The Fair Work Ombudsman has secured a $17,500 penalty against facilities services company Spotless Services Australia Limited in a legal action that has established greater clarity on situations in which employers must pay redundancy entitlements.

The Federal Court imposed the penalty after finding that Spotless contravened the Fair Work Act when it terminated the employment of three workers at Perth International Airport but failed to pay a total of $29,013 in redundancy entitlements.

The three workers were among more than 30 whose employment was terminated by Spotless in 2015 after its contracts to provide catering and hospitality services at Perth International Airport expired and were not renewed.

Spotless had employed one of the three workers, an accountant, for 32 years and the other two – a retail manager and one who performed various roles – for about four-and-a-half years.

Under the Fair Work Act, redundancy entitlements are payable when an employee’s job is made redundant unless an exception applies. One exception is where termination of employment is due to the ‘ordinary and customary turnover of labour’.

The Federal Court dismissed Spotless’s submission that this exception applied to the three workers.

Unfair and unlawful

Fair Work Ombudsman Sandra Parker said the court’s decision provided important clarity on situations in which there is a lawful requirement for employers to pay redundancy entitlements.

“The treatment of the three workers in this matter was unfair and unlawful and it was for us to take action to ensure employees in the Spotless Group of companies and in the wider workforce were not deprived of their redundancy pay in a similar manner,” Ms Parker said.

After the Fair Work Ombudsman investigated, Spotless paid the three workers the amounts they were owed but did not admit liability under the Fair Work Act. The FWO, therefore, commenced legal action in late 2017.

Justice Craig Colvin found that when Spotless terminated the three workers’ employment in 2015, it told them there had been a change in the law and redundancy pay was not payable where the termination of employment was due to the ordinary and customary turnover of labour.

“The statement to that effect was false. There had been no change in the law,” Justice Colvin said.

Justice Colvin found that the underpayment of the three workers followed Spotless senior managers being involved in a decision in late 2014 to significantly change the company’s approach to redundancy pay.

Justice Colvin found there was “a complete absence of evidence of any advice or analysis at the time that caused Spotless to change its approach”.

“The decision taken was plainly one that was in the commercial interests of Spotless,” he said.

Justice Colvin found that the conduct toward the accountant “was particularly harsh in depriving him of the financial protection from the burden of forced termination of his employment after many years of service.”

He said that at the time of the contravention, companies in the Spotless Group employed about 27,000 people. He found that if the FWO had not investigated the conduct would have been ongoing and had the potential to have affected many more employees.

“The potential financial gains to the Spotless Group in not paying redundancy pay were considerable,” Justice Colvin said.