Redundancy can come as a significant shock that leaves many people feeling uncertain and vulnerable. Redundancy is a complex area of law and it is important to have independent legal advice to ensure the legality of the redundancy itself and to safeguard your rights and entitlements. At Maurice Blackburn we are ideally positioned to ensure all your statutory and contractual entitlements to notice, leave and redundancy pay, as well as any non-salary rights such as bonuses and share options.

McCormick v Riverwood International Australia

McCormick v Riverwood International (Australia) Pty Ltd [1999] 167ALR 689

In 1999 Maurice Blackburn's employment lawyers conducted the leading redundancy pay case to date.    Riverwood denied that it had a contractual obligation to make a redundancy payment to Mr McCormick.

Representing Mr McCormick, we successfully proved that an employee could recover redundancy pay contained in a company policy. 

Mr McCormick was awarded $76,435.74 in compensation plus all legal expenses.


FAQs - your questions answered

An employee is said to be 'redundant' when an employer decides that it no longer wants the employee's job to be done by anyone.   A redundancy may occur for a number of reasons – however the key is that the job is no longer to be performed.

If you have been made redundant or are facing redundancy, you should get legal advice.  Some employers may be unaware of their legal obligations to employees.  You may have rights to challenge the employer's decision to declare your position redundant, or you may have a right to refuse a position that is offered to you. You should ensure that you receive all your statutory and contractual entitlements to notice, leave and redundancy pay.

The payments that the employer proposes to make to you should be checked to ensure that you are paid the correct amount and that any non-salary rights (such as bonuses or share options) are paid. Redundancy law has changed as a result of the provisions of the Fair Work Act 2009. It remains a complex area of law.

With the introduction on 1 January 2010 of the National Employment Standards (NES) under the Fair Work Act 2009, most employees will have an entitlement to a redundancy payment.

Many employees may also have an entitlement to redundancy pay arising out of the terms of:

  • an award
  • an enterprise agreement
  • an Australian Workplace Agreement (AWA) or other statutory agreement
  • a contract of employment, or
  • a company policy.

If you are employed by a business partnership or a state government department, you may also have a right to redundancy pay under state legislation.

Under the National Employment Standards (NES), the following employees are not entitled to redundancy pay:

  • employees of a business which has fewer than 15 employees
  • people employed on a casual basis
  • people employed on a fixed term contract
  • where the termination results from the 'ordinary and customary turnover of labour', and
  • apprentices.

Redundancy pay comprises notice and redundancy pay.

Notice

The National Employment Standards (NES) sets out the minimum amount of notice to be given to an employee if they have been made redundant:

Length of service                       

Weeks

Up to 1 year of service

  1

1 - 3 years of service

  2

3 - 5 years of service

  3

More than 5 years of service

  4

If you are over 45 with a minimum of 2 years service, the period is increased by 1 week.

A contract, employer policy, award or industrial agreement may give a longer period of notice.

The employer may elect to pay the employee instead of asking them to work the period of notice.

Redundancy or severance pay

The purpose of redundancy pay (also called 'severance pay') is to compensate an employee whose job has become redundant for things such as lost personal leave (including sick and carer's leave) and long service leave, as well as for the inconvenience and hardship imposed on the employee. This may include compensating for things such as loss of seniority, loss of security of employment and other kinds of losses.

Where an employee is entitled to redundancy pay, it should be paid in addition to notice of termination or pay in lieu of notice.

The NES sets out the minimum amount of redundancy pay to be paid to an employee who is made redundant:

Period of continuous service     

Weeks

Less than 1 year

Nil

1 year (less than 2 years)

4

2 years (less than 3 years)

6

3 years (less than 4 years)

7

4 years (less than 5 years)

8

5 years (less than 6 years)

10

6 years (less than 7 years)

11

7 years (less than 8 years)

13

8 years (less than 9 years)

14

9 years (less than 10 years)

16

10 years and over

12

The length of service of an employee is calculated from 1 January 2010, unless the employee had an existing right to redundancy before 1 January 2010.

For example: John started worked for Acme Tools in June 2006. He was not covered by an award or an industrial agreement. His contract did not give him a right to redundancy payments. He is therefore only entitled to redundancy pay from 1 January 2010. John is made redundant by Acme in August 2012. He receives 6 weeks redundancy pay, for the 2 years and 8 months service from 1 January 2010 to August 2012.

A contract, company policy, award or industrial agreement may give a greater amount of redundancy pay.

An employee who is made redundant is also entitled to receive a payment equivalent to any accrued annual leave. Some employees may also be entitled to long service leave and sick leave.

There are complex laws that govern the situation where a business is sold.

In most circumstances, if an employee accepts a job with the new employer, the employee is not entitled to redundancy payments from the old employer. Service with the old employer may be recognised for the purpose of long service and other entitlements.

However each situation is different and employees should seek the advice of a lawyer if faced with a transfer of employment from one business to another.