When redundancy pay is reduced to nil


When redundancy pay is reduced to nil

When redundancies are contemplated and suitable alternative employment is offered to an employee but is rejected, the employee can lose any entitlement to redundancy pay. These cases illustrate some alternative employment offers that have recently been considered by the FWC.


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When redundancies are contemplated and suitable alternative employment is offered to an employee but is rejected, the employee can lose any entitlement to redundancy pay.

There has also been a suggestion in cases decided by the tribunals that less advantageous terms of employment do not automatically constitute an unacceptable offer.
The cases noted below illustrate that alternative employment offers have to be closely examined to assess whether an employer is relieved from having to make redundancy payments. 
Better pay offered — redundancy pay reduced to nil
The employer sought to reduce the amount of redundancy pay to an employee to nil. The employee commenced employment with the employer, UGL, in May 2010 as a Facilities Manager at a Commonwealth Bank site. UGL lost the property services contract in May 2013. As a result, 20 employees were to be made redundant in June unless alternative employment could be obtained. UGL submitted that the employee was entitled to eight weeks pay, but this should be reduced to nil as he had been offered other acceptable employment as a Facilities Manager at a Westpac site. The job was on same grade under company grading system and the annual salary was $9000 more. The location of the Westpac site was one kilometre away. No car parking space was provided by UGL at either site but the employee currently had the use of a space at a Commonwealth Bank site. The Westpac site had responsibilities for three other sites. The employee declined the offer of employment because it was not a single site.
Deputy President Lawrence in the Fair Work Commission (FWC) said that factors such as nature of the work, pay, hours, skills, duties, seniority and work location must be considered. It was clear the Westpac position was suitable for the employee. It was financially more advantageous than the current position. The fact that other sites were involved made no material difference. The Commission found the alternative employment was acceptable. The amount of redundancy pay therefore was reduced to nil.
UGL Services P/L v M [2013] FWC 4209 (28 June 2013) 

Less advantageous terms — not automatically unacceptable offer
The employer sought to vary redundancy payments that would otherwise be due to the employee. The employee had been employed by the company in various roles since September 2010. The company had been required to restructure due to a downturn in profits and the employee was offered an alternative role in the same company. She was told that if she rejected the offer, an application would be made to reduce her redundancy entitlements. The company argued the offer constituted other acceptable employment under the Act. The employee argued the offer was effectively a demotion with less pay, more travel and substantially different duties.

Commissioner Williams in the FWC cited the Datacom Systems case on what is considered to constitute acceptable employment and found that it must be determined objectively — less advantageous terms of employment did not automatically constitute an unacceptable offer. The Commissioner considered the employee’s objections to the offer and was satisfied that she had been offered acceptable employment. The employee’s entitlement to redundancy pay was reduced to nil.
The onus of establishing that the alternative employment in question is acceptable rests with the applicant employer.
In order to establish whether the alternative employment obtained by the employer was acceptable it is necessary to have regard to such matters as: pay levels, hours of work, seniority, fringe benefits, workload and speed, job security and other matters (including the location of the employment and travelling time). Other employment does not cease to be ‘acceptable’ merely because it is on terms that are less advantageous to that of the terminating position. The Commissioner concluded:
‘I accept that the Sale Administrator job was less attractive to Ms D in a number of ways. However the Commission has previously found alternative employment to be acceptable notwithstanding inconvenience to employees and some detrimental alteration to the terms and conditions of employment. It is not a requirement that the alternative employment be no less beneficial to the employee to objectively be acceptable. Considering all of these factors objectively I am satisfied that the Sales Administrator position that was obtained by RMS and offered to Ms D was other acceptable employment … It should be appreciated that the legislation which establishes an entitlement to redundancy pay does not provide this entitlement on the basis that an employee can simply reject another job which is acceptable alternative employment the employer has obtained for them and instead elect to accept termination with a redundancy payment.’
Richards Mining Services P/L v D [2013] FWC 4022 (26 June 2013)

One offer suitable, the other not

This employer’s application was made on the basis that acceptable alternative employment had been found and it did not have financial capacity to pay redundancy pay. The employer submitted it had arranged for discussions with three potential employers for G as a mechanic and organised an alternative position for J which involved better pay and conditions, and he subsequently left that employment. G contended none of the alternative job propositions were suitable or appropriate. The options included becoming a contractor or a business owner. The FWC was required to consider whether the employer was a strong, moving force behind the creation of available opportunities for G and J.

The FWC considered the concept of acceptable alternative employment in Australian Chamber of Manufacturers and Derole Nominees Pty Ltd — Clothing Trades Award 1982 (1), (1990) 140 IR 123 per Peterson J, Marsh DP and Oldmeadow C.

It was not clear that any actual or concrete alternative positions became available to G and the FWC was not satisfied they would be considered acceptable within the meaning of the authorities. There was no grounds to consider reduction in severance payments to G on basis of ‘obtaining’ suitable alternative positions.
The employer had, however, obtained acceptable alternative employment for J and severance entitlements were reduced to zero.
Mildren Automotive P/L v G and Anor [2013] FWC 2113 (4 July 2013)

Additional travel time insufficient reason for refusing re-employment
The employer sought to reduce redundancy pay for two employees. The employees had a contract for providing various services including catering, and they worked nights and weekends and travelled to work by car. The employer informed the employees that there would be reduced catering hours. Re-employment opportunities were investigated. The employees were informed that alternative work had been identified with the same hours and rate of pay. The employees declined the offer of re-employment citing additional travel required to the new location. The employer maintained the re-employment offers constituted acceptable alternative employment.
Deputy President Sams considered the Datacom Systems decision in relation to ‘acceptable alternative employment’ and was unable to conclude additional travel time constituted sufficient reason for refusing re-employment so no amount of redundancy pay was applicable.
Re Spotless Services Australia Limited [2013] FWC 4484 (9 July 2013)
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