Redundancy and service with associated entities

 

Under the Fair Work Act, the amount of statutory redundancy which must be paid in the event of a redundancy depends upon the employee’s “period of continuous service with the employer on termination”; see sec 119.

Recently I have been asked to provide advice to several employer clients about their liability to include an employee’s service with an associated entity in the count of continuous service for the purpose of calculating the amount of statutory redundancy payable, and the answer is not as simple as first thought.

We all know that employees of an associated entity of an employer are counted when determining  whether the employer is a small business employer. This is because sub-sec 23(3) expressly says so. Furthermore small business employers are not liable to pay statutory redundancy; see sub-sec 121(1)(b).

However, there is no equivalent provision in the Act which provides that service with an associated entity of an employer which renders the employment of an employee redundant is deemed to be service with that employer.

However sec 22 of the Act defines what is meant by “service” and continuous service” and allows service with an “associated entity” to be counted as service with a particular employer in certain circumstances, such as when there is a particular type of  transfer of business between them. Sub-sec 22(5) provides that if there is a transfer of employment of a particular kind between Employer A and Employer B “any period of service of the employee” with Employer A “counts as service” with Employer B and any period of time between the termination of employment with Employer A and the start of employment with Employer B does not “break the employee’s continuous service” with Employer B “but does not count towards the length of the employee’s continuous service with” Employer B.

There is one rider on this and it negates double dipping. It essentially provides that if the employee has “had the benefit of an entitlement which was calculated by reference to a period of service” with Employer A (which presumably includes statutory redundancy pay) then that period is not counts as service with Employer B.

However none of this answers the question at the heart of this post which is the issue of the effect of prior service with associated entities.

The answer is provided by sub-sec 22(7) the essence of which is that there will be deemed to have been a “transfer of business” of the kind contemplated by sub-sec 22(5) as above between associated entities Employer A and Employer B if (a) the employee becomes employed by Employer B not more than 3 months after the termination of the employee’s employment with Employer A and (b)  if Employers A and B are associated entities when the employee becomes an employee of Employer B.

NB There are many posts on my web site about the circumstances in which companies covered by the Fair Work Act will be deemed to be associated entities and several which deal with when overseas companies will be deemed to be an associated entity of an Australian company.