Redundancy payments: Did Rio run the risk gauntlet

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Resources giant Rio Tinto is embroiled in a court battle with the Construction Forestry Mining and Energy Union (CMFEU) over claims it paid higher redundancy payments to non-union members – if the union is able to prove Rio Tinto discriminated against union members, there may be wider consequences for employers.

According to the CMFEU’s Sydney based national legal director, Alex Bukarica, the outcome of the case will show whether a company can apply its own policy in a discriminatory way, he told AAP.

It is being claimed that workers on individual contracts were given more generous payouts than those on collective agreements. In turn, the CFMEU filed a claim in the Federal Court which argues that the differing levels of redundancy pay, which was prescribed in Rio Tinto’s policy, discriminate against union members, and in turn are a breach of the Fair Work Act.

According to the CFMEU, when 70 full-time production and engineering staff were made redundant last year, non-union employees were given a redundancy payout based on their entire salary, including compulsory overtime and bonuses. In addition, those workers received an extra three months' pay as part of their redundancy.

In contrast, unionised staff were given redundancy payments based on their base salary only. “They [Rio Tinto] have treated them less favourably because they have chosen to bargain collectively," Bukarica said.

Rio Tinto has defended its practice of having a two-tiered redundancy scheme – it is arguing that union members on collective agreements had benefitted from secure working conditions.

"Employees [at Blair Athol Mine] were able to choose whether they worked under the collective agreement or on individual arrangements,” a company spokesman said in a statement. “Redundancy payments were made in accordance with the employee's conditions of employment, which Rio Tinto believes was fair.”

The matter is due to be heard in March.

Other than redundancy payments, Aspect Legal director Joanna Oakey says there are key factors an organisation needs to take in account when making redundancies, to avoid legal pitfalls:

  • Make sure you document your decisions well, that there are "genuine operational reasons" for the redundancy, and that you have complied with any consultation requirements 
  • Consider whether it might be reasonable for the employee to be redeployed elsewhere in the business (or in an associated entity of the business)
  • Treat people equally, don’t make selections that might be seen as discriminating between employees (e.g. choosing only people who are on maternity leave). Otherwise an effected employee might feel they have rights to a claim of unlawful termination 
  • Make sure you have carefully calculated the notice period and severance pay that you are required to provide. 
  • Understand your obligations under legislation and your company policies, individual agreements and any workplace agreements – sometimes these documents might have differing requirements 
  • Remember that redundancy relates to making the position redundant – so you can't then employ someone else to do that job

Related article: Rio embroiled in redundancy union stoush

More stories:

New health and safety laws: Are you compliant?

Redundancies: How to avoid reputational risks

Compliance risks highlighted by Fair Work Ombudsman


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