of the agreement; or

N.1.6 Continuous service is defined in clause ?.

N.2.1 The notice of termination required to be given by an employee is the same as that required of an employer, save and except that there is no requirement on the employee to give additional notice based on the age of the employee concerned.

N.2.2 If an employee fails to give the notice specified in N.1.1 the employer has the right to withhold monies due to the employee to a maximum amount equal to the amount the employee would have received under N.1.4.

Where an employer has given notice of termination to an employee, an employee shall be allowed up to one day's time off without loss of pay for the purpose of seeking other employment. The time off shall be taken at times that are convenient to the employee after consultation with the employer.

Where a business is transmitted from one employer to another, as set out in clause R - Redundancy, the period of continuous service that the employee had with the transmittor or any prior transmittor is deemed to be service with the transmittee and taken into account when calculating notice of termination. However, an employee shall not be entitled to notice of termination or payment in lieu of notice for any period of continuous service in respect of which notice has already been given or paid for.

R.1.1 Business includes trade, process, business or occupation and includes part of any such business.

R.1.2 Redundancy occurs where an employer has made a definite decision that the employer no longer wishes the job the employee has been doing done by anyone and that decision leads to the termination of employment of the employee, except where this is due to the ordinary and customary turnover of labour.

R.1.3 Small employer means an employer who employs fewer than 15 employees.

R.1.4 Transmission includes transfer, conveyance, assignment or succession whether by agreement or by operation of law and transmitted has a corresponding meaning.

R.1.5 Week's pay means the ordinary time rate of pay for the employee concerned. Provided that such rate shall exclude:

• overtime;
• penalty rates;
• disability allowances;
• shift allowances;
• special rates;
• fares and travelling time allowances;
• bonuses; and
• any other ancillary payments of a like nature.

Where an employee is transferred to lower paid duties by reason of redundancy the same period of notice must be given as the employee would have been entitled to if the employment had been terminated and the employer may at the employer's option, make payment in lieu thereof of an amount equal to the difference between the former ordinary rate of pay and the new ordinary time rate for the number of weeks of notice still owing.

R.3.1 Severance pay - other than employees of a small employer

An employee, other than an employee of a small employer as defined in R.1, whose employment is terminated by reason of redundancy is entitled to the following amount of severance pay in respect of a period of continuous service:

R.3.2 Severance pay - employees of a small employer

An employee of a small employer as defined in R.1 whose employment is terminated by reason of redundancy is entitled to the following amount of severance pay in respect of a period of continuous service:

R.3.3 Provided that the severance payments shall not exceed the amount which the employee would have earned if employment with the employer had proceeded to the employee's normal retirement date.

R.3.4 Continuity of service shall be calculated in the manner prescribed by clause [ ]. Provided that service prior to [ ] shall not be taken into account in calculating an entitlement to severance pay for an employee of a small employer pursuant to R.3.2.

R.3.5 Application may be made for variation of the severance pay provided for in this clause in a particular redundancy situation in accordance with the Redundancy Case Decision [PR062004, 8 June 2004].

An employee given notice of termination in circumstances of redundancy may terminate his/her employment during the period of notice set out in clause N - Notice of Termination. In this circumstance the employee will be entitled to receive the benefits and payments they would have received under this clause had they remained with the employer until the expiry of the notice, but will not be entitled to payment in lieu of notice.

R.5.1 An employer, in a particular redundancy case, may make application to the Commission to have the general severance pay prescription varied if the employer obtains acceptable alternative employment for an employee.

R.5.2 This provision does not apply in circumstances involving transmission of business as set in R.7.

R.6.1 During the period of notice of termination given by the employer in accordance with N.1, an employee shall be allowed up to one day's time off without loss of pay during each week of notice for the purpose of seeking other employment.

R.6.2 If the employee has been allowed paid leave for more than one day during the notice period for the purpose of seeking other employment, the employee shall, at the request of the employer, be required to produce proof of attendance at an interview or he or she shall not receive payment for the time absent. For this purpose a statutory declaration will be sufficient.

R.6.3 The job search entitlements under this subclause apply in lieu of the provisions of N.3.

R.7.1 The provisions of this clause are not applicable where a business is before or after the date of this award, transmitted from an employer (in this subclause called the transmittor) to another employer (in this subclause called the transmittee), in any of the following circumstances:

R.7.1(a) Where the employee accepts employment with the transmittee which recognises the period of continuous service which the employee had with the transmittor and any prior transmittor to be continuous service of the employee with the transmittee; or

R.7.1(b) Where the employee rejects an offer of employment with the transmittee:

• in which the terms and conditions are substantially similar and no less favourable, considered on an overall basis, than the terms and conditions applicable to the employee at the time of ceasing employment with the transmittor; and
• which recognises the period of continuous service which the employee had with the transmittor and any prior transmittor to be continuous service of the employee with the transmittee.

R.7.2 The Commission may vary R.7.1(b) if it is satisfied that this provision would operate unfairly in a particular case.

• employees terminated as a consequence of serious misconduct that justifies dismissal without notice;
• probationary employees;
• apprentices;
• trainees;
• employees engaged for a specific period of time or for a specified task or tasks; or
• casual employees.

The Commission may vary the severance pay prescription on the basis of an employer's incapacity to pay. An application for variation may be made by an employer or a group of employers.

M Bissett for the Australian Council of Trade Unions.

J Nucifora for the Australian Municipal, Administrative, Clerical and Services Union.

N Swancott for the Liquor, Hospitality and Miscellaneous Union.

S Barklamb with P Anderson for the Australian Chamber of Commerce and Industry, and J Hargrave for the Printing Industries Association of Australia.

S Smith for the Australian Industry Group and the Engineering Employers' Association of South Australia.

J Stewart for the Minister for Employment and Workplace Relations.

1 Redundancy Case - March 2004 decision, PR032004.

8 Redundancy Case - March 2004 decision, PR032004, para [373].

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