Consideration
39 Employment relationships are not usually purely contractual in the sense that many employment relationships involve a contract of service that operates in the context that applies here, where Medirest was a national system employer and the 31 employees were national system employees to whom the provisions of the Fair Work Act and, possibly, a modern award or enterprise agreement, applied. Moreover, the relationship between employer and employee is one class of accepted fiduciary relationships: Concut Pty Ltd v Worrell (2000) 176 ALR 693 at 697-698 [17] per Gleeson CJ, Gaudron and Gummow JJ. In addition, over time, while the relationship subsists, the employee may be promoted, his or her wage, salary or conditions may change and the location at which he or she works can vary. It may be necessary to characterise whether those changes to the employment constitute a new contract or a variation to the existing one using the principles that Gleeson CJ, Gaudron, McHugh and Hayne JJ identified in Federal Commissioner of Taxation v Sara Lee Household & Body Care (Australia) Pty Ltd (2000) 201 CLR 520 at 533-534 [22]; Concut 176 ALR at 698-699 [18]-[19].
40 Here, prior to 25 September 2017 when Medirest and Eldercare made the joint statement, the employment relationship that Medirest had with the 31 employees was not one that the parties intended would involve displacing them from accrued rights and liabilities when contracts in the 2008 and 2016 form came to an end. That was reflected in the opening statement in the 2008 form that Ms Aylett had transferred her employment to Compass (see [11] above), and in the recognition in cl 2 of the 2016 form for Ms Lane (see [14] above) and cl 2 of the 2018 form for Ms Lockyer (see [16] above) that each of their start dates in 2006 and 2008 respectively "will continue to apply". In addition, cl 12 of each of the 2016 and 2018 forms reaffirmed that "Service with Compass Group related companies will count as service for the purposes of accrual of long service leave". The parties acted on the basis that the employment relationship was ongoing and indefinite (albeit that the parties recognised that Medirest's contractual relationship with Eldercare may come to an end at some future time) and entered into new contracts of employment under which the employees continued performing their existing jobs or a new one. The express provision that the employee's start date in the Compass group "will continue to apply" recognised the industrial reality that those were employees who had accrued entitlements and were working for an indefinite time.
41 The situation of the employees in Delta FM 308 IR 94 was not comparable to that of the 31 employees. That is because there the Full Court found that all the parties knew that the employees' jobs would end when the construction of the particular onshore facility on which they were engaged was completed. The Full Court found that the parties to those contracts of employment would have understood that the jobs were not permanent or ongoing but inevitably would come to an end at the completion of the construction work: Delta FM 308 IR at 104 [47]. Ordinarily, the period of time during which the construction of a building or facility occurs is finite, although the exact date of its completion may not be known, since factors such as weather, strikes, delays in supply of materials, unexpected issues with the site or work, variations and the like, can be expected to make that date somewhat uncertain. Nonetheless, when a person is employed to do construction work on such a project, ordinarily, both employer and employee will understand that the employee's job is limited to that project and that it will terminate due to the ordinary and customary turnover of labour when completion occurs.
42 Here, the jobs of the 31 employees involved working at an aged care facility providing services of the kind that such a facility would need to have performed while-ever it continued to operate. Of course, each of the employees would have been aware that there was a possibility that the particular Medirest company employing him or her may cease to carry on business. The 2008 form stated that "your employment is subject to operational demands, requirements of the client and tenure of the contract which the Company has with its clients". The 2016 form stated that "Your continuing employment is subject to the operational requirements of the Company's business, which is directly affected by the needs of our clients". Both forms then stated that "continuous employment … cannot be guaranteed". However, none of those or the related statements in either the 2008 or 2016 forms conveyed that the job was finite or for a particular duration. Neither form said anything about the nature or length of the employer's contract with the "client" or conveyed that the employment would come to an end in a reasonably foreseeable timeframe.
43 As the trial judge found, Ms Graham accepted that Compass group's standard employment process did not involve its employees being told about the duration of its subsidiary's client contract for which it employed them (see [29] above). This finding is also consistent with Ms McArdle's acknowledgement in her cross-examination, set out at [24] above, namely, that Compass group itself does not know whether a client contract will be renewed or extended when it hires employees.
44 As we noted at [5] above, in Delta FM 308 IR at 103 [43], Rares, O'Callaghan and Wheelahan JJ approved Rares J's distillation of the test as to whether termination will fall within the exception in his concurring reasons in Berkeley 279 FCR at 260 [32] where he explained more fully:
The purpose of the exception in s 119(1)(a) is to protect an employer from having to make redundancy payments in circumstances where a reasonable person in the position of both parties to the contract of employment would have understood or expected, from its inception or nature or as the length of the employee's service grew, that the job was not of a permanent or an ongoing nature, but would come to an end within a reasonably foreseeable timeframe. In other words, in order to fall within the exception in s 119(1)(a), the employment, or job, must be of such a nature that a reasonable person in the position of both those offering or seeking the particular job (or who were aware of all of the circumstances in which the employee had remained in the employer's workforce for sufficiently long) would be aware and expect that it would come to an end in the ordinary course. That expectation arises objectively because, in the regular or usual order of things, and the accepted custom of the industry, trade, or employment market, when the employer terminates the employee's job and he or she is not replaced, the employee will have no right to payment of redundancy pay.
(emphasis added)
45 The trial judge's reasoning that the redundancy terminations of the 31 employees occurred because of the ordinary and customary turnover of labour, as to bring Medirest within the exception in s 119(1)(a) of the Act, was erroneous. His Honour proceeded on a misunderstanding of the operation of the exception, as is evident from his characterisation (at [104] and [142] of his reasons) that, despite what he described as the "superficially curious" approach of the binding ratio decidendi in Berkeley 279 FCR 249 and Delta FM 308 IR 94, instead the trial judge followed (at [142]) his erroneous thought (at [104] of those reasons) that the question required "simply a finding to be made having regard to an employer's business practices". Thus, in [142] of his reasons, his Honour found that the 31 employees "were engaged for the purpose of the contract which [Medirest] had with Eldercare", being the 2013 Eldercare contract. That reasoning focussed on the subjective purpose of Medirest. First, it ignored the employees' lack of knowledge of the existence or material provisions of the 2013 Eldercare contract (or, as Ms Graham and Ms McArdle accepted, any specific information about the duration of their employment), namely when it began, how long it would last and the nature of the ongoing employment relationship. Secondly, it failed to give the words before and in the exception in s 119(1)(a) their natural and ordinary meaning by treating the section as providing that an employer had no obligation to pay redundancy pay if it asserted that it had terminated its employee's employment in accordance with its own "business practices". His Honour found that, somehow, despite many of the 31 employees being employed long before Medirest and Eldercare entered into the 2013 Eldercare contract (as the 2008 and 2016 forms of Ms Aylett and Ms Lane acknowledged), those employees had been engaged only in 2013 for a definite term that would end on 31 March 2018.
46 Thirdly, his Honour's reasoning, which Medirest's submissions supported on the appeal, was in the teeth of the facts and also of what Rares J held in Berkeley 279 FCR at 258 [24]-[26], consistently with the reasons of Collier and Rangiah JJ (at 306-307 [207]-[208], 309 [214]) of:
24 The appellants' arguments sought to identify the particular commercial circumstances of the Spotless group as the governing criterion for ascertaining whether, in any employment situation in which a member of the group found itself when it decided to terminate an employee's employment, the ordinary and customary turnover of labour exception relieved it from the statutory obligation to pay redundancy. They asserted that the Spotless group's business was, as the appellants said, to win and lose contracts on a regular basis.
25 However, the Spotless group's overall perceptions of how it ran its business cannot control what reasonable persons in the position of any member company in the group and any particular employee of that company would expect to be the nature and duration of that employment relationship or job. As Gleeson CJ, McHugh, Kirby, Hayne and Callinan JJ said in Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 218 CLR 471 at [34]:
the "general test of objectivity [that] is of pervasive influence in the law of contract" (Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 549, per Gleeson CJ). The legal rights and obligations of the parties turn upon what their words and conduct would be reasonably understood to convey, not upon actual beliefs or intentions (Gissing v Gissing [1971] AC 886 at 906, per Lord Diplock; Ashington Piggeries Ltd v Christopher Hill Ltd [1972] AC 441 at 502, per Lord Diplock).
(Emphasis added.)
26 Something that is ordinary and customary and affects the incidents of a job must be known to the actual or prospective parties to the contract of employment. Hence, the distinction that Fisher P identified between terminations of employment due to the ordinary and customary turnover of labour, which almost invariably occurred on the employer giving the employee a reasonable period of notice, and those terminating a career or settled expectation of continued employment, which attracted the right to payment on redundancy.
(emphasis added)
47 Moreover, Collier and Rangiah JJ held (at 309 [214]):
"Ordinary and customary turnover of labour" connotes a termination where the employer no longer requires the job to be performed because termination in the particular case is common or usual, both in the sense that it is commonly observed and in the sense that it is habitual or of longstanding practice.
48 Fourthly, the trial judge failed to analyse the employment relationship of the 31 employees, on the basis of the parties' submissions that focused on the positions of Ms Aylett, Ms Lane and Ms Lockyer and the 2008, 2016 and 2018 forms. As we have noted at [27] above, his Honour said that "it was accepted by the parties that for the purposes of the claim" (emphasis added) the 2013 Eldercare contract "was relevant". However, he did not elaborate as to what issue it was relevant. His Honour recorded the Union's submission (at [75] of his reasons) that the employees' contracts "are not expressed to be subject to the Compass contracts [sic] with Eldercare, and the duration of the employment contracts is not expressly tied to the Compass contracts [sic]". We infer that his Honour understood the 2013 Eldercare contract to be relevant to Medirest's decision to terminate the employees' employment, as it plainly was. However, the trial judge did not deal with the nature of the employment relationship over the whole period covered by the evidence despite his finding that none of the employees was aware of the 2013 Eldercare contract (or earlier ones) and did not know its (or the earlier ones') duration. The trial judge's failure to make any findings about the period prior to the commencement of the 2013 Eldercare contract and how, if at all, that bore on the correct characterisation of the employment relationship requires us to do so. Because the trial judge accepted in substance the evidence of all of the witnesses, the Court is in as good a position as he was to decide on the proper inference to be drawn from the undisputed facts: Warren v Coombes (1979) 142 CLR 531 at 551 per Gibbs ACJ, Jacobs and Murphy JJ.
49 Instead of analysing whether a reasonable person in the position of both parties would have understood or expected that the 31 employees' jobs were not of a permanent or ongoing nature, as the two Full Court decisions to which we have referred required, the trial judge said that he focussed on, first, their employment contracts being specifically and only for the performance of Medirest's obligations under the 2013 Eldercare contract and, secondly, Compass group's subjective understandings of its policies and practices. Even if his Honour focussed on the three forms of employees' contracts that were in evidence, it is difficult to understand how either of the 2008 or 2016 forms could be understood to have incorporated the duration of the 2013 Eldercare contract as defining a limited duration of the relevant employee's employment. Obviously, something must have happened after Ms Aylett began her job in 2008 to make the 2013 Eldercare contract relevant at all to the definition of the duration of her employment that had begun five years before that contract came into existence. Neither the 2008 nor the 2016 form mentioned any contract that the relevant Medirest employer had with Eldercare or specified the duration of the job. As the trial judge recognised in [148] of his reasons, neither the 2008 nor the 2016 form "in any detailed way explicitly tie[d] the employment contracts" to the 2013 Eldercare contract or identified its less than certain duration, since it could be extended if one or both options for a two year additional term was or were exercised or, we might add, Medirest secured a new contract with Eldercare.
50 His Honour found implicitly (at [148] and [146]) that the 31 employees had no idea of the limited duration of their jobs. That was because he found that Medirest "was willing to provide sufficient information if employees wished to know when their employment may come to an end" (emphasis added) and that (prior to the joint statement) there was no certainty as to whether the 2013 Eldercare contract might be extended. In other words, Medirest had not told the employees anything more than that their jobs might not last forever, which is a risk inherent in all employment.
51 That finding also ignored the context in which Ms McArdle's evidence established that, of 27 of the 31 employees, whose history she could trace when she made her affidavit, at least 18 of them had worked for one of the Medirest companies since 2008. That evidence established that one of those employees had done so since November 2004 and eight others had begun their employment in 2006 to 2007. During the hearing of the appeal, the parties agreed that 16 of the 31 employees had 10 years' service at the time of their terminations, one had 14 years, one had 11, and another, 12 years while the others had between 2 and 9 years of service. Thus, termination due to redundancy was not an apparent feature of employment at the Eldercare facilities which the Medirest companies had serviced in the period since 2001, when companies in Compass group first began providing hospitality services at Eldercare facilities.
52 Fifthly, the trial judge concluded (at [149]) that "the approach of the Court in Delta is applicable to the facts of this case". That reinforces the conclusion that his Honour did not apply the test that the two binding Full Court decisions determined, but simply compared the terms of the employees' contracts in this proceeding and those in Delta FM 308 IR 94 without addressing the wider factual evaluation that was essential before a determination could be made as to whether the terminations of the 31 employees fell within the exception.
53 It may be accepted that, as Medirest argued, the four employees who signed the 2018 form, including Ms Lockyer, identified in Ms McArdle's affidavit were employed under that contract for an expressly limited time with the certainty that their employment would end shortly thereafter. That followed since they had known of this from 25 September 2017, when they became aware of the joint statement. One of those four employees was a casual, Karen Buckney. Hospitality had engaged her on 9 July 2014. On 16 April 2018, she had been given her notice of termination as at 30 June 2018 even though she entered into the 2018 contract two months later on 14 June 2018. However, because she was a casual employee, she had no right to redundancy pay by force of s 119(3). However, the entry of the other three employees into the contracts on the 2018 form, as a further contract in their ongoing employment relationship, could not conclude the enquiry required under s 119(1)(a) to ascertain whether Medirest could rely on the exception to deny them redundancy pay. One of those three employees was Tracey Zacheria. She had only begun her job on 23 March 2018 and so did not have any entitlement to redundancy pay under s 119(1)(a) because she did not have at least one years' continuous service as required in ss 119(2) and 121(1)(a). The employment relationship of the other two employees who signed the 2018 form, Ms Lockyer and Agnes McGrattan, commenced in 2008.
54 Obviously, once Eldercare and Medirest made the joint statement on 25 September 2017, all of the 31 employees knew that their employer no longer required their job to be done by anyone after 30 June 2018. But that fact alone could not determine whether their terminations were due to the ordinary and customary turnover of labour within the meaning of s 119(1)(a) of the Act. In particular, although Ms Lockyer and Ms McGrattan had entered into the 2018 form, each did so with actual knowledge that her subsequent employment would be for a very short period. However, that circumstance did not detract from the fact that their employment relationship with Medirest by then had lasted about 10 years. The remaining employees had at least one, and most had many more, years' of continuous service with their employer within the meaning of ss 119(1)(a) and (2).
55 Whether the termination of an employee's employment will fall within the exception in s 119(1)(a) requires consideration of the whole of the context of the employment relationship, including the nature of the job and any express contractual terms. Sometimes, the contract of employment, and the context in which it is made, will make it clear that the job is for a finite term that will end "due to the ordinary and customary turnover of labour", such as in Delta FM 308 IR 93. But that was not so here.
56 We reject Medirest's submission, which it repeated on the appeal and that the trial judge accepted, that the way in which Compass group overall, including Medirest, and the group's competitors operated determined whether the terminations of the 31 employees were due to the ordinary and customary turnover of labour.
57 The question of whether a termination falls within the exception cannot be determined conclusively by how the employer chooses to conduct its business. Nor can the employer define its practice in a contract of employment so as to avoid its obligations under the national employment standards in the Act, including under s 119(1)(a) (see too: s 123(2)). Rather, the question is as framed by the two Full Court decisions, namely, whether a reasonable person in the position of both parties would be aware and expect that, in the ordinary course, the employment would come to an end within a reasonably foreseeable timeframe and was not of a permanent or indefinite nature. Thus, for the purpose of determining whether any of the 31 employees, who was not a casual and had worked continuously for Medirest for at least one year immediately beforehand, was entitled to redundancy pay the question was whether the termination of their "continuous service" occurred due to the ordinary and customary turnover of labour.
58 None of those employees or anyone else, including either of the Medirest companies, had experienced or observed since the inception of Compass group's relationship with Eldercare in 2001 terminations of employees, including those who worked at Eldercare's facilities, of the kind on which Medirest now relies.
59 Here, the facts, including the length of continuous service of many of the 31 employees, demonstrated that their jobs were of a permanent or ongoing nature. Until the making of the joint statement on 25 September 2017, a reasonable person in the position of both parties would not have understood that there was any likely or predictable time at which those longstanding jobs, necessary to the conduct of Eldercare's ongoing aged care facilities and at which most of the 31 employees had worked in continuous service for many years, would be terminated. As Gummow, Hayne and Heydon JJ explained in Amcor Ltd v Construction, Forestry, Mining and Energy Union (2005) 222 CLR 241 at 256 [44]:
The focus of the provision was upon the work undertaken by the employee (the "job"), not upon the identity of either the employee or the employer. The relevant inquiry was whether employment in a particular kind of work then being undertaken was to come to an end. If that employment was to come to an end, it was necessary to consider why that was to happen. Was it because the employer no longer wanted the job, then being done by the employee, done by anyone? Or was it "due to the ordinary and customary turnover of labour"?
(emphasis added; footnote omitted)
60 The job of each of the 31 employees was not working for a labour hire company on a fixed or finite term basis. It was a job working for a business providing necessary and ongoing services at aged care facilities on an apparently indefinite basis. Collier and Rangiah JJ held in Berkeley 279 FCR at 311 [227] that evidence of the normal features and practices of an employer's business (including as part of those in a corporate group) may be relevant to informing a court on the question of whether a termination falls within the exception. However, as they held, "an employer cannot claim that termination practices constitute 'ordinary and customary turnover of labour' simply because [those are] the practices it adopts. Such an outcome would be contrary to the purposes of the [Fair Work Act] and outside the scope of 'ordinary and customary turnover of labour' as traditionally understood". Their Honours approved (at 309 [218]) what Colvin J had held in Spotless [2019] FCA 9 at [129], namely:
It may be expected because it was a normal aspect of a business of the kind conducted by the employer that would be evident to the employee. The "normal feature of a business" was a reference to a feature inherent in the nature of the particular kind of business, not a feature that was made normal for the particular business by its own practices in terminating employees.
(emphasis added)
61 And as Collier and Rangiah JJ said (at 311 [228]), uncommunicated or hidden policies of an employer cannot inform the legitimate expectations of employees (or, we might add, a reasonable person in the position of both parties to an employment contract or relationship) as to whether or not work (or a job) is ongoing. Until the joint statement occurred on 25 September 2017, as the trial judge's finding at [148] of his reasons made clear, the 31 employees did not know and had not ever been told about the duration of Compass group's contracts with Eldercare.
62 We reject Medirest's argument that it would be commercially unrealistic for its employment contracts to include the date on which its relevant client contract would terminate. If the Compass group wished to rely on the ordinary and customary turnover of labour to relieve itself of the obligation to pay redundancy pay to employees, it is difficult to understand any commercial justification for withholding from its workforce the information vital to them in understanding and planning for their future, being the date that the employer expected in the ordinary course that it would no longer require their jobs to be performed by anyone.
63 One reason why Compass group did not, and also might not want to, tell its workforce in jobs like those of the 31 employees at Eldercare's facilities (and unlike those in situations like in Delta FM 308 IR 94 where an end to the construction project was obvious and inevitable) is that, on its evidence before his Honour, Compass group hoped to keep renewing its client contracts for which it would want and need to retain the existing workforce. Common sense suggests that this is why the 2008 and 2016 forms left the expected end of the employment indefinite and created the expectation of ongoing employment unless, first, the client contract was not extended or renewed and, secondly, both forms suggested that if employment at the current site were to cease, the employer would or might offer the employee employment elsewhere. During the course of argument of the appeal, Medirest explained that such a provision or action by an employer to offer alternative work could be seen as consistent with the employer's need to establish the genuineness of a redundancy under s 389 of the Fair Work Act in certain circumstances.
64 Since Ms McArdle and Ms Graham gave evidence that the 31 employees were not told, at any time before the joint statement was made on 25 September 2017, of the date at which their work, or Medirest's contract with its client, would end, a reasonable person in the position of Medirest and the 31 employees would not have understood that their, mostly long term, jobs were of a limited or finite duration. Moreover, over the previous 17 years of Compass group's (and Medirest's) relationship with Eldercare, there was no evidence that any employment contract was terminated when any of the contracts with Eldercare ended or were renewed.
65 The terminations on 30 June 2018 were not due to the ordinary and customary turnover of labour. Medirest was liable to pay those of the 31 employees, who had been in continuous service for at least one year and was not a casual, redundancy pay in accordance with s 119.