FEATURE | employment law >>
Penning has already seen a steep increase in the number of terminations and redundancies walking through his door and he describes the High Court’s decision as significant in the current climate. “A lot of senior executives who come to me are in their mid-50s and they’ve been with the one organisation for 20 years or more,” he says. “Often, this is the end of their career, so if they want to use the redundancy to set themselves up in business or retire early, the final payout is extremely important.” Penning points to share options as just one example. Employee share-ownership schemes are an important part of corporate remuneration and are used to foster loyalty executive and staff. They are rarely – if ever – part of an initial contract of employment and are usually recorded in a separate document drawn up years into an employee’s career. And he cites many other examples of detail that is missed. “Most people know that they are due for a payout that represents a certain number of weeks’ pay for every year of service, but they often miss the detail of exactly what constitutes a week’s pay and, unfortunately, leave it up to the organisation to work it out for them,” he says. One of his clients, an investment banker who worked in foreign investment, was made redundant and, according to his policy document, in case of severance he was due four weeks’ pay per year of service. To determine what makes up a week’s pay, Penning describes how he looked for entitlements such as superannuation, motor vehicles, bonuses and commissions as factors to take into account. Even the annual calendar-year bonus came into it because there may be some entitlement if an employee is laid off before the calendar year is up. According to Penning, there are many cases where there is no definite answer and the trick is to look at the documents for what is called ‘an enforceable right’. “Sometimes it’s a matter of negotiation,” he says. “With one client, we decided to let the bonuses go because we were prepared to weigh up the cost of battling for that with other concessions that were eventually granted.” There has also been another important recent judgement with wide implications for this part of employment law. This time, the NSW Supreme Court highlighted the www.legalbusinessonline.com
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existence of what are described as ‘implied terms’ within an employment contract. The decision is important for employees who have been promoted during their time with an organisation if no new contract was drawn up after they moved positions. In the Supreme Court case, a general manager was awarded nine months’ pay after he was made redundant. When he joined the company, in 1999, he was originally employed as a business development manager. He was then promoted twice before finally becoming managing director but found that a promised job description and performance indicators were not provided. When he was made redundant, in 2006, the company tried to rely on a three-month payout clause related to the contract from his former role. What they failed to understand was that, if there was no contract that stipulated a notice period, the courts would be able to imply one. And they did. Penning has seen a number of similar examples. One, a senior executive with 20 years’ experience at the same bank, had his contract rewritten as part of a promotion that occurred in 2003. In 2005, he was promoted to an overseas posting in Europe and, in 2008, he was relocated to Sydney in a new position. But there was no contract written for the new position. The 2003 contract stated that any termination of employment would require a minimum proportion of his salary package. But there was a second issue in this case, that involved coverage of the employee by an award, which meant that he was able to claim substantial benefits outside those stated in his contract. Penning also warns redundant employees to get legal advice to find out if there was any underlying issue relating to discrimination. He recalls a case involving a woman who held a senior position in an accounting firm who was made redundant while on maternity leave. This is important because it allows for a greater payout if the organisation has breached its family leave policies, which operate in contradistinction from redundancy policies in maternity leave cases. Tough times make for tougher negotiations, and sometimes employers will try to avoid their responsibilities when making redundancy payouts. Often, an organisation will simply transfer an
employee to a less exciting position, hoping the humiliation will force them to resign. Penning saw this with a major Australian energy company. After 20 years’ service, the employee took long service leave and his position was deleted after he had gone. When he returned he was told by a company representative that they believed he was going to retire. He was told that, if he wanted to come back, they would create a position for him. What was important, in this case, was the question of whether or not his contract stated that he could be moved to a new position and what terms surround the level of responsibility in that new position. Here also it was important to evaluate any implied terms in the employment contract. Employees often don’t realise that they don’t have to accept the change. In cases such as these, they usually don’t change salary, but reporting lines and conditions do change. This particular employee found that, once he moved, he was required to work on weekends. He was given three days’ notice that he was to change to this new position and that it required him to perform duties he did in a similar role seven years previously, which included the weekend work. “Employees are often not aware that the organisation is able to offer the change in position, but that they can’t compel the employee to take it,” Penning says. In the end, a redundancy payout is intended to provide a level of security for the time a person needs to look after their family commitments until they can secure another form of income. How long that period will be is anybody’s guess so there is no way of quantifying how much will be enough. The best thing to do is see a lawyer, have an appraisal done for a small fee, get what you’re entitled to and then move on. Moving on, particularly after a long period of time with one organisation, often requires a very difficult period of adjustment. If you’re going to set yourself up in a new business, an adequate payout is an important first step. “Any new business takes time and money before it brings in the returns necessary,” says Penning. “Redundant employees need to get what they are entitled to – and then move on.” Steven Penning is a senior partner at the employment law firm, Turner Freeman Lawyers
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