A full bench in the WA Industrial Relations Commission has confirmed that a contractor does not have to pay redundancy because the employee’s job loss was part of the ordinary and customary turnover of labour. This is an issue for many companies that provide services on fixed term contracts to their clients. What to do when they lose a contract and can’t re-deploy the staff that worked on it? 

Right from the beginning of a series of key redundancy decisions in the arbitral tribunals in the early 1980s, it has been accepted that redundancy does not apply where a person was dismissed due to “the ordinary and customary turnover of labour”. In fact it has been enshrined in law, with these words, known colloquially as “the exception”, forming part of the NES in the Fair Work Act. 

In the WA case, the employee claimed his employment contract contemplated he would be paid redundancy on termination. However his employer argued that the reason for the loss of his job was the company’s loss of the contract. This meant that even though redundancy pay was included in his contract, what had actually occurred was not redundancy at all – because “the exception” applied. 

The facts in this case were focussed on the tension between the employment contract and the legislation, and the employer’s argument that no redundancy had in fact occurred was not seen as controversial or tenuous. It wasn’t challenged.  
While not referred to by this WA bench, a case 18 months ago in the federal jurisdiction traversed the history of “the exception” in an appeal matter where a company had lost a contract.  

The FWC full bench in that matter concluded that as the company lost a contract, and an employee who worked on that contract had neither been able to secure work with the new contractor or an alternative position with the existing employer, the employee was not entitled to redundancy. The loss of contract was unremarkable, and a typical or normal business occurrence for that employer. 

Like most issues in the employment relationship, each case will have its own characteristics and different outcomes may eventuate. However as a general rule of thumb, redundancy refers to a job becoming redundant and not necessarily to the employee becoming redundant. In these cases, the work continued, albeit with a different employer and the reason for the employee’s termination fell within the purview of “the exception”.  

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