Redundancy & suitable alternative employment

Analysis

Redundancy & suitable alternative employment

Many employers are seeking to address issues relating to redundancy, and alternatives to dismissal where a position is to become redundant are among them.

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Many employers are seeking to address issues relating to redundancy, and alternatives to dismissal where a position is to become redundant are among them.
 
One preferred action by employers when attempting to avoid a redundancy, particularly when it involves a long-serving employee, is to try and arrange suitable alternative employment, either within the organisation or with another employer.
 
Employers should become familiar with the criteria applying to the suitability of an alternate offer of employment in a redundancy situation, as the unfair dismissal laws under the Fair Work Act 2009 will commence from 1 July 2009.
 
Definition of redundancy
 
Redundancy occurs when an employee is no longer required for work through no fault of their own, usually because the employer no longer needs or requires the job to be performed by anyone.
 
The definition centres around the job becoming redundant, not the employee. An employee’s actions do not cause redundancy. Termination is not necessarily the consequence on each occasion.
 
Suitability of an employer’s offer
 
Industrial courts and tribunals have considered several factors when determining the suitability of an employer’s offer of alternative employment to an employee whose position has become redundant.
 
The test that is usually applied in this instance is an objective one, and should take into account each individual employee’s circumstance. This test should be applied when an employer is either trying to organise alternate employment with another employer, or trying to arrange other employment within the organisation.
 
From 1 July, 2009, these matters will be heard by Fair Work Australia.
 
Such factors relevant to a consideration of ‘suitability’ include:
  • Pay levels — if the salary offered for an alternate job is similar or the same as the redundant position, this could be viewed as suitable to the acceptability of the offer. Where there is a drop in salary, the tribunal would determine the reasonableness, or otherwise, of the lower salary;
  • Hours of work — where the offer involves a change of starting and finishing times, a change from shift work to day work, or vice-versa, or work on different days of the week, this may be deemed unsuitable, depending on the circumstances of the individual employee. The tribunal may take into account such factors as the employee’s family responsibilities when determining the suitability of the offer;
  • Nature of employment — the offer of part-time or casual employment to a current full-time employee may be deemed unsuitable. This may also fail on the basis of a lower salary level associated with these types of employment;
  • Employment status/seniority — the offer of a non-managerial position to a manager may be unsuitable as there is a certain ‘status’ associated with the current position. Such an offer could be viewed by a tribunal as a demotion;
  • Skills & qualifications — does the offer involve a position that the employee has the necessary skills and/or qualifications to perform? If not, the employer must have offered to provide the necessary training for the employee to acquire the necessary skills and/or qualifications;
  • Location of new offered position — where there is a relocation of the position, a tribunal will consider such factors as: the similarity of the job at the new location, the notice given to an employee(s) of the new location, whether the new location offers similar transport facilities, and the amount of additional time, if any, travelled by the employees to the new location;
  • Loss of fringe benefits — a tribunal, where relevant, may look at the overall impact of the offer of alternate employment on the employee’s contract of employment. The loss of benefits such as the provision of a company motor vehicle, share option plan, shift or penalty rates, bonus and commission payments, or regular overtime payments, may make the offer unsuitable despite the base salary remaining the same;
  • Job security — this can be a factor in the offer of casual work to an employee because, with casual employment, there is no guarantee of permanent employment. Also, if the new position offered is of a temporary nature, this could be viewed as unsuitable.
Offer of alternative employment
 
Many pre-reform federal awards, NAPSAs and agreements prescribe that redundancy payments may be altered or not paid at all in cases where the employer has arranged suitable alternative employment for redundant employee(s).
 
An employer, as part of the consultation process, must discuss possible alternative positions with the affected employee(s), otherwise the employee may successfully claim a failure of procedural fairness relating to the redundancy.
 
Making an offer of alternative employment does not mean an employer is not required to pay severance pay if the employee refuses to accept the offer. An employer should be careful in ensuring the employee is not placed in a position of ‘accept or resign’, as this could be viewed as a ‘constructive dismissal’ by the employer. The employer’s offer must be genuine, suitable and acceptable.
 
Pre-reform federal awards and NAPSAs
 
The redundancy provisions prescribed by a pre-reform federal award and a NAPSA will continue to operate until replaced, on 1 January 2010, by the National Employment Standards (NES) and the provisions of the relevant modern award.
 
Redundancy & Fair Work system
 
The minimum entitlements under the National Employment Standards (NES) will commence from 1 January 2010.
 
Section 120 of the Fair Work Act 2009 (FWAct) provides for a variation of redundancy pay where the employer obtains other acceptable employment for the employee, or cannot pay the amount.
 
On application by the employer, Fair Work Australia (FWA) may determine that the amount of redundancy pay is reduced to a specified amount (which may be nil) that FWA considers appropriate when an employee obtains suitable alternative employment.
 
Modern awards refer to the NES on this issue, and do not contain a provision with respect to an offer of alternative employment when a position becomes redundant because the NES provides for this scenario.
 
 Source:  Paul Munro, IR Consultant.
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