Redundancy from employment may occur as a result of economic, market, business restructuring, technological changes or when the employer becomes insolvent or bankrupt. The cessation of employment is not related to poor performance or misconduct of an employee.

All employees who have been employed for more than a year are entitled to get compensation for redundancy as per the Fair Work Act 2009 (FWA). However, the applicability of FWA is not uniform as the Fair Work Australia, formed under the FWA provides a salary cap which restricts the remedy available under it, from being applicable to the senior executives earning high salaries and pay packages. Though, the salary cap is revised regularly, it definitely restricts the application of FWA.

Issues Relating To Redundancy and Claims For Compensation

An executive needs to ascertain whether his cessation of employment is genuinely due to redundancy or not. It is not a genuine redundancy situation, if it is reasonable for an employee to be redeployed within the employer’s business or relocated to an associated business. It is then a case of an unfair dismissal and the employee is entitled hire an unfair dismissal lawyer and to get an appropriate compensation. It will be sensible to monitor online and print advertisements to check if the employer is advertising the claimed ‘redundant’ job position.

An executive needs to carefully read and understand the clauses of his employment contract since the Courts in Australia will imply a term of reasonable notice into a contract of employment when there is no explicit term or clause regarding the issue. However, the Courts will not imply a term of severance payment (intended as compensation for the loss of future entitlements to long service leave and accrued sick leave) into a contract of employment. In such cases, the employer can have a common law claim. Further, an executive should ask and clarify his rights to receive compensation in case of redundancy during initial appointment.

An employer may seek to portray the wrongful termination of an executive as a “redundancy”. However, it will always imply that the employment contract is being terminated at the initiative of the employer. In such case, the executive will have a common law claim against the employer even if there is no legal claim to a severance payment.

In the event of bankruptcy or insolvency of the employer a claim for financial assistance can be made to the government funded General Employee Entitlements and Redundancy Scheme. General Employee Entitlements and Redundancy Scheme may pay unpaid wages, unpaid annual leave, unpaid long service leave, money in lieu of notice and redundancy entitlement.

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