Relocation and employees’ right to redundancy pay

Analysis

Relocation and employees’ right to redundancy pay

When a business relocates its workplace, the issue of redundancy can arise because some employees may argue that there has been a material change to their roles and employment relationships. This article explores relocation and an employee’s entitlement to redundancy pay.

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When a business relocates its workplace, the issue of redundancy can arise because some employees may argue that there has been a material change to their roles and employment relationships. This article explores relocation and an employee’s entitlement to redundancy pay.

Questions often arise about an employee’s entitlement to redundancy pay when the employer decides to relocate the business to other premises and an employee or employees refuse to accept the same, or similar position, at the new premises because the new location is too distant or inconvenient for the employee to travel. The location of the employee’s employment is regarded as an implied term of their contract of employment and to vary this would require the employee’s agreement.

Generally, the courts and industrial tribunals have considered whether an employee’s refusal to accept employment at the new location is reasonable in the circumstances and, consequently, whether an employee is entitled to redundancy pay. The reasonableness, or otherwise, of an employee’s refusal to relocate depends on whether there has been an effective or material change to the employee’s contract of employment.

What is reasonable?
 
The question usually considered by a court or industrial tribunal in any relocation is whether the change in location of employment is of a degree that amounts to a repudiation of the contract of employment.

Generally, the following factors have been considered relevant by a tribunal when determining an employee’s entitlement to redundancy pay, although these factors are not exhaustive:
  • similar alternative employment is offered at the new location (eg similar remuneration and employment status)
  • the amount of notice given by the employer to the employees of the planned relocation
  • whether or not there is a total rejection of the relocation or whether some employees accept the alternative offer
  • whether the new locality offers similar or improved transport facilities
  • the additional time taken and the number of kilometres travelled by employees to the new location.
Distance is not necessarily an overriding factor in justifying the reasonableness of an employee’s refusal to relocate, although a tribunal’s reasoning on this point can be subjective. 
Examples
 
An employer successfully argued against payment of redundancy pay where employees were offered identical terms and conditions of employment at the new location that resulted in an increase in distance travelled by the employee of 40 kilometres.
 
Whereas, in another matter, an order for redundancy pay was made where the relocation was less than 30 kilometres. In most instances, the employer also offered financial or logistical assistance to employees to alleviate any inconvenience to employees accepting the relocation.

Source of entitlement
 
Redundancy pay is a statutory entitlement under the National Employment Standard (NES), which provides a minimum level of redundancy pay based on the employee’s years of continuous service with the employer. 

Section120 of the Fair Work Act 2009 allows Fair Work Australia (FWA), upon application by the employer, to vary the amount of redundancy pay where the employee is entitled to redundancy pay and the employer has arranged other acceptable employment for the employee(s). Consequently, while FWA may regard the factors relating to a particular relocation as an entitlement to redundancy pay, FWA may vary the entitlement to a lower amount of redundancy pay, particularly where some of the factors mentioned above apply to the relocation.

Transitional arrangements
 
Under transitional arrangements in many modern awards, an employee will continue to be entitled to a more beneficial redundancy pay scheme that was previously provided under a NAPSA. Where provided, this transitional arrangement will usually cease on 31 December 2014.

Source: Paul Munro, IR Consultant.
 
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