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Excerpt from this article first published in Human Resources Magazine, Issue 121 - 6 February 2007
Where a company is bought or sold, an issue which often arises is whether employees are entitled to redundancy payments. This will usually depend on whether the offer of employment is comparable to the terms and conditions enjoyed by employees with their former employer.
The Australian Industrial Relations Commission has been asked to consider these issues in a series of decisions in Feltex Australia v TCFUA (21 November 2006 and 11 December 2006). Feltex Carpets began negotiations to buy the assets and employ the employees of Feltex Australia which had gone into receivership. However, the receivers wanted to avoid making redundancy payment to employees. Feltex Australia relied on a provision of the applicable union certified agreement which disentitled employees to severance payments where they receive offers of “acceptable alternative employment”.
Feltex Australia applied to the Commission seeking a declaration that the offers made to employees under Australian Workplace Agreements were acceptable and relieved it of the obligation to make redundancy payments.
The Commission said that in assessing whether offers of employment constituted acceptable alternative employment, there did not have to be an offer of identical terms and conditions of employment but terms and conditions merely had to be substantially similar and no less favourable overall than the terms and conditions applicable to the employee at the time of redundancy.
In its first decision, the Commission found that the offer did not satisfy the requirements of acceptable alternative employment in a number of areas. Importantly, the Commission found that the offer was inadequate because, amongst other things, it denied employees the right of representation, consultation and approval on key issues which existed under the certified agreement.
Feltex Australia revised their offers. On this occasion, Feltex Australia argued that the union clauses were “objectionable content” and therefore invalid and could not be taken into account. Feltex Australia submitted that these clauses encouraged employees to become members of the union and therefore contravened the freedom of association laws under the workplace relations laws.
The Commission again rejected the offers as unacceptable. The Commission determined that merely requiring that a union be involved and have rights in the workplace does not necessarily encourage employees to become union members.
HR Tips:
Union rights of representation are a substantive right. This will need to be taken into account in making offers of employment to employees.
Senior Associate
