Claims for severance payments (cont.)

1. Express Contractual TermThe contract of employment may itself contain an explicit provision for a severance payment on redundancy. Although this was unusual in the past, it is now becoming more common. Alternatively, there may be an express provision incorporating an award/certified agreement that includes an obligation on the employer to make a severance payment.
2. Company Policy and Procedures ManualIn addition, a severance entitlement may be found in the company’s policy and procedures manual.If either your contract of employment or the company manual provides for severance, careful attention will need to be paid to the wording of these clauses. It is not uncommon for a clause to provide that, before a severance entitlement is payable, there must be no other position in the company that you are capable of performing.At the time of negotiating your contract of employment, this is one of the many issues that need to be examined. It may, for example, be possible to insist on a tightening up of this definition so that it becomes easier to qualify for a severance payment.
3. Industrial InstrumentFor those executives who are lower in the hierarchy and who have supervisory (as opposed to managerial) responsibilities, it may be possible to base a claim on either an award or a collective employment agreement known as a “Certified Agreement”. To succeed in this argument, you need to be able to demonstrate that your employer is a party to the award/agreement and your position description effectively falls within the relevant award classification. Most executives are not covered by any relevant industrial instrument.

   If you do have a right to receive a severance payment, are you also entitled to receive notice?

   As noted above, notice and severance are intended to compensate you for two different categories of loss. It follows that, if you have a contractual entitlement to severance pay, this is enforceable as a contractual debt and you are entitled to receive notice in addition to this payment.On the other hand, a company may make you an ex gratia severance payment i.e. where they have no legal obligation to do so but are simply making the payment as a goodwill gesture. In these circumstances, the ex gratia severance payment would be deducted from your common law reasonable notice claim.

4. Legislation – Fair Work Act 2009The Commonwealth Fair Work Act creates a safety net of conditions known as the National Employment Standards (“NES”).

   These conditions apply to all Australian employees, irrespective of their seniority and salary package.

   One of the 10 matters covered by the NES relates to redundancy pay.

   The NES sets out a redundancy pay scale on a “steps and stairs” basis. For example, an employee with at least 1 year of service (but less than 2 years) is entitled to 4 weeks’ redundancy pay. This is calculated at the base rate for ordinary hours worked.

   The payout rises to 16 weeks for those with at least 9 years’ service (but less than 10 years). It drops to 12 weeks for those with 10 years’ service. This may seem anomalous, but the rationale is that, after 10 years of service, most employees are entitled to long service leave.

   Those employers who employ fewer than 15 staff members (“small business employer”) are excluded from this obligation.

   Note however that, under the transitional provisions, your years of service prior to 1 January 2010 only count for the purposes of calculating your severance entitlement if your conditions of employment conferred an entitlement to redundancy.

   You should not be lulled into a false sense of complacency regarding the existence of a statutory right to redundancy. The scheme is simply intended as a bare minimum and when negotiating an Executive Service Agreement, there is no reason why you should not attempt to press for a more generous payout.

 Redundancy