Security firm avoids redundancy pay because of “ordinary and customary turnover of labour”

4 December 2014

In a recent decision, the Fair Work Commission has decided that a security firm need not pay redundancy pay to an employee dismissed when it lost a client contract.

MSS Security dismissed Edward Kilsby after it lost the contract to provide security services at the Mackay Airport to a competitor. This had been the only contract that it held in Mackay.

MSS Security successfully argued that the security industry relied on periodically rotating contracts.  It said that the dismissal occurred as a result of the “ordinary and customary turnover of labour”, which provided it with an exemption from making a redundancy payment under the Fair Work Act 2009 (C’th) (“FW Act”).

The employer’s enterprise agreement and its letter of appointment to this employee were consistent with the redundancy provisions in the FW Act and clearly contemplated that the employee would not receive redundancy pay if MSS Security lost its contract and he could not be redeployed.

The evidence showed that the employee was aware of this and that MSS Security had tried to find him another acceptable position.

The phrase “ordinary and customary turnover of labour” appears in many employment contracts, as well as section 119 of the FW Act as an exception to the requirement to pay redundancy pay.  However, the phrase is not commonly understood and is rarely considered in Court and Tribunal decisions.

Section 119(1) of the FW Act states:

  1. An employee is entitled to be paid redundancy pay by the employer if the employee's employment is terminated:

  • at the employer's initiative because the employer no longer requires the job done by the employee to be done by anyone, except where this is due to the ordinary and customary turnover of labour; or
  • because of the insolvency or bankruptcy of the employer.

In this case, MSS Security provided the employee with a letter of appointment which made it clear that his ongoing employment was dependent upon MSS Security retaining the Mackay Airport contract and that, if MSS Security lost its contract and did not have a comparable position to transfer him to, he could be dismissed without payment of redundancy pay.  The employer also had a policy document which was consistent with these terms.

Commissioner Spencer considered past decisions which examined the meaning of the phrase “ordinary and customary turnover of labour” and found that it was relevant that the employee here understood that his continued employment was dependent upon the Mackay Airport contract.  It was also critical that the employer had properly explored redeployment options but could not find an acceptable position for him.  This case was distinguished from other cases in the services industries where it was not customary for employers to dismiss employees upon the loss of a client contract.

Commissioner Spencer concluded her reasons with the following summary of the facts and circumstances in this matter which supported her decision that redundancy pay was not owed to the employee:

  • The employee had been made aware in writing on engagement that his employment was linked to the Mackay Airport contract;

  • The employee had been advised of the insecurity of his employment, as linked to the continuation of the client contract;

  • When MSS Security confirmed to employees that the contract was up for re-tender, it confirmed the vulnerability of ongoing employment, as tied to the renewal of the contract;

  • The ability of MSS Security to engage and retain labour was dependent upon its ability to win or hold the contract;

  • The loss of the contract was not due to MSS Security turning it in or a general economic downturn;

  • The period of employment was for just over a year; and

  • MSS Security offered alternative employment, however, no suitable alternative job was available.

Lessons for Employers

Employers in service industries where client contracts rotate often should carefully consider whether the “turnover of labour” exception to redundancy payment applies to them.  It may not, in every case, but forward planning and the careful drafting of documents would be beneficial in the right circumstances. For example, employers in industries such as security, cleaning and information technology may be able to utilise the exception. 

If you believe this case is relevant to your business, we can assist you to review your workplace practices, including staff engagement and communication protocols as well as the wording of documents such as employment contracts, enterprise agreements and policies.

To view the case in full see:


Kilsby v MSS Security Pty Ltd t/a MSS Security [2014] FWC 7475 (21 November 2014):