Construction company wins case on exception to redundancy payments

A Full Federal Court has found, in a case involving a construction company and the CEPU, that the “ordinary and customary turnover” exception to redundancy pay in section 119 of the Fair Work Act 2009 (Cth) applied to employees employed for a specific construction project.

At first instance, the primary judge found that the employees could not have had a reasonable expectation of ongoing employment, as work for the employer was undertaken in accordance with client contracts that are limited and finite. When those contracts (in relation to a project) were fulfilled, there was no longer a requirement by the employer for the job to be done by the employee or by anyone.

The Full Court agreeing with the primary judge, pointed out that each of the employment contracts and the applicable enterprise agreement contained unambiguous and plain terms such as:

Your continuous employment is subject to the operational requirements of the Company’s business, which is directly affected by the needs of our clients. You understand that continuous employment cannot be guaranteed. As a result of changes in operational requirements, there may no longer be a position for you.

Termination of employment due to a change or loss of contract between the Company and its client is a usual reason for a change in the Company’s workforce and is part of the ordinary and customary turnover of labour within the Company”.

It further stated that a reasonable person in the position of both parties would have been bound to have understood, based on the terms of the contracts and enterprise agreement, that the relevant jobs were not permanent or ongoing, but would inevitably come to an end at the completion of the construction phase of the project.

What does this mean for your organisation?

Organisations are not required to pay redundancy if the termination of employment is due to the ordinary and customary turnover of labour. This is especially important for construction companies that engage workers on project-based contracts.

Having properly drafted contracts and enterprise agreements and using clear and unambiguous wording around the nature of employment is vital in being able to rely on the “ordinary and customary turnover of labour” exception.

If you would like to discuss this further and the implications for your business please contact our Employment + Workplace Relations Partner, Erin Lynch.

The contents of this publication do not constitute legal advice and are for general information purposes only. You should seek legal advice regarding your particular circumstances.