FEDERAL COURT OF AUSTRALIA

Broadlex Services Pty Ltd v United Workers’ Union [2020] FCA 867

ORDERS

THE COURT ORDERS THAT:

1.    The appeal be dismissed.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

KATZMANN J:

1    Subsection 119(1) of the Fair Work Act 2009 (Cth) (FW Act) provides that:

An employee is entitled to be paid redundancy pay by the employer if the employee’s employment is terminated:

(a)    at the employer’s initiative because the employer no longer requires the job done by the employee to be done by anyone, except where this is due to the ordinary and customary turnover of labour; or

(b)    because of the insolvency or bankruptcy of the employer.

2    The central question raised by this appeal is what is meant by the phrase “employment is terminated” in the chapeau to the subsection.

Background

3    The appellant, Broadlex Services Pty Ltd, supplies cleaning services to the electricity distributor, Ausgrid. On 1 May 2014 Broadlex entered into a contract of employment with Brizitka Vrtkovski. Ms Vrtkovski was employed as a full-time cleaner at an Energy Australia/Ausgrid site in Wallsend, a suburb of Newcastle. In July 2017 Broadlex negotiated a new contract with Ausgrid in which the cleaning hours it had provided were reduced. On 15 August 2017 Ms Vrtkovski was informed by Broadlex that “due to consideration of work flow an operational requirement has been identified to reduce [her] status from full time to part time” and that her work hours would alter on and from 12 September 2017. The effect of the decision was to reduce Ms Vrtkovski’s working hours from 38 hours a week to 20 hours a week and her salary by about 40% to $16,790.80.

4    Ms Vrtkovski was invited to sign a form of consent to this change, which was described as a “transfer from full time to part time” with a change in hourly rates. Unsurprisingly, she refused. Nevertheless, she began working the reduced hours on 12 September 2017 because she considered she had no choice.

5    Ms Vrtkovski’s union, United Voice (now the United Workers’ Union), issued proceedings in the Local Court seeking a declaration that Broadlex contravened s 44 of the FW Act, by failing to pay Ms Vrtkovski redundancy pay in accordance with s 119, and orders for compensation and penalties. Section 44 provides that an employer must not contravene a provision of the National Employment Standards. Civil penalties may be imposed on those who do. Section 119 is such a provision. The National Employment Standards are minimum standards that apply to the employment of employees which cannot be displaced: s 61(2).

6    The magistrate upheld the Union’s claims, awarded Ms Vrtkovski $5,194.98 in redundancy pay, with interest fixed at $502.56, and ordered Broadlex to pay the Union a civil penalty of $1,500.

7    At trial, the parties apparently agreed that the duties and tasks Ms Vrtkovski performed on a part-time basis were the same as those she had performed on a full-time basis, and it was common ground that her accrued service benefits were maintained after she began working part-time. Broadlex nevertheless accepted that, in reducing Ms Vrtkovski’s employment status from full-time to part-time, it had repudiated her employment contract and the magistrate found that Ms Vrtkovski had accepted the repudiation by refusing to sign the consent form or agreeing to the variation in terms. Consequently, her Honour held that the contract of employment was terminated and, when the employee started work on a part-time basis, she did so under a new contract of employment. Her Honour went on to find that Ms Vrtkovski’s employment was terminated at the initiative of Broadlex because it no longer required the full-time job to be done by anyone, that there was no evidence that the termination was due to the ordinary and customary turnover of labour, and that Ms Vrtkovski was entitled to redundancy pay.

The appeal

8    The appeal is brought pursuant to s 565 of the FW Act, which provides that an appeal lies to this Court from an eligible State or Territory court exercising jurisdiction under the Act. The Local Court is such a court: FW Act, s 12.

9    Broadlex contended that the magistrate’s decision was based on an incorrect interpretation of subs 119(1). In this Court, as in the court below, Broadlex argued that Ms Vrtkovski was not entitled to redundancy pay because, so it reasoned, the employment relationship continued after the termination of the contract and termination of a contract of employment at the employer’s initiative is not enough to generate the entitlement under subs 119(1), even if the reason for the termination of the contract is that the employer no longer requires the job the employee was doing to be done by anyone It seeks orders that the appeal be allowed, the magistrate’s judgment be reversed, that her order requiring Broadlex to pay a civil penalty be quashed, and that the Union repay all amounts paid by Broadlex together with interest at the applicable rate.

The magistrate’s reasons

10    Broadlex’s argument in the court below, as summarised by the magistrate, was that:

    an employee is only entitled to a redundancy payment under s 119 if the employment relationship has been terminated; and

    the employment relationship between the parties continued despite the fact that Ms Vrtkovski accepted the repudiation by Broadlex of her full-time contract and entered into a new part-time contract or agreed to a variation of the full-time contract.

11    The magistrate did not accept that there had been a variation of the full-time contract. Rather, as I have already noted, her Honour found that Broadlex had repudiated the contract and Ms Vrtkovski accepted the repudiation.

12    The magistrate considered that there was no express support for the interpretation for which Broadlex contended in any of the authorities to which the court was referred. In her Honour’s view, Fair Work Ombudsman v FL Press Pty Ltd [2015] FCCA 1578, however, was directly on point and did not support it. Although her Honour observed that she was not bound to follow it, she considered it persuasive and not inconsistent with the other authorities.

13    The salient facts in FL Press were very similar. The Ombudsman had complained, amongst other things, that FL Press had failed to pay redundancy pay to a journalist in its employ, Nikola Jovic. From 1 July 2003 until 26 April 2010 Mr Jovic was employed full-time and from 27 April 2010 until 11 January 2011 he was employed part-time after his hours of work were reduced by 60% without his consent. FL Press argued that subs 119(1) did not apply because his employment had not been terminated. Judge Cameron determined otherwise.

14    His Honour held at [233]–[236] that, by imposing this change on Mr Jovic, FL Press had repudiated his employment contract and, by agreeing to the new employment terms, Mr Jovic accepted the repudiation, bringing to an end both his contract and his employment. His Honour also held at [236] that, because FL Press no longer wanted anyone to do Mr Jovic’s former full-time job, the termination of his employment amounted to a redundancy for the purposes of s 119 of the FW Act.

15    On the point of principle, his Honour said at [232]:

[A] person’s employment cannot be divorced from the contract of employment which governs it. This is so even if the employment and the contract terminate at different times, for instance in circumstances where, although the employment has ended following a dismissal, the contract remains on foot because the employer’s repudiatory conduct has not been accepted: Visscher v Giudice (2009) 239 CLR 361. Because the terms of a person’s employment are determined by the related contract of employment, to identify whether the employment of a person such as Mr Jovic has been terminated and replaced with another employment or continued according to amended terms depends on the contractual terms applicable to that employment. The reasons for the employer’s actions are not relevant to this aspect of the analysis.

The scope of the appeal

16    As I mentioned at the outset, the appeal is concerned with the question of statutory construction. Grounds 1 and 2 of the notice of appeal turn on its resolution. Ground 3 was not pressed.

17    Broadlex submitted that the issue was “whether on the proper construction the phrase ‘employment is terminated’ within s 119(1) of the [FW Act] refers to the employment relationship exclusively or whether it could mean the employment contract”. As the Union contended, however, the resolution of the construction question should not pre-emptively be constrained as a binary choice between termination of the employment relationship and the employment contract.

18    The focus of Broadlex’s argument was on the distinction between the termination of the employment relationship and the employment contract. Broadlex submitted that the magistrate erred by relying on the fact that s 119 fails to refer expressly to the employment relationship as a reason for construing the phrase “employment is terminated” to include the employment contract.

The relevant principles

19    The relevant principles are well-established.

20    First, the issue is to be resolved by reference to the text considered from the outset in context and having regard to the legislative purpose, using context in its widest sense to include the legislative history and extrinsic materials: CIC Insurance Limited v Bankstown Football Club Limited (1997) 187 CLR 384 at 408 (Brennan CJ, Dawson, Toohey and Gummow JJ); Thiess v Collector of Customs (2014) 250 CLR 664 at [22]. As Kiefel CJ, Nettle and Gordon JJ explained in SZTAL v Minister for Immigration and Border Protection (2017) 262 CLR 362 at [14]:

This is not to deny the importance of the natural and ordinary meaning of a word, namely how it is ordinarily understood in discourse, to the process of construction. Considerations of context and purpose simply recognise that, understood in its statutory, historical or other context, some other meaning of a word may be suggested, and so too, if its ordinary meaning is not consistent with the statutory purpose, that meaning must be rejected.

21    Second, the meaning of the provision must be determined by reference to the language of the statute “viewed as a whole”. The statute must be construed “on the prima facie basis that its provisions are intended to give effect to harmonious goals”. See Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at [69]–[70] (McHugh, Gummow, Kirby and Hayne JJ).

22    Third, the interpretation that would best achieve the legislative purpose is to be preferred to any other interpretation: Acts Interpretation Act 1901 (Cth), s 15AA. This rule may be of little assistance, however, in interpreting a statutory provision that “strikes a balance between competing interests”: Carr v The State of Western Australia (2007) 232 CLR 138 at [5] (Gleeson CJ). As his Honour went on to observe in that case:

Legislation rarely pursues a single purpose at all costs. Where the problem is one of doubt about the extent to which the legislation pursues a purpose, stating the purpose is unlikely to solve the problem. For a court to construe the legislation as though it pursued the purpose to the fullest possible extent may be contrary to the manifest intention of the legislation and a purported exercise of judicial power for a legislative purpose.

The text

23    Putting to one side the exception for the ordinary and customary turnover of labour, which is irrelevant in this case, para 119(1)(a) erects an entitlement to redundancy pay on the happening of two causally connected events. One is the termination of the employee’s employment at the employer’s initiative. The other is the termination of the employee’s employment because the employer no longer requires the job done by the employee to be done by anyone. The Union argued that the phrase “employment is terminated” is not to be construed in isolation from the words around them. Drawing on Amcor Limited v Construction, Forestry, Mining and Energy Union (2005) 222 CLR 241 at [44] (Gummow, Hayne and Heydon JJ), it submitted that the entitlement to redundancy pay created by para 119(1)(a) depends on the job becoming redundant and not on the employee being surplus to the employer’s requirements, which is the effect of the construction for which Broadlex contends.

24    But the entitlement to redundancy pay does not only depend on the job being surplus to the employer’s requirements. It also depends on the employment having been terminated on that account. Both questions must be answered in the employee’s favour before she is eligible for redundancy pay. As Judge Cameron put it in FL Press at [230], “the reason for the termination should not distract from the question of termination”. Where, as here, it was common ground that the job the employee was doing was redundant, the only question was whether the employee’s employment had been terminated.

25    On the other hand, the phrase “employment is terminated” is ambiguous. It could refer to the employment relationship, to the employment contract, to both, or to the termination of employment in the job which the employer no longer requires done. Thus, to discern its meaning it is necessary to consider a number of contextual matters, including the context in which it is used in the section.

26    Broadlex focussed on the word “employment”. It submitted that, as “employment” is not defined in the Act, its ordinary meaning applies, and in its ordinary meaning it refers to the employment relationship. Broadlex pointed to the definition of “employment” in the Macquarie Dictionary, 7th edition, as “the state of being employed”, in contrast to “unemployment”, which means “lack of employment”. It submitted that contextual considerations clearly demonstrate that this is the intended meaning of the word in the phrase “employment is terminated” in subs 119(1).

27    In fact, however, this is only one of three meanings given for “employment” in the Macquarie Dictionary. The other two are “the act of employing” and “that on which one is employed; work; occupation; business”. This latter meaning may well support the Union’s position.

28    Be that as it may, the question is not what is ordinarily meant by the word “employment” but what is meant by the phrase “employment is terminated” in the particular statutory context in which it appears. It can be misleading to construe a phrase by combining the dictionary meanings of its component parts: XYZ v The Commonwealth of Australia (2006) 227 CLR 532 at [19] (Gleeson CJ).

29    Not only is “employment” not defined in the FW Act, but neither is the phrase “employment is terminated”. It appears four times in the Act: in subss 119(1), 123(1), 772(2), and 789(1). Paragraph 123(1)(b) excludes an employee whose employment is terminated because of serious misconduct from the right to receive notice of termination or payment in lieu. Paragraph 772(2)(b) carves out an exception to para 772(1)(f), which prohibits an employer from terminating an employee’s employment on the basis of “race, colour, sex, sexual orientation, age, physical or mental disability, marital status, family or carer’s responsibilities, pregnancy, religion, political opinion, national extraction or social origin”. That exception operates where “the person is a member of the staff of an institution that is conducted in accordance with the doctrines, tenets, beliefs or teachings of a particular religion or creed” and the “employment is terminated” in good faith and to avoid injury to the religious susceptibilities of adherents of that religion or creed. Paragraph 789(1)(b) excludes the requirements for notification and consultation in Pt 6-4 Div 3 of the FW Act in relation to such an employee. The phrase also appears in a note to s 768BM, which cross-references s 119.

30    None of these references assists in resolving the question of interpretation in this case. The phrase “termination of employment” appears more frequently but likewise nothing in those provisions is of assistance. Importantly, I was not taken to any authorities on the meaning of “employment” or “termination of employment” in any of these provisions.

31    I turn now to a number of contextual matters.

The legislative history

32    As Colvin J observed in Fair Work Ombudsman v Spotless Services Australia Ltd [2019] FCA 9 at [21]:

[T]he pre-existing law in the form of decided industrial cases may form part of the context to be considered in resolving the construction questions in this case. However, it is important to be clear about the way the pre-existing law may be used. It provides an historical context in which to read the words, particularly to consider what was intended by using words in the Act that echo a phrase deployed as part of the pre-existing law. It may also assist in understanding the purpose of the [statutory language] which may then be used to choose between competing constructions.

33    But “[t]he pre-existing law and the legislative history should not deflect the Court from its duty to resolve an issue of statutory construction, which is a text-based activity”: Alphapharm Pty Ltd v H Lundbeck A/S (2014) 254 CLR 247 at [42] (Crennan, Bell and Gageler JJ).

34    Unlike s 117, which, with s 123, largely replicates s 170CM of the predecessor legislation (the Workplace Relations Act 1996 (Cth) (WR Act)), s 119 is a relatively new statutory entitlement. Before the enactment of the FW Act, redundancy pay was covered by awards and there were no comparable provisions in the applicable legislation.

35    It was common ground that the history of the legislative entitlement to redundancy pay begins with two decisions of the Australian Conciliation and Arbitration Commission (C&A Commission): Termination, Change and Redundancy Case (1984) 8 IR 34 (TCR No 1) and Termination, Change and Redundancy Case (1984) 9 IR 115 (TCR No 2) (the TCR case). The TCR case was a test case brought by the Australian Council of Trade Unions. As a result of the TCR case, federal (and later most state) awards were varied to include a standard set of redundancy provisions: see Andrew Stewart, Stewart’s Guide to Employment Law, 5th ed, The Federation Press, 2015, [16.25].

36    The C&A Commission did not distinguish between the termination of an employment contract and the termination of the employment relationship. Broadlex submitted that the first decision distinguished between “a redundancy event” and “the obligation to provide severance pay”. The references it provided in support (at 56 and 76 of TCR No 1) do not bear out the submission. But the C&A Commission did distinguish between a transfer of an employee to lower paid duties due to the position he or she held becoming redundant and an employee whose employment was terminated. In TCR No 1 the C&A Commission said (at 67) that it was “prepared to provide that where an employee is transferred to lower paid duties because the employer no longer wishes the job the employee has been doing, done by anyone, then the employee should be entitled to the same period of notice of the change in employment as he (sic) would have been entitled to if his/her employment had been terminated”.

37    Broadlex pointed out that a number of modern awards, including the Cleaning Services Award 2010 which applied to Ms Vrtkovski at the relevant time, picked up this distinction. Clause 14.2 relevantly provided that:

Where an employee is transferred to lower paid duties by reason of redundancy, the same period of notice must be given as the employee would have been entitled to if the employee had been terminated …

38    Further, in TCR No 1, the C&A Commission took the view that the payment of redundancy (or severance) pay was justifiable “as compensation for non-transferable credits and the inconvenience and hardship imposed on employees” (at 71). In doing so, the C&A Commission adopted two of three conclusions reached by the Committee of Inquiry into Technological Change in Australia 1980 (CITCA Committee) as to the elements of monetary compensation for retrenchment. They were set out at 72–73 of the decision:

–    compensation for non-transferable ‘credits’ that have been built up, such as: accrued benefits like sick leave and long service leave; loss of seniority; and loss of the employer’s contribution to pension or superannuation

–    compensation for the inconvenience or hardship imposed and assistance to the retrenched employee to make the change, with aims such as: to act as temporary income maintenance while the retrenched employee searches for another job; and to allow for the possibility of retraining or relocation to take up a new job.

39    In TCR No 2, the Full Bench sat again to consider an amendment to the Metal Industry Award 1984 to reflect its decision and, after hearing further argument, determined (at 135) to include a provision in these terms in the amendment:

An employer, in a particular redundancy case, may make application to the Commission to have the general severance pay prescription varied if he/she obtains acceptable alternative employment for an employee.

40    It is abundantly clear that the terms of s 119 derive from the relevant part of the standard clause developed by the C&A Commission for inclusion in federal awards. That clause distinguished between an employee who was transferred to lower paid duties by reason of redundancy and an employee whose employment was terminated for that reason:

#. REDUNDANCY

#.1 Definition

Redundancy occurs when an employer decides that the employer no longer wishes the job the employee has been doing to be done by anyone and this is not due to the ordinary and customary turnover of labour.

#.2 Transfer to lower paid duties

Where an employee is transferred to lower paid duties by reason of redundancy the same period of notice must be given as the employee would have been entitled to if the employment had been terminated and the employer may at the employer's option, make payment in lieu thereof of an amount equal to the difference between the former ordinary rate of pay and the new ordinary time rate for the number of weeks of notice still owing.

#.3 Severance pay

#.3.1 In addition to the period of notice prescribed for ordinary termination in clause ? - Termination of employment, an employee whose employment is terminated by reason of redundancy must be paid, subject to further order of the Commission, the following amount of severance pay in respect of a continuous period of service:

#.3.2 Week’s pay means the ordinary time rate of pay for the employees concerned.

#.3.3 Provided that the severance payments shall not exceed the amount which the employee would have earned if employment with the employer had proceeded to the employee's normal retirement date.

#.4 Employee leaving during notice period

An employee whose employment is terminated by reason of redundancy may terminate his/her employment during the period of notice and, if so, will be entitled to the same benefits and payments under this clause had they remained with the employer until the expiry of such notice. However, in this circumstance the employee will not be entitled to payment in lieu of notice.

#.5 Alternative employment

An employer, in a particular redundancy case, may make application to the Commission to have the general severance pay prescription varied if the employer obtains acceptable alternative employment for an employee.

41    Broadlex acknowledged that the FW Act does not state that its intention was to codify established minimum terms and conditions of employment. Clause r.82 of the regulatory analysis incorporated in the Explanatory Memorandum to the Fair Work Bill 2008 (Cth) (FW Bill) states:

The NES will provide for written notice of termination and redundancy pay. These are currently awards-based entitlements, which will be legislated to provide more comprehensive protection for employees and extend redundancy pay to award-free employees.

42    Beyond this, there is no indication that the Parliament intended to extend the entitlement to redundancy pay. Broadlex submitted that the language used in para 119(1)(a) “goes no further than the basis of redundancy pay enunciated in the TCR Cases” and contended that this was “a contextual indication that the legislature had in mind the adoption of concepts that applied under pre-existing law”.

Legislative context and purpose

43    Section 119 is located within Division 11 of the FW Act, which deals with, and is entitled “Notice of termination and redundancy pay”, and includes ss 117 to 123 inclusive.

44    Subdivision A is concerned with notice. Section 117 prohibits an employer from terminating “an employee’s employment” without written notice or payment in lieu and prescribes the minimum period of notice. Section 118 provides that a modern award or enterprise agreement may include terms specifying the period of notice.

45    Subdivision B is concerned with redundancy pay.

46    As noted at [34] above, s 119 is a relatively new statutory entitlement. Before the enactment of the FW Act, redundancy pay was covered by awards but there was no comparable provision in the former Act.

47    Subsection 119(1) describes the circumstances in which the entitlement arises and s 119(2) the amount by reference to the “employee’s period of continuous service with the employer on termination”. Broadlex argued that the expression “on termination” in subs (2) is a contextual indication that the legislature had in mind the termination of the employment relationship. It argued that, because the amount of redundancy pay is linked to the duration of continuous service and only the severance of the employment relationship breaks continuity, the Parliament could only have had in mind a termination of the employment relationship. Otherwise, it complained that, if the employee continued to work for the employer, albeit in a different job and at a substantially reduced rate of pay, the employee would recover twice for the same loss.

48    But s 119 must be read with s 120. Section 120 gives the Fair Work Commission the power, on the application of the employer, to determine that the amount of redundancy payment should be reduced in the circumstances described in subs (1), that is to say, if:

(a)    an employee is entitled to be paid an amount of redundancy pay by the employer because of section 119; and

  (b)    the employer:

(i)    obtains other acceptable employment for the employee; or

(ii)    cannot pay the amount.

49    On its face, the expression “other acceptable employment” is not confined to employment with another employer. There is certainly nothing in the Act to limit the application of the section to a situation in which the employer obtains “acceptable employment” for the employee with another employer. There is no apparent reason why the expression should be read down in this way. That is not the view the Fair Work Commission has taken: see, for example, Stanley International College Pty Ltd t/a Stanley College [2018] FWC 4843. And Broadlex did not argue for such a restriction.

50    The Union submitted that, if Broadlex’s construction of s 119 were correct, then s 120 would never be engaged where an employer obtains other acceptable employment for the employee within the same firm.

51    Broadlex did not engage with the Union’s point in its written submissions in reply. In oral argument it submitted that, for the purposes of s 120, employment means something different from what it means in s 119. It argued that there had to be a break in the continuity of employment before s 120 would be engaged. Based on Broadlex’s interpretation, an employee whose contract was terminated but immediately entered into a new contract would not be entitled to redundancy pay but an employee who entered into a new contract a day or two later would be. It seems unlikely that this was Parliament’s intention.

52    Section 119 includes the following note, which is part of the Act (see s 13 of the Acts Interpretation Act):

Sections 121, 122 and 123 describe situations in which the employee does not have this entitlement.

53    The note indicates that s 119 should be read with ss 121, 122 and 123. But none of these sections sheds any light on the present issue.

54    Subsection 121(1) provides that s 119 does not apply to “the termination of an employee’s employment” if, immediately before the time of termination or at the time the employee was given notice of termination, whichever occurred first, the employee’s period of continuous service with the employer was less than 12 months or the employer is “a small business employer”. Subsection 121(2) provides that a modern award may include a term specifying other situations in which s 119 does not apply to the termination of an employee’s employment. Where a modern award includes such a term, subs 121(3) allows for its incorporation by reference in an enterprise agreement.

55    While in general, if an employee’s employment is transferred from one employer to another, service with the first employer counts as service with the second employer (see subs 22(5)), subs 122(2) provides that such an employee is not entitled to redundancy pay under s 119 “in relation to the termination of his or her employment with the first employer”. Subsection 122(3) provides that an employee is not entitled to redundancy pay if the employee rejects an offer of employment made by another employer on substantially similar terms and conditions and which recognises the employee’s service with the first employer and, had the employee accepted the offer, there would have been a transfer of the employee’s employment.

56    Section 123 excludes from the operation of the Division certain kinds of employees. They include employees on fixed-term contracts, employees whose employment is terminated for serious misconduct, and casual employees. Subsection 123(4) expressly exempts from operation of the redundancy pay provisions apprentices; employees covered by an industry-specific redundancy scheme in a modern award; employees covered by certain redundancy schemes in enterprise agreements; and employees prescribed by the regulations. It does not exempt employees in Ms Vrtkovski’s situation, at least not expressly, and Broadlex did not argue that it exempted them implicitly.

57    So what about the legislative purpose?

58    The object of the FW Act is described in s 3 as follows:

The object of this Act is to provide a balanced framework for cooperative and productive workplace relations that promotes national economic prosperity and social inclusion for all Australians by:

(a)    providing workplace relations laws that are fair to working Australians, are flexible for businesses, promote productivity and economic growth for Australia’s future economic prosperity and take into account Australia’s international labour obligations; and

(b)    ensuring a guaranteed safety net of fair, relevant and enforceable minimum terms and conditions through the National Employment Standards, modern awards and national minimum wage orders; and

(c)    ensuring that the guaranteed safety net of fair, relevant and enforceable minimum wages and conditions can no longer be undermined by the making of statutory individual employment agreements of any kind given that such agreements can never be part of a fair workplace relations system; and

(d)    assisting employees to balance their work and family responsibilities by providing for flexible working arrangements; and

(e)    enabling fairness and representation at work and the prevention of discrimination by recognising the right to freedom of association and the right to be represented, protecting against unfair treatment and discrimination, providing accessible and effective procedures to resolve grievances and disputes and providing effective compliance mechanisms; and

(f)    achieving productivity and fairness through an emphasis on enterprise-level collective bargaining underpinned by simple good faith bargaining obligations and clear rules governing industrial action; and

(g)    acknowledging the special circumstances of small and medium-sized businesses.

59    Broadlex argued that subs 119(1) falls into the “category of statutory provisions” that strike a balance between competing interests so that a beneficial approach to its construction should not be adopted.

60    In Spotless at [37]–[41] Colvin J made the following observations about the legislative purpose of s 119(1):

37    First, the Act is to provide a safety net of minimum terms and conditions of employment that cannot be undermined.

38    Second, the Act is not expressed as a reform that removes or reduces minimum terms and conditions of employment afforded by the law as it existed at the time of enactment. Nor is it expressed as a codification or improvement of existing minimum standards. Rather, its object is to ensure ‘fair, relevant and enforceable’ minimum terms and conditions. Save that there might be said to be unfairness to employees in a general sense if minimum standards were reduced by the Act (such as by confining the circumstances in which there may be an entitlement to redundancy pay), it is difficult to discern any specific object concerning the relativity between minimum standards as they existed before the Act was enacted and those expressed through the Standards. Nevertheless, it would appear to be unlikely that the Act would deploy established terminology in the field of industrial law concerning an established standard as to particular workplace conditions (such as redundancy pay) where it was intended to change the standard. A purpose of establishing minimum terms and conditions may be expected to be advanced by using existing terminology where such conditions were to be adopted by the Act.

39    Third, the Act has detailed provisions that provide for compliance and enforcement and establishes a Fair Work Ombudsman and a Fair Work Commission with substantial powers to supervise compliance and ensure enforcement of the Standards. The rights and protections afforded by the Act do not depend upon the employee independently resorting to claims. The Act puts in place a substantial structure to support the making of claims. Nevertheless, the Fair Work Act confers statutory entitlements upon employees that cannot be undermined and to that extent is protective of the interests of employees. It would be contrary to this purpose if a particular condition was interpreted in a manner that, in effect, conferred power upon an employer by adopting a particular business practice to decide whether its employees would receive the benefit of a particular minimum entitlement (such as redundancy pay).

40    Fourth, the Act has objects that include the promotion of productivity and economic growth and flexibility for business. An interpretation that inhibited the ability of a business to adopt employment practices that best suited the nature of its business activities would be inconsistent with this object.

41    Fifth, the terms of Division 11 manifest an intention to provide a qualified right to redundancy pay. It is qualified by the presently contentious language in s 119(1)(a). It is also qualified by the exclusions expressed in s 121 (employees for less than 12 months and employees of small business and those the subject of a modern award with specific provisions). Importantly, it is further qualified because Division 11 does not apply to the employees described in s 123. They include employees ‘employed for a specified period of time, for a specified task, or for the duration of a specified season’, employees terminated for misconduct and casual employees.

The resolution of the issue

61    The employment relationship is “inherently” a contractual one: Lister v Romford Ice and Cold Storage Co Ltd [1957] AC 555 at 587; R v Bowen; Ex parte Amalgamated Metal Workers and Shipwrights’ Union (1980) 144 CLR 462 at 475. Consequently, there can be no employment relationship without a contract of employment. As McHugh and Gummow JJ observed in Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 436:

The evolution in the common law as to the relationship of employment has been seen as a classic illustration of the shift from status (that of master and servant) to that of contract (between employer and employee).

62    Nevertheless, there is a difference between the employment relationship and the contract of employment. A contract of employment can come into existence before the employment relationship is formed and an employer who withdraws an offer of employment after it has been accepted or an employee who resigns before the starting date can be liable for breach of contract: Turner v The Australasian Coal and Shale Employees’ Federation (1984) 6 FCR 177; Network Ten Pty Ltd v Seven Network (Operations) Ltd [2014] NSWSC 692. Furthermore, a contract of employment can include obligations, such as a restraint of trade covenant, which continue after the employment relationship has come to an end.

63    There is also a conceptual difference between the termination of an employment relationship and the discharge of a contract of employment: Visscher v Giudice (2009) 239 CLR 361 at [53].

64    The central flaw in Broadlex’s argument is that it proceeded on the false premise that the employment relationship survived the termination of the employment contract.

65    In the 8th edition of Macken’s Law of Employment, published in 2016, Professor Sappideen and her fellow authors wrote (at [9.60]):

The employer-employee relationship will also end when the contract of employment ends, if that relationship has not ended earlier. The possibility of the contract of employment existing after the employment relationship has ended seems established, although ordinarily it will be of “no real significance”.

66    The statement of principle is well-supported. In Byrne at 427, cited by the majority in Visscher at [53], Brennan CJ, Dawson and Toohey JJ said:

It does not appear to have been doubted in this country that a wrongful dismissal terminates the employment relationship notwithstanding that the contract of employment may continue until the employee accepts the repudiation constituted by the wrongful dismissal and puts an end to the contract. That was accepted by both the majority and minority in Automatic Fire Sprinklers Pty Ltd v Watson …

67    In both Visscher (at [53]) and Byrne (at 427) reference was made to the statements of Latham CJ in Automatic Fire Sprinklers Pty Ltd v Watson (1946) 72 CLR 435 at 454 that “[a]n employer terminates the employment of a servant when he dismisses him …” and Dixon J in the same case at 469 that “[t]here is nothing in the general law preventing the wrongful dismissal of a servant operating to discharge him from service, notwithstanding that he declines to accept the dismissal as absolving him from further performance but keeps the contract open and remains ready and willing to serve”. In Visscher (at [54]) reference was also made to the statement by Latham CJ in Automatic Fire Sprinklers Pty Ltd v Watson at 451 that:

[T]he wrongful dismissal determines the relationship of master and servant created by the contract, even though the servant may not have accepted his dismissal as entitling him to regard the contract as discharged.

68    Visscher began as a claim for reinstatement in the Australian Industrial Relations Commission. Mr Visscher commenced employment with the respondent shipping company (Teekay) in March 2000. He began as a casual employee but soon afterwards accepted an offer of permanent employment as a Third Mate. Within months he was promoted to Chief Officer but Teekay wrote to him declaring that it would no longer be bound by its legal obligations. Nevertheless, Mr Visscher continued in its employment working as a Chief Officer, although Teekay considered he had returned to his original position as Third Mate albeit that his duties and remuneration did not change. In the Full Court, Buchanan J (with whom Ryan and Madgwick JJ agreed in separate judgments) held that Mr Visscher could not insist on performance of his contract, even if the contract itself remained on foot for limited purposes: Visscher v Australian Industrial Relations Commission [2007] FCAFC 206; 170 IR 419 at [49]. His employment as a permanent Chief Officer was brought to an end by Teekay’s conduct, although it was wrongful. His Honour went on to say at [50] that the fact that Mr Visscher remained in employment with Teekay and sailed as Chief Officer did not lead to a different conclusion. His Honour considered that Mr Visscher continued under a new contract, in his original position of permanent Third Mate.

69    In the High Court the majority said that Buchanan J had elided the concepts of termination of an employment relationship and the discharge of a contract of employment: Visscher at [53]. Their Honours explained that it does not follow from the fact that a wrongful dismissal is effective to bring the employment relationship to an end that the contract is thereby discharged. At [56] they said that the case did not involve dismissal with a consequent destruction of the employment relationship. It was accepted that the employment relationship continued after the repudiation. But Visscher was a very unusual case. As the majority observed at [57], it was a feature of the case that “the employment relationship continued with Mr Visscher undertaking the duties of a Chief Officer and being remunerated to the same extent”.

70    Here, in contrast to Visscher, there was, in effect, a wrongful dismissal constituted by Broadlex’s repudiation of the employment contract, which brought the employment relationship to an end. The relationship in which Ms Vrtkovski entered after she accepted the repudiation was a fundamentally different relationship from the relationship the parties previously enjoyed. She was no longer a full-time employee but a part-time employee, performing a fraction of the work she formerly undertook for a fraction of the remuneration she formerly received.

71    Even if I am wrong in this respect, I do not accept that what happened to Ms Vrtkovski was not a termination of her employment within the meaning of the FW Act.

72    I mentioned earlier that, before the FW Act and following TCR No 1, employers who transferred employees to lower paid duties by reason of redundancy were required by federal awards to give the same notice to employees or make payment in lieu as they would have been required to give if their employment had been terminated. If Broadlex were right, however, then s 117, which is the National Employment Standard for written notice of termination or payment in lieu, would not apply to employees who were transferred to lower paid duties because it provides that an employer must not “terminate an employee’s employment” without giving the requisite written notice or payment in lieu. Yet there is no reason to think that the enactment of s 117 was intended to reduce the rights employees had formerly enjoyed under federal awards.

73    Broadlex argued that the learned magistrate was wrong to conclude that none of the authorities upon which it relied supported its construction of s 119(1).

74    I accept that those authorities acknowledged that there was a difference between the employment contract and the employment relationship. I also accept that there is support for the notion that in some circumstances the employment relationship can survive the termination of the employment contract. But none of those authorities was directly on point. None of them stands for the proposition that, where the employer repudiates the contract of employment and the employee accepts the repudiation, the employment relationship endures.

75    In Brackenridge v Toyota Motor Corporation Australia Ltd (1996) 142 ALR 99, upon which Broadlex relied, the Full Court of the Industrial Relations Court of Australia (Wilcox CJ, von Doussa and Marshall JJ) dismissed an appeal from a judgment of Beazley J who held that a demotion did not constitute a “termination of employment” within the meaning of Div 3 of Pt VIA of the Industrial Relations Act 1988 (Cth) (IR Act), although, unlike her Honour, the Full Court accepted that the demotion terminated Ms Brackenridge’s contract of employment as a chef supervisor and she was thereafter employed under a new contract as a canteen assistant. Their Honours held at 101 that there was a conceptual difference between the two situations and, while dismissal will ordinarily terminate both the particular contract of employment and the employment relationship, Ms Brackenridge continued to be employed after her original contract was terminated, albeit under a new contract of employment.

76    It does not follow, however, that the phrase in subs 119(1) should be interpreted in the same way or that the magistrate was wrong to find that Ms Vrtkovski was entitled to redundancy pay.

77    First, the object of Div 3 of Pt VIA of the IR Act, as stated in para 170CA(1)(a), was “to give effect, or give further effect to” the ILO Convention (No. 158) concerning Termination of Employment at the Initiative of the Employer, done at Geneva on 22 June 1982, and entered into force for Australia on 26 February 1994. Section 170CB provided that expressions in Div 3 of Pt VIA picked up the meaning of those expressions in the Convention. There are no comparable provisions to ss 170CA or 170CB in the FW Act.

78    Second, Brackenridge involved a demotion. This case does not. What occurred in the present case appears to have been within the contemplation of the Convention. Paragraph 22 of the 1995 General Survey of the International Labour Office entitled “Protection against Unjustified Dismissal”, to which the Full Court referred at 103–4 of its reasons, relevantly stated:

Certain changes introduced by the employer, in particular as concerns conditions of employment and which do not arise out of genuine operational requirements, might place the worker under pressure either to accept such changes or to give up his job or incur the risk of being sanctioned for having disregarded the employer’s instructions. It is therefore necessary to be able to verify whether a situation does not constitute a disguised dismissal or a real termination of the relationship instigated by the employer in the sense of the Convention, since otherwise the worker concerned would de facto or de jure be unduly deprived of the protection provided by the Convention.

(Original emphasis.)

79    Third, in Brackenridge, as the majority observed in Visscher at [52], the employer did not breach the employment contract. The Full Court in Brackenridge held at 109 that Toyota was entitled to terminate the first contract and replace it with another. Moreover, while Ms Brackenridge was demoted and future award increases would only be paid at the rate applicable to the lower position, her salary was maintained.

80    Fourth, a termination of employment under the FW Act can occur even if the employee remains in the employment of the employer. That is apparent from the unfair dismissal provisions.

81    No remedy is available for unfair dismissal in a case such as the present because cases of genuine redundancy are excluded from s 385, presumably because a person in that position is entitled to redundancy pay under subs 119(1). But s 386 defines “dismissed” in such a way as to indicate that, where there has been a repudiation by the employer of the contract of employment and the employee is re-employed in a significantly diminished or inferior position whether in duties or income, the employment is terminated.

82    “Dismissed” is defined in s 386 of the Act. It relevantly provides that:

(1)    A person has been dismissed if:

(a)    the person’s employment with his or her employer has been terminated on the employer’s initiative; or

(b)    the person has resigned from his or her employment, but was forced to do so because of conduct, or a course of conduct, engaged in by his or her employer.

(2)    However, a person has not been dismissed if:

…

(c)    the person was demoted in employment but:

(i)    the demotion does not involve a significant reduction in his or her remuneration or duties; and

(ii)    he or she remains employed with the employer that effected the demotion.

…

83    Subsection 386(2) re-enacts the exception introduced into the WR Act in 2001. That was contained in subs 170CD(1B) of that Act. Only the chapeau was different because that Act, like the IR Act, referred to “termination or termination of employment” rather than dismissal. In Visscher all members of the Court accepted that “termination of employment” within the meaning of subs 170CD(1B) could include a demotion in employment which involved a significant reduction in the employee’s remuneration or duties.

84    As Broadlex submitted, para 386(2)(c) necessarily implies that a demotion involving a significant reduction in remuneration or duties is a dismissal although the employee remains in the employer’s employment. Logically, the termination of a full-time contract at the initiative of the employer and its replacement by a part-time contract with significantly reduced hours or duties would also be a dismissal within the meaning of s 386. Properly construed, s 385 treats both kinds of cases as the termination of the employee’s employment on the employer’s initiative.

85    Broadlex submitted, however, that “[d]emotion as implicitly referred to in s 386(2)(c) is a specific type of dismissal that is outside the meaning of termination of employment”, citing Scott Harrison v FLSmidth Pty Limited t/a FLSmidth Pty Limited [2018] FWC 6695 at [26]. I do not accept the submission. Notwithstanding the approach taken in that case and with due respect to similar views expressed in other decisions of the Commission, properly construed s 386 does not erect a class of deemed dismissals. It proceeds from the premise that a demotion in employment which involves a significant reduction in remuneration or duties is a termination of employment within the meaning of the FW Act.

86    Broadlex drew attention to paragraph 1528 of the Explanatory Memorandum to the FW Bill, which states that s 386 is “intended to capture case law relating to the meaning of ‘termination at the initiative of the employer’” and which refers to Mohazab v Dick Smith Electronics Pty Ltd (1995) 62 IR 200 by way of example. According to Broadlex, this reference to Mohazab assists its argument. It claimed that there were two limbs to the decision in Mohazab: first, that termination must be at the employer’s initiative and second, that it is the employment relationship that must be terminated. In Mohazab the Full Court said at 205:

Consistent with the ordinary meaning of the expression in the Convention, a termination of employment at the initiative of the employer may be treated as a termination in which the action of the employer is the principal contributing factor which leads to the termination of the employment relationship. We proceed on the basis that the termination of the employment relationship is what is comprehended by the expression “termination of employment”: Siagian v Sanel (1994) 1 IRCR 1 at 19; 54 IR 185 at 201.

(Emphasis added.)

87    Since the statement in paragraph 1528 of the Explanatory Memorandum was that s 386 was intended to capture case law relating to the meaning of “termination at the initiative of the employer” it seems to me that the intention was to pick up that part of the decision in Mohazab which I emphasised in the above extract. If anything, the absence of a similar reference to Mohazab or, for that matter, Brackenridge in the paragraph of the Explanatory Memorandum dealing with redundancy tends to undermine Broadlex’s argument. It rather suggests that it was not Parliament’s intention that s 119 “capture” the same case law.

88    In Siagian, to which the Full Court in Mohazab referred, Wilcox CJ said that it was “preferable to the treat the words ‘termination of … employment’ in Div 3 of the Part VIA of the [IR Act] as including any act that brings to an end the employer-employee relationship, whether or not the act, or any acceptance of it, also brings to an end the contract of employment”. His Honour did not decide that employment or the employment relationship endures where an employer repudiates the contract of employment and the employee accepts the repudiation. Indeed, his Honour referred at [200] with apparent approval to a statement from the 3rd edition of Macken’s Law of Employment in substantially identical terms to the statement I quoted in [65] above.

89    Broadlex also relied on the decision in Saeid Khayam v Navitas English PIL t/a Navitas English [2017] FWCFB 5162; 273 IR 44. In Navitas, the Full Bench found that Department of Justice v Lunn (2006) 158 IR 410; 59 AILR 100-595 stood for several incorrect propositions, one of which was that “the expression ‘termination of employment at the initiative of the employer’ in s 170CB of the WR Act as it then was bore its ‘ordinary meaning’ and referred to the termination of a contract of employment, not the termination of the employment relationship” (at [31]). Drawing on Visscher, the Full Bench said at [50] that this proposition was incorrect:

Thus it is clear, contrary to the first proposition stated in Lunn to which we have earlier referred, that a termination of the employment relationship might constitute a termination at the initiative of the employer under the WR Act notwithstanding that the contract of employment remains on foot. That is, under the WR Act, termination at the initiative of the employer did not, on its ordinary meaning, refer to termination of the contract of employment. The first proposition in Lunn to which we have earlier referred was therefore not a correct statement of the law under the WR Act, and as a result the Full Bench’s analysis in Lunn proceeded on the wrong premise that it was necessary to analyse whether the final employment contract was terminated at the initiative of the employer, not whether the employment relationship was terminated at the initiative of the employer. The correct position remained as stated in Mohazab, namely that a termination of employment at the initiative of the employer occurs where the action of the employer is the principal contributing factor which leads to the termination of the employment relationship.

90    This extract certainly underscores the conceptual difference between an employment contract and an employment relationship. It does not however support the proposition that employment or an employment relationship survives where the employer repudiates the contract of employment and the employee accepts the repudiation by entering into a new contract of employment on substantially inferior terms.

91    In the result, in a case such as the present, where, for reasons unrelated to the ordinary and customary turnover of labour, the employer repudiates the employee’s contract of employment because it no longer required the job the employee was doing to be done by anyone and the employee accepts the repudiation by agreeing to work significantly fewer hours with a consequential reduction in her remuneration, the employee is entitled to be paid redundancy pay. By repudiating the contract the employer terminates the employment relationship. By accepting the repudiation the employee brings the employment contract to an end. Reading s 119(1) in this way is entirely harmonious with the operation of the unfair dismissal provisions in Pt 3-2 of the FW Act.

Conclusion

92    For all these reasons I am satisfied that Ms Vrtkovski’s employment was terminated when Broadlex repudiated her contract of employment as a full-time cleaner. Since it is common ground that the reason for the termination was that Broadlex no longer required that job to be done by anyone, she was entitled to redundancy pay in accordance with s 119(1). It follows that the appeal must be dismissed.

93    Section 570 of the FW Act limits the Court’s power to award costs. Neither party applied for costs. And I am not satisfied that the conditions for an award are met in this case. I will therefore make no award as to costs.

Associate:

Dated:    22 June 2020