Ambiguous Enterprise Agreement Win

Employment Law – Background:

The Fair Work Commission held that a South Australian car manufacturing company must pay out 117 redundant employees in lieu of notice as part of a redundancy package agreed to in their enterprise agreement. The case concerned the alleged ambiguity of certain terms in the enterprise agreement. Furthermore, it stresses the importance of clear drafting of enterprise agreements in employment law.

Employment Law – Facts:

In essence:

  • the South Australian operations of Futuris Automotive Interiors Pty Ltd (Futuris) announced it was closing down because Holden were ceasing manufacturing operations in Australia in October 2017
  • in February 2017, Futuris told 117 employees that all roles would be made redundant around October 2017
  • Futuris also said all employees would be required to work out their employment notice period
  • an employee asserted to HR that given clauses 3.5.5 and 3.5.6 of the Futuris Automotive Interiors (South Australia) Work Place Agreement (Enterprise Agreement), employees were not required to work out their employment notice period
  • HR stated that the Enterprise Agreement and the National Employment Standards under the Fair Work Act provided that employees could be paid in lieu of notice only when it did not require employees to work during the notice period
  • clause 3.5.5 of the Enterprise Agreement contained an entitlement to be paid when an employee received a separation package even where notice was provided
  • the relevant union argued that Futuris had been applying the Enterprise Agreement inconsistently. In addition, this was causing employees to feel ‘betrayed’ when past employees who accepted voluntary redundancies were not required to work out their employment notice periods

Employment Law – Fair Work Commission Decision:

The Fair Work Commission:

  • considered whether the Enterprise Agreement had intended for the notice entitlement in clause 3.5 to be a part of the redundancy package or to be paid out through the employment notice period
  • stated that the terms in the Enterprise Agreement were ‘ambiguous’ and ‘susceptible to more than one meaning’
  • concluded that ‘the concept of the package of entitlements is more consistent with the notion that payment is to be made upon the redundancy, rather than having the notice provided and paid in the lead up to that redundancy’
  • held that in consideration of the whole of the Enterprise Agreement, the intention of clause 3.5 was for a package to be paid to each employee upon the redundancy
  • restricted its decision to the particular words used in the Enterprise Agreement

The decision is available for you to read through the following hyperlink:

John Illingworth v Futuris Automotive Interiors Pty Ltd T/A Futuris Automotive [2017] FWC 2349 (19 May 2017)

Employment Law – Tips for Employers:

Our Matthews Folbigg Workplace Solutions employment law team recommends employers:

  • review this Fair Work Commission decision
  • seek the assistance of an employment lawyer to understand the impacts of this Fair Work Commission decision
  • carefully draft Enterprise Agreements to reduce the risk of ambiguity, uncertainty and inconsistency
  • ensure all employment contracts and employment law policies comply with relevant employment laws, Fair Work Commission decisions, common law employment law principles and contractual obligations including those under any applicable Enterprise Agreement

Employment Law – More Information:

Please call the leading employment lawyers in Parramatta, the Matthews Folbigg Workplace Solutions employment law team, on 9635-7966 to speak with one of our employment lawyers.