Redundancy – Court rules on ‘ordinary and customary turnover of labour’ exception


Posted By on 17/08/20 at 6:11 PM

In a significant decision, Rares and Collier JJ (with whom Rangiah J “broadly” agreed) have held in the case of Berkeley Challenge Pty Ltd v United Voice [2020] FCAFC 113 (Decision) (available here) that long-standing employees dismissed when long-standing contracts that had been the basis for the work that they were employed to do ended were entitled to redundancy pay as their employment had not ended due to the ‘ordinary and customary turnover of labour’. 

Why does the Decision matter?

Section 119(1)(a) of Fair Work Act 2009 (Cth) (FW Act) is part of the National Employment Standards (NES) and creates a prima facie right to redundancy pay where the employee’s employment is terminated at the employer’s initiative because the employer no longer required the job done by the employee to be done by anyone except where this is due to the ‘ordinary and customary turnover of labour’.

Practically, the interpretation of the phrase ‘ordinary and customary turnover of labour’ is the difference between (what may be) a large redundancy pay liability or no liability at all. It is a phrase that has also been the subject of much judicial discussion.

Background to the Decision

The Decision concerned separate appeals from two decisions (namely, United Voice v Berkeley Challenge Pty Limited [2018] FCA 224 and Fair Work Ombudsman v Spotless Services Australia Ltd [2019] FCA 9) regarding the meaning of the ‘ordinary and customary turnover of labour’ exception.

At a high level, the key overlaps between the factual scenarios of those two decisions are that:

  • Both Berkeley Challenge Pty Limited and Spotless Services Australia Ltd were subsidiaries of the Spotless Group;
  • The employees were engaged in work relating to long-standing contracts that each of the employers had with third parties;
  • Those contracts terminated;
  • All the employees had been employed for lengthy periods at the time of the termination;
  • None of the employment contracts contained provisions to the effect that they were subject to the contracts between the employer and external third parties being on foot; and
  • The employees were dismissed without redundancy pay in reliance on the ‘ordinary and customary turnover of labour’ exception.
Guidance from the Decision

In dismissing the appeals, Justices Rares and Collier provided a non-exclusive list of factors that can assist in determining whether there has been an ‘ordinary and customary turnover of labour’ which we have summarised in the table below.

KHQ Lawyers - ordinary and customary turnover - redundancy pay

Key Takeaway

A key takeaway is that, whilst not determinative, material provided to employees (for example, any policies, communications by or with the employer at the start and during the employment, the offer of employment) is considered in determining their reasonable expectations about whether their employment is ongoing.  As such, if the job is tied to a service contract, then it may be of assistance to specifically say so in the employment contract and to also specify that the role is not ongoing.

As always if you have any questions or would like to discuss the implications that this decision might have for your business, please get in touch.

Chris Gianatti

Chris Gianatti Director

Chris worked for a number of years with Corrs before moving in-house to Telstra as HR Legal Counsel for the “Factory” (covering Telstra’s back of house operations including the field... Read More