The Case

Savco Vegetation Services Pty Ltd (2021)

Savco Vegetation Services Pty Ltd (Savco) made an application to the Fair Work Commission (FWC) to vary the severance payments to be paid to its employees to nil. Savco implemented redundancies as a result of losing an important contract, which was awarded to Falbury Pty Ltd T/A ETS Vegetation Management (ETS).

All but one of the affected employees entered into confidential settlements with Savco prior to the hearing. The matter continued with Mr Corcoran being the only employee represented by the Communications, Electrical and Plumbing Union (CEPU). Mr Corcoran had successfully applied for a position with ETS by responding to an advertisement on SEEK and attending an interview.

Savco tried to argue it had obtained acceptable alternative employment for Mr Corcoran with ETS. The CEPU argued Savco had not obtained acceptable alternative employment for Mr Corcoran because:

• Mr Corcoran had applied for the position on SEEK and participated in an interview process; and
• the terms of employment with ETS were less beneficial than the terms and conditions of employment with Savco, as Mr Corcoran:
  • was now paid $5.17 less per hour;
  • was placed on a 6-month probation period;
  • moved to a less desirable work location;
  • had his rostering arrangements changed significantly to his detriment; and
  • lost various non-transferable employment credits derived from length of service.

The Verdict

The FWC held that:

• Savco’s application had no jurisdictional basis, as the application made to the FWC was to reduce severance payments provided under the National Employment Standards (NES), whereas the entitlements to severance pay in this case arose under the enterprise agreement;
• the facilitation and assistance provided by Savco to find alternative employment for Mr Corcoran fell far short of obtaining other acceptable employment for him;
• Mr Corcoran had been the primary facilitator of securing alternative employment for himself; and
• on any reasonable and objective assessment, the employment that Mr Corcoran obtained with ETS could not be established as acceptable, given there were several significant detriments for Mr Corcoran in respect of the terms and conditions of employment with ETS.

The Lessons

This case demonstrates the care that must be taken when implementing redundancies, especially if the business wants to reduce the severance payments payable.

Considerations include:

• the source of the severance payment entitlement (i.e. NES, contract or industrial instrument) to determine what, if anything, can be done to reduce the obligation to make severance payments;
• the requirement for the business to obtain (as opposed to assist) alternative employment for affected employees; and
• the need for that alternative employment to be acceptable in nature and not cause the employee a detriment.

Where acceptable alternative employment cannot be obtained, you must pay severance pay.

Consultation with affected employees should not be overlooked.

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.