CCH Australia - 17 July 2002

The Federal Court has found that 800 transferred employees of Amcor Limited were in fact made redundant and deserving of severance pay, though "contrary to commonsense and unfair".

The Court's object was to determine what the parties intended in their certified agreement. The difficulty for Finkelstein J was that if the rule that the words mean what they say were to be applied in this case then the result might be an affront to commonsense. The issue, then, was whether the words could be given another meaning.

The union contended that the employees who were given notice that their employment with Amcor was terminated, were redundant within the meaning of the agreement and so entitled to severance payments. It said that the fact that most employees took up employment with Paper Australia (Amcor's wholly owned subsidiary) with the same jobs and on the same terms and conditions of employment, did not deny the proposition that they had been made redundant.

Amcor said that, having regard to the reality of the situation (that is, that all employees continued to work as usual with no diminution in their rights), there had been no redundancy.

Finkelstein J identified three factors which went against Amcor's approach. The effect of them was that in deciding whether a person had been made redundant, that he (or she) had a new employer was irrelevant. The first was the authorities, which established that the word "redundant" referred to the situation where an employee had been dismissed for a particular reason. Finkelstein J found that they did not suggest that there would be no redundancy if the position established by the employer was continued by another employer, ie "redundancy" was a word which described the reason why an employee had been dismissed.

The second factor was the second condition that must be satisfied to obtain the redundancy payment, namely that the employee had been retrenched. Finkelstein J took the word retrenched to mean "dismissed". If the employer no longer required the work previously carried out by the employee to be performed and dismissed that employee for that reason, both conditions were satisfied and the employee had been retrenched for reason of redundancy, according to Finkelstein J. Finally, the agreement assumed that the dismissal (or retrenchment) would be by the employer who was bound by the certified agreement.

The problem that existed in the present case was the result of the parties failing to anticipate the particular situation which occurred. The court was not being asked to construe the agreement in question, but to fill a gap. Finkelstein J considered it was by no means clear the court could do this in the case of an instrument such as a certified agreement. Before the court could undertake that task it must be possible to state with certainty precisely what would have inserted had attention been drawn to the omission.