Further, employees with 10 or more years of continuous service who are over 45 years of age will be entitled to 16 weeks’ severance pay, in recognition of the need to assist older employees who are made redundant.

The decision varies current minimum standards in South Australian Awards which prescribe a maximum of 8 weeks severance pay for employees with 5 or more years service.

It should be noted that employers with 15 or less employees are exempt from the standards and that the previous minimum standards will still apply to those employers.

Other noteworthy changes include the introduction of a “contrived arrangement” clause, which allows the Commission to order the employee be paid in accordance with the above scale where an employer attempts to deprive the employee of that entitlement (For example, the Commission referred to concerns about contrived arrangements through corporate restructuring intended to avoid the liability to make severance payments. Although the Commissioner considered such attempts only occur “infrequently”, it did see the merit in a new provision directed at dealing with such circumstances when they arise.) Further, the “incapacity to pay” provision has been included whereby the Commission may vary the severance pay prescription upon the application of a group of employers, (the previous provision only allowed for such an application to be made by a single employer).

As a term of the settlement agreement reached, the Unions agreed not to support or make any further application to vary severance pay standards prior to 30 June 2007.

Implications for employers

Despite the fact that the matter could not ultimately be given the status of a “Test Case” (given that it was the subject of a mutual agreement) and, consequently, the new minimum standards apply only in respect of the specific Awards that were the subject of the application, the Full Bench foreshadowed that the decision will have a wide “flow-on” effect. If the matter had been run as a Test Case, it would have established prime facie entitlements for all awards of the Commission.

What can be expected is that applications on behalf of Unions to amend further Awards will quickly ensue, to bring minimum severance pay standards in line with those set by the Commission in this case. In such cases, the Commission would inevitably be bound by the terms of agreement approved by the Commission in this case.

There may well be considerable haste applied to such applications, with the threatened removal of state industrial relations systems by the Federal Government now that they control the legislature.

A copy of the decision can be viewed at: www.industrialcourt.sa.gov.au. If you require further detail in relation to the specific Awards to which the decision will apply, please contact us.