09 August 2012

Redundancy: Service & Food Workers Union v. OCS Ltd


Business restructuring can result in a new employer taking over existing employment contracts.  Transferring employees might negotiate new terms but the new employer is not obliged to depart from their pre-existing employment contract.
Cleaners at Massey University who are members of the Service and Food Workers Union failed in their attempt to get redundancy provisions from their new employer when their pre-existing employment contract specifically excluded any right to redundancy.
The problem arose after Massey University put its cleaning contracts out to tender in early 2010.  OCS Ltd won the new contract and a number of cleaners transferred to OCS as their new employer.  These transfers were treated as continuous employment with the cleaners joining a new employer on their pre-existing contract terms.
The court was told OCS then told transferring staff they would no longer be employed unless they agreed to a new contract less favourable than their pre-existing contract.  For those not willing to accept the new terms, questions of redundancy arose.
The Supreme Court ruled that provisions of the Employment Relations Act dealing with redundancy in this case are clear: the pre-existing contract dictates what is due.  If the pre-existing contract expressly excludes redundancy (as it did in this case) then there is no entitlement to redundancy.  The employees’ position gets no better on transfer to the new employer.
Service & Food Workers Union v. OCS Ltd – Supreme Court (9.08.12)
12.029