RETRENCHMENT...know your rights!

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WHAT IS “RETRENCHMENT” AND “REDUNDANCY”?

An employee is said to be “retrenched” when his or her job becomes redundant and the employer either cannot offer the employee any alternative position or, any alternative position offered by the employer cannot be accepted by the employee.

The concept of “retrenchment” is usually linked with “redundancy” and also with the concept of “severance” or “severance pay”.

The following is a brief explanation of what these various expressions mean in practice.

An employee is often referred to as “redundant” but a more accurate description is that the job the employee was employed to perform is redundant (that is, the employer does not want the job performed by anyone, anymore) and the employee’s employment is then terminated by reason of that redundancy. That is, a job becomes redundant, not an employee.

“Retrenchment” is the expression to describe what occurs to an employee whose employment is terminated by reason of his or her job becoming redundant.

“Severance” is the expression, usually seen as “severance pay”, referrable to the amount or amounts an employee receives upon being retrenched.

In cases of termination by reason of redundancy (that is, retrenchment), the law requires an employer to treat the employee fairly and lawfully. For example, an employer is not allowed to single out an employee for retrenchment as an easy means of avoiding a process of performance review of the employee or to avoid a claim of unfair dismissal by the employee.

Furthermore, since 1982 that part of the workforce that is regulated by awards has certain protections in relation to termination by reason of redundancy. Employees not regulated by awards (e.g. executive level employees) do not have the same specific protections, but there are court precedents that now recognise that employers nevertheless do have obligations to such employees in circumstances of redundancy.

Redundancy and unfair dismissal laws interact in such a way that a retrenched worker can make a claim for unfair dismissal. However, the court will take the view that provided the employer has acted in good faith then the employer’s needs must be respected. However, a claim can be made that the dismissal by way of redundancy is harsh, unjust or unreasonable on the grounds that:

• the worker was unfairly selected for redundancy;
• the worker was selected for redundancy because of work performance without having been given the opportunity to respond to the employer’s concerns about his ability or performance;
• the worker was not properly consulted before the decision to retrench was made;
• in some cases non-award employees can attack the adequacy of the redundancy payments made to them.

STANDARD AWARD PROTECTIONS

Most of the Australian workforce is regulated by either industrial awards or other similar types of registered Industrial instruments (e.g. enterprise agreements or Australian Workplace Agreements).

The procedures and requirements in relation to retrenchment in relation to any particular award regulated group of employees depends upon a combination of statute laws and relevant industrial instruments. Therefore, it is not possible to be too specific about the requirements that apply to particular employers. Regard must be had to the applicable industrial award or equivalent instrument.

Nevertheless, there are some basic standards which, generally speaking, employees who are part of the “Award regulated workforce” should expect to receive upon retrenchment.

In New South Wales the State’s Industrial Relations Commission has prescribed, through a test case on redundancy matters, standard procedures in respect of Award regulated employees. The standard format can be found in many State Industrial Awards – for example, the Clerical & Administrative Employees (State) Award. A copy of that Award can be purchased from the New South Wales Department of Industrial Relations or obtained through Internet legal services. However it should not be assumed that what is prescribed in this award will be exactly the same for employees regulated by other awards.

The relevant legal instrument has to be examined. There may be subtle differences between awards even when they deal with a standard subject.

Furthermore it is important to note that generally speaking those employers who employ less than fifteen (15) employees at the time that retrenchments are taking place, are generally exempted from these award standards.

The following are the basic award standards that one would expect to find in most New South Wales industrial awards:

• Employees will be entitled to Notice of Termination (or payment in lieu of such Notice). The amount of Notice relates to the length of service and age of employees affected. Generally speaking, an employee with less than one year of continuous service is entitled to one week’s Notice, whilst an employee with five years service will be entitled to four week’s Notice. An employee over the age of 45 with more than two years service, would be entitled to an additional week’s Notice.
• Employees will be entitled to one day off in each week of the Notice period for the purpose of seeking alternative employment.

If an employee leaves the employ prior to the expiry of the notice period for reasons other than misconduct (e.g. by obtaining another job), the employee still obtains severance pay entitlements (but not any monetary payment for the residual notice period unworked).

A terminated employee is entitled to a Statement of Service from the employer, specifying at least the period of service and the jobs or classifications undertaken.

The employer is obliged to notify the relevant agency (which was previously the Commonwealth Employment Service) as to impending retrenchments.

Upon request, the employer is to provide an employee with an “Employment Separation Certificate” to facilitate the employee obtaining access to unemployment or other social security benefits.

Awards prescribe minimum severance payments for employees who are retrenched as a result of redundancy. The Scale applicable to any particular category of employee can be found in the relevant award, however there are some scales that do have wide application.

The minimum standards for severance pay currently found in Awards depends upon whether the Award is a Federal or a State Award. The standard prescribed for New South Wales Awards (at least in respect of those employers that employ at least fifteen employees) is as follows:

YEARS                                   ENTITLEMENT         ENTITLEMENT

OF SERVICE                             UNDER 45             45 & OVER