The Full Bench of the Fair Work Commission (FWC) has determined that periods of ‘contiguous’ casual service are not to be counted as ‘continuous service’ when calculating permanent employees’ entitlements to redundancy pay, distinguishing a previous Full Bench decision.
In Unilever Australia Trading Limited v AMWU  FWCFB 4463, the Full Bench interpreted the redundancy provisions of the enterprise agreement in question to find that permanent employees’ ‘contiguous’ periods of casual service before conversion to permanent are not considered as service when calculating redundancy payments. This is in contrast to the majority decision in AMWU v Donau Pty Ltd  FWCFB 3075.
Redundancy pay provisions
Generally, redundancy pay is calculated based on a permanent employee’s period of continuous service with an employer at the time of termination pursuant to section 119 of the Fair Work Act 2009 (Cth) (Fair Work Act) or the provisions of an enterprise agreement.
Section 22 of the FWA provides for the meaning of an employee’s period of service with an employer and the calculation of an employee’s continuous service by comparison to periods that do not count as service.
Casual employees are excluded from redundancy pay provisions pursuant to section 123 of the Fair Work Act.
In Donau, the Full Bench was required to consider the redundancy provisions of an enterprise agreement that incorporated the National Employment Standards (NES). In this case, employees had performed periods of regular and systematic casual service before they became permanent employees. As the enterprise agreement did not provide any guidance about ‘continuous service’, the majority of the Full Bench examined section 22 of the Fair Work Act and its application to periods of regular and systematic casual service.
The majority determined that section 22 of the Fair Work Act did not contain any words excluding a period of regular and systematic casual employment from the definition of ‘service’ or ‘continuous service’ for the purposes of redundancy payments. Drawing on its interpretation of section 22, the majority found that a period of ‘contiguous’ casual service counted as service in the calculation of redundancy pay under the applicable enterprise agreement.
The majority decision in Donau was controversial, considering that casual employees receive a 25% casual loading to compensate them for entitlements provided to permanent employees (such as notice of termination and redundancy pay).
In his dissenting judgment, Commissioner Cambridge highlighted the significant implications of the majority’s decision impacting on entitlements such as annual leave and paid personal/carer’s leave .
As a result of Donau, employers could no longer confidently calculate employee’s redundancy payments where casual service had been previously performed.
In Unilever, the Full Bench was required to consider an appeal against the decision of Deputy President Gooley about the interpretation of the redundancy provisions of an enterprise agreement.
The relevant provisions of the enterprise agreement referred to service and continuous service but did not provide definitions of these terms. At first instance, Deputy President Gooley, relying on Donau, found that the meaning of service for section 22 of the Fair Work Act includes service as a regular and systematic casual/seasonal employee, unless there is a contrary provision in the enterprise agreement.
Deputy President Gooley concluded that the contiguous periods of casual/seasonal service counted in determining the employee’s entitlements to redundancy under the provisions of the enterprise agreement.
The Full Bench overturned Deputy President Gooley’s decision and unanimously found that periods of service as a casual or seasonal employee should not count as service for the purpose of determining entitlements to redundancy payments under the enterprise agreement.
The Full Bench noted that the concept of regular and systematic casual employment is a statutory construct used for the unfair dismissal provisions (and other limited contexts) of the Fair Work Act and not reflected in the meaning of service or continuous service under section 22 of the Fair Work Act.
The Full Bench also noted that casual and seasonal employees render service:
In relation to casuals, the common law position is that each engagement stands alone. Each engagement constitutes a period of service, but there is no continuity of service from one engagement to the next. Such is the case also with seasonal workers, who render service for each season they are engaged, but ordinarily do not have continuity of service from one season to the next. The common law position can of course be altered by statute, contract, or an industrial instrument. In this case, the Agreement says nothing about the matter.
The Full Bench cautioned that the Donau decision turned on its own facts and circumstances and ‘should not be understood as establishing a principle about the application of section 22 of the Fair Work Act to casual employment, or the approach to calculating service in enterprise agreements’.
Learnings for employers
Employers, when considering making employees redundant, need to carefully consider the wording of any applicable enterprise agreement to determine what service counts in its redundancy calculations.
As the Commission has clearly indicated, each decision will turn on its own facts and circumstances, and employers should seek advice when making employees redundant. Employers should also ensure that terms in their enterprise agreements and applicable policies are clearly defined and unambiguous.