Redundancy pay: cases wrap

Cases

Redundancy pay: cases wrap

Continuity of service continued within corporate group; Redundancy pay reduced — material effort to place employee in new job; Not suitable alternative employment — pay and car allowance cut; Short-term placement reduces redundancy pay by 75%.

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Continuity of service continued within corporate group; Redundancy pay reduced — material effort to place employee in new job; Not suitable alternative employment — pay and car allowance cut; Short-term placement reduces redundancy pay by 75%.
 
Continuity of service continued within corporate group
 
Fair Work Australia has granted redundancy pay to an employee who was employed in different parts of the ‘Coles group’ over 20 years.
 
 
Commissioner Bissett noted that to an outside observer, the employee had effectively had one employer. It could be inferred he had gone from being a Kmart casual one day to a Coles Myer Logistics casual the next with little thought as to the effect of the transfer on his previous employment:
‘Whilst I accept the argument of Coles Group Supply Chain that, absent any deeming, Mr Smith’s retail employment with Kmart cannot be recognised, it appears to me that the transmission of business and transfer of employees from Kmart warehouse to Coles Myer Logistics in effect provides that deeming …
 
… the employee’s period of permanent employment for the purposes of the agreement’s redundancy clause encompassed his service with Kmart (1989 to 1997) and with Coles Group Supply Chain (2000 to present) …’
Particular to the facts
 
The commissioner warned that her finding was particular to the facts of the case before her:
‘Coles Group Supply Chain submits that to recognise Mr Smith’s retail employment with Kmart for the purpose of severance pay “would be contrary to the accepted justification for the payment of severance pay.” As outlined above, the purpose of redundancy pay is well settled. Given no other purpose in the Agreement, it is reasonable to assume that those who drafted the Agreement considered that the redundancy pay to be made under the Agreement would be for the “inconvenience and hardship” which goes to matters such as loss of security of employment, seniority etc but is not to compensate for periods of unemployment. It is unclear how the recognition of Mr Smith’s retail employment would be contrary to this purpose and I find that it would not be so contrary …
 
…The conflation of Coles Group Supply Chain and Kmart leads me to consider that the retail employment with Kmart should be considered as part of the permanent employment of [the employee] for the purposes of the redundancy clause in the agreement …’
Commissioner Bissett ruled that the employee's period of permanent employment for the purposes of the agreement’s redundancy clause ‘encompassed his service with Kmart (1989 to 1997) and with Coles Group Supply Chain (2000 to present) …’
 
 
 
Redundancy pay reduced — material effort to place employee in new job
 
Commissioner Williams (FWA) said the previous employer’s successful encouragement of the new prospective employer to hire the redundant workers was sufficient to satisfy the s120 test of the Fair Work Act 2009.
 
 
The commissioner stated that employers should be encouraged to take such actions:
‘… It would be unhelpful to future employees who may be made redundant to discourage employers from taking positive action to obtain acceptable alternative employment by setting unreasonably high thresholds of effort to be demonstrated before an employer is rewarded with the possible benefits available under s.120 …’
Commissioner Williams concluded that given that the employees’ entitlements and service had not transferred to their new employers, a 50% discount was appropriate.
 
 
 
Not suitable alternative employment — pay and car allowance cut
 
A 2.5% pay reduction and a diminished vehicle entitlement meant that the new position offered was not suitable alternative employment and did not reduce the employer’s liability to pay redundancy benefits.
 
 
Commissioner roe in FWA concluded:
‘There are no grounds for me to reduce the amount that otherwise should be paid. Based on the plain wording of the provisions of the Act I have a discretion to reduce the redundancy entitlement (to nil should I so decide) in circumstances where other acceptable employment is found … Having found that the employment obtained is not acceptable, the application to reduce the amount otherwise payable to Ms Bonomo is also rejected …’
 
 
Short-term placement reduces redundancy pay by 75% 
 
Even though the new employment was only for six months, Commissioner Smith in FWA said the employee was fortunate to have had suitable alternative employment arranged for him and to have avoided any immediate reduction in terms and conditions.
 
 
The employer’s redundancy obligation was reduced under the Fair Work Act, s120, from four weeks wages to one week.
 
The commissioner concluded:
‘Affinity has a very persuasive case. There is nearly always some form of trauma associated with losing employment but in the case of Mr Russell he has been fortunate to have suitable alternative employment arranged for him and other than another change in employer, remains employed today without having any period of unemployment or employment with inferior terms and conditions with one exception. That exception was, of course, the fact that the employment offer was, on its face, only for six months.
 
Given the circumstances, Affinity has made out a case for the amount of redundancy pay to be reduced. Section 120(2) permits Fair Work Australia (FWA) to reduce the amount of redundancy pay by a specified amount that it considers appropriate. Section 578 provides that in performing functions or exercising powers in relation to a matter under a part of the Act, FWA must take into consideration, among other matters, equity, good conscience and the merits of the matter …’
 
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