The Case

Serco Sodexo Defence Services Pty Ltd (SSDS) (2015)

Serco dismissed many of its NSW and ACT employees when it lost its government defence contracts. Serco applied to the Fair Work Commission (FWC) under section 120 of the Fair Work Act 2009 (Cth) to avoid paying the employees severance pay on the grounds it had helped the employees obtain acceptable employment with the incoming defence contractors by assisting in the recruitment process.

The Verdict

The FWC found that more than assistance was required to avoid the obligation to pay employees severance pay, saying, “The test is that the actions must be ‘a strong moving force’ towards the job offer being made, not that the actions had a material influence on the job offer being made.” To be successful, the employer’s actions must “cause acceptable alternative employment to become available to the redundant employee”.

The FWC found that while Serco had gone beyond what they were required to do under their enterprise agreement in assisting the employees, they were not, by their actions, a “strong moving force” in securing the positions. The incoming contractors ran a competitive selection process in which some employees were successful and some were unsuccessful in obtaining employment. Serco did not secure a guarantee of employment with any of the incoming contractors.

The Lesson

To avoid severance pay obligations, you must show that your conduct essentially secured an employee a job offer with another employer in a position which is an acceptable alternative to an employee’s current job. When determining this, you should consider things such as the employee’s qualifications, and the new position’s remuneration and location.

Please note: Case law is reported as correct and current at time of publishing. Be aware that cases in lower courts may be appealed and decisions subsequently overturned.