United FM Group Services Pty Limited trading as United KFPW v National Union of Workers, New South Wales Branch

DECISION

On 20 July 2023, Snowy Monaro Regional Council ("Council") passed a resolution to divest itself of Yallambee Lodge Aged Care facility ("Yallambee Lodge") to Respect Aged Care. One of the results of the divestment was that certain employees of the Council, who had been employed at Yallambee Lodge, would no longer have positions.
Negotiations ensued between the Council and Respect Aged Care as to the terms on which the affected employees would be offered employment with Respect Aged Care. The result was that employees were offered, and accepted, employment with Respect Aged Care.
In their employment with the Council, the relevant employees were covered by one of the following awards (collectively, "Awards"): 1. Local Government (State) Award 2023; 2. Local Government, Aged, Disability and Home Care (State) Award; and 3. Nurses' (Local Government) Residential Aged Care Consolidated (State) Award 2021.
Each of the Awards contains a provision entitling an employee to "severance pay" (or "retrenchment pay") if their employment is terminated on the basis of redundancy. However, the employer may apply to the Commission to be excused from making such a payment on the basis that it has obtained "acceptable alternative employment" for the employee. There is no controversy that those provisions are enacted as a result of the divestment by the Council of Yallambee Lodge.
On 17 April 2024, the Council filed three applications with the Industrial Registry seeking, respectively, exemptions from the requirement to pay severance pay to: 1. two employees covered by the Local Government (State) Award 2023, who had been offered and accepted employment with Respect Aged Care. That application was assigned matter number 2024/00142884; 2. two employees covered by the Nurses' (Local Government) Residential Aged Care Consolidated (State) Award 2021, who had been offered and accepted employment with Respect Aged Care. That application was assigned matter number 2024/00145189; and 3. sixteen employees covered by the Local Government, Aged, Disability and Home Care (State) Award, who had been offered and accepted employment with Respect Aged Care. That application was assigned matter number 2024/00146796.

Consideration

As already stated, each of the Awards entitles an employee who is dismissed on the basis of redundancy to receive a severance (or retrenchment) payment. However, each Award contains an avenue for the employer to apply to the Commission for relief from paying a severance payment. For example, cl 43 of the Local Government (State) Award 2023 provides: (xii) Subject to an application by the employer and further order of the Industrial Relations Commission of New South Wales, the employer may pay a lesser amount (or no amount) of severance pay than that contained in subclause (iii) above if the employer obtains acceptable alternative employment for an employee.
Clause 40(vii) of the Local Government, Aged, Disability and Home Care (State) Award and cl 43(iv)(c) of the Nurses' (Local Government) Residential Aged Care Consolidated (State) Award 2021 are in relevantly the same terms.
In United FM Group Services Pty Limited trading as United KFPW v National Union of Workers, New South Wales Branch [2006] NSWIRComm 391 the Full Bench observed: "78. The purpose, then, of severance pay is to compensate for 'non-transferable credits and the inconvenience and hardship imposed on employees'. See also Westfield Holdings v Adams (2001) 114 IR 241 at [144] and the cases referred to therein. However, under the test case standard, which is reflected in cl 34 of the Award, it is open to an employer to seek relief from the general obligation to pay severance pay if it is able to show it has obtained acceptable alternative employment for an employee. In considering an application for relief it will be important for the tribunal to have regard to whether 'previous service with the previous employer was recognised as service with the new employer'. 79. Thus, it seems to us that where an employer, through its efforts, has obtained alternative employment involving minimal dislocation for employees, no loss of accumulated employment benefits such as sick leave and long service leave, where there is continuity of service and the employees are not disadvantaged by the terms offered in the new employment (as would be the case in a succession, assignment or transmission of business), the employer would have a prima facie case for the exercise of discretion in its favour for the granting of an exemption, either in whole or in part, from the award obligation to make severance payments. We elaborate on this view in the following paragraphs. 80. For the reasons expressed by the Full Bench in Re Clothing Trades Award we do not consider that the word 'obtains' should be given a narrow, literal interpretation. As the Full Bench determined in that case, where the employer is a 'strong moving force' in causing the employment to become available, that will be an important consideration for a tribunal of fact in exercising its discretion as to whether an exemption from the requirement to make severance payments should be granted. However, there is the additional consideration, that cannot be ignored or overlooked, of whether the employment was acceptable. There will be circumstances, as is the case here, where the incoming employer intends to employ the employees of the outgoing employer, regardless of any overtures or effort of the outgoing employer to secure that employment. In those circumstances it is necessary for the tribunal to consider what role the outgoing employer has played in causing the new employment to be available on acceptable terms. 81. In other words, the tribunal will have regard to the full extent of the role of the outgoing employer in the placement of its employees, not simply in alternative employment, but in acceptable alternative employment. That is to say, even though the outgoing employer did not 'obtain' employment for the employees in the fullest sense of that word, when regard is had to the employer's overall role, including the part played in bringing about new terms of employment that were acceptable when viewed objectively, it may be concluded that in the absence of the employer's effort or request, acceptable alternative employment would not have become available to the employees. 82. To express the notion differently, if the outgoing employer is a strong moving force in causing acceptable alternative employment to become available to employees or, in circumstances where employment becomes available regardless of the outgoing employer's efforts or overtures, but the outgoing employer is a strong moving force in causing the employment to become available on acceptable terms, we consider the employer would have an arguable case for the exercise of the tribunal's discretion in favour of granting an appropriate exemption, whether in whole or in part. 83. We take the view that the primary objective should be maintaining employees in acceptable employment and thus, where an employer is a strong moving force, to use the words of the Full Bench in Re Clothing Trades Award, in causing to have made available acceptable alternative employment for employees, the employer should, prima facie, be entitled to the exercise of discretion in its favour granting an exemption from having to make severance payments, either in whole or in part. To take a different approach is likely to have the effect of removing the incentive for employers to make the necessary effort to maintain employees in acceptable employment." (Italics in original)
Each application was accompanied by an affidavit of Stephanie Sellar-Peam, the Chief Workforce Officer of the Council, affirmed on 11 April 2024 and an affidavit of Peter Bell, a Senior Industrial Officer with Local Government NSW, affirmed on 16 April 2024. In all but one respect, the affidavits of Ms Sellar-Peam and Mr Bell, respectively, filed in connection with each application were identical. The exception was that Annexure B to each of Ms Sellar-Peam's affidavits identified the employees covered by the Award to which the particular application related. Those annexures indicated that the relevant employees had accepted employment with Respect Aged Care.
In her affidavit, Ms Sellar-Peam deposed as to the negotiations between the Council and Respect Aged Care regarding the divestment of Yallambee Lodge. She described efforts by the Council to consult with the affected employees and their union representatives to explain the agreed arrangements between the Council and Respect Aged Care, and to address any questions or concerns the employees may have had. In addition, Ms Sellar-Peam deposed: "5. Snowy Monaro Regional Council entered discussions with Respect Aged Care with regards to the negotiation to ensure parity in rates for all transferring staff in mid/late 2023. These negotiations were guided by a principle of fairness and the objective to ensure no employee would be disadvantaged in terms of their compensation and conditions. Comparative analyses of current compensation structures versus those proposed by Respect Aged Care were conducted by myself and the Chief People Officer of Respect Aged Care to identify and rectify and discrepancies. 6. Snowy Monaro Regional Council worked to ensure that all leave - including annual, sick and long service leave - would be honoured and transferred to the employees' new contracts with Respect Aged Care. This included an audit of existing entitlements and coordination with Respect Human Resources to integrate these entitlements. 7. The sixteen employees who are covered by the Local Government Aged Disability and Home Care (State) Award are primarily Care Service employees. Other employees include a Physiotherapist, and Assistant Catering Officer. In each case, the rate of pay for the affected employees has either been maintained or increased. 8. The two employees covered by the Local Government (State) Award are Administration Support employees. In both cases, their rate of pay has been maintained. These employees are paid significantly above what Administration Support employees are ordinarily paid under the Hudson House Agreement. I played a part in assisting Respect in reaching a conclusion that maintaining these employees and their rate of pay was an appropriate outcome. 9. The two employees covered by the Nurses' (Local Government) Residential Aged Care Consolidated (State) Award are a Registered Nurse Year 5 and a Clinical Nurse Consultant. In one case, the employee's rate of pay has been maintained. In another, it has been increased. … 12. Final employment contracts were issued to staff on Monday 4 March 2024. … All employees are guaranteed the same or better conditions upon signing these contracts."
In his affidavit, Mr Bell deposed that he had been informed by Respect Aged Care that the instrument that would apply to the affected employees, if they were to accept employment with Respect Aged Care, is the Sir William Hudson Memorial Centre, NSWNMA, ANMF, NSW Branch and HSU New South Wales Branch Enterprise Agreement 2020 ("Enterprise Agreement"). He stated that he had compared the provisions of the Awards with those of the Enterprise Agreement. The results of that comparison were contained in a spreadsheet attached to the affidavit.
Mr Bell further deposed that: 1. he was satisfied that the Enterprise Agreement "provides more beneficial terms and conditions" than the Awards "when considered holistically"; 2. he was further satisfied that employees transferring from the Council to Respect Aged Care "will experience the same or better conditions of employment when considered holistically"; and 3. in the "limited circumstances" where the Awards provide more beneficial rates of pay, he understood that Respect Aged Care would maintain those rates for transferring employees.
Having regard to this evidence, and in light of the observations of the Full Bench in United FM Group Services, I am satisfied that the Council obtained alternative employment for the affected employees and that it was acceptable. I am fortified in this view by the fact that the USU, the NSWNMA and the HSU supported the Commission granting the relief sought by the Council.

At a glance

Court

Decision date

Source

Judgment (4 paragraphs)

Parties

Cases Cited (2)