Putting the cap on redundancy payments

Every four years the Fair Work Commission (FWC) conducts a review of the Black Coal Mining Industry Award, which outlines the minimum terms and conditions of employment. The Commission has the power to make variations to the award and allows the public to table submissions on suggested changes.

Sometimes it is positive for workers, other times for employers.

However, in a year when workers are struggling to deal with the resurgence of black lung, coal miners have received another blow in terms of their long term future.

This time the Coal Mining Industry Employer Group (CMIEG) – which represents several mining companies such as Glencore, Peabody, and BHP Billiton BMA – has called for redundancy payments, currently uncapped, to now be capped at nine years.

The payment’s current uncapped status came after the Commission’s decision to delete an age based cap of 60 years from the award, which was deemed discriminatory by the Construction, Forestry, Mining, and Energy Union (CFMEU).

Off the back of this decision, the Full Bench suggested there “may potentially be some merit” in the suggestion of a new limitation on redundancy payments to replace the previous clause, paving the way for the CMIEG to put in their bid.

In their submission to the FWC, the CMIEG suggested, “The amount of any payment an employee is entitled to receive in respect of severance pay… and retrenchment pay… [should be] limited to the amount the employee would receive after nine years’ service”, a maximum benefit of 27 weeks’ pay regardless of how long you work after the first nine years.

Under the current scheme, coal mine workers are entitled to one week’s severance pay for each year of work and, in terms of retrenchment, two weeks’ pay per year of employment: altogether three weeks per year of employment.

The CMIEG argues that the current scheme does not provide a “fair and relevant minimum safety net” for employment as they say it is “far in excess” of the minimum standard outlined in the National Employment Standard – the list of ten minimum employment entitlements for all employees.

They believe their proposal, if implemented, will be fairer and more relevant as it is consistent with past redundancy cases, takes into account other benefits available such as long service leave payments and government payments; and will still keep the initial formula of one week’s pay per year of service and two weeks’ pay per year of service for severance.

The Australian Industry Group (Ai Group), the peak body representative of businesses throughout a range of sectors, also supports the cap, arguing that the current scheme is unfair for employers.

In their submission, they said the scheme “as currently crafted, imposes a significant financial burden on employers which would, in the relevant circumstances, be lifted if the CMIEG’s claim were granted. It would reduce the redundancy entitlement that is presently payable to employees with more than nine years of service. Quite clearly, this will alleviate employment costs that presently face employers in the industry.”

However, the CFMEU is pushing against the cap, focussing on the impact it will have on workers.

Stephen Smyth, district president of the CFMEU in Mackay, told Australian Mining they did not want the scheme to change.

“We think it should remain as it is. This is an entitlement they’ve [coal mine workers] had for a long time,” he said.

In their submission, the CFMEU said that not having a cap “will serve to maximise the entitlements that a low paid employee could accrue prior to retrenchment”.

Some reports claim that depending on their position, workers could lose between $50k and $150k in redundancy payments.

The CFMEU argued that the cap would discourage the retention of longer tenure employees as their redundancy payment would be less expensive compared to those with a shorter tenure. They also highlighted the difficultly to determine the effect the cap would have on the economy.

“It is difficult to comprehend how the removal, or reinsertion, of a cap on redundancy payments, which may affect one segment of the coal industry workforce can be said to have any impact at a macro-economic level,” their submission states.

Director of the Collieries’ Staff and Officials Association Catherine Bolger is also against the cap, saying that workers could stand to lose between 18 and 63 weeks of redundancy pay if it is successful.

“Workers who have given more than ten years’ service will be hit hard…losing tens of thousands of dollars in entitlements,” she said.

“Redundancy pay is essential to keep families and communities together and it is a breach of faith with the workforce for BMA to try to strip this fundamental entitlement from loyal workers.”

She also called for BMA to withdraw their application for the cap.

Australian Mining contacted the Fair Work Commission, however they declined to make a comment as the case is still up for review at the time of publishing.

The Commission will begin hearings on the submissions on November 7, after which a final decision will be made.