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Introduction

You can read the full decision here.

A well-known, iconic retailer shut the doors on one store and sought to transfer an employee to another store some four kilometres away. The employee refused the offered position and sought redundancy pay in accordance with the award and NES. The retailer sought relief from payment of the redundancy pay.

This decision sets out the circumstances in which redundancy pay may not be paid.

Background

The employee was an assistant manager for the retailer. It was noted that she lived some distance from the retail premises that was to be closed. The offer of a same position was to a store four kilometres distant from where she currently worked – an eight-minute drive. Given that she already travelled some distance, the additional travel was deemed negligible.

The employee was provided with 90 days’ notice of the pending closure.

The employee’s views about the alternative position of Store Manager at the nearby store included a reluctance to work with a particular employee of that store whom she alleges engages in bullying behaviour and her lack of faith in the company’s future.

The employee would, if made redundant, be entitled to six week’s redundancy pay.

The company applied to the Fair Work Commission to have this redundancy pay reduced to nil.

The principles relating to the variation of redundancy pay

The Commissioner in this matter noting that the principles relating to the variation of redundancy pay for reason of an employer finding acceptable alternative employment are now well established, and have been summarised by Vice President Lawler in the following way:

In NUW v Tontine Fibres [2007] AIRCFB 1016 (Tontine) a Full Bench of the AIRC considered the meaning of the expression ‘acceptable alternative employment’ in a redundancy provision in an enterprise agreement. It was common for enterprise agreements to reflect award provisions and contain redundancy entitlements that could be reduced if the employer obtained acceptable alternative employment (or some variant of that expression). The Full Bench observed:

‘It is well established… that the concept of acceptable alternative employment is to be determined objectively. As noted by a Full Bench in Australian Chamber of Manufacturers v Derole Nominees Pty Ltd:

What constitutes ‘acceptable alternative employment’ is a matter to be determined…on an objective basis. Alternative employment accepted by the employee (and its corollary, alternative employment acceptable to the employee) cannot be an appropriate application of the words because that meaning would give an employee an unreasonable and uncontrollable opportunity to reject the new employment in order to receive redundancy pay; the exemption provision would be without practical effect.

Yet, the use of the qualification “acceptable” is a clear indication that it is not any employment which complies but that which meets the relevant standard. In our opinion there are obvious elements of such a standard including the work being of like nature; the location being not unreasonably distant; the pay arrangements complying with award requirements. There will probably be others.”

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 is 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)…” [My emphasis].

“Other employment does not cease to be “acceptable” merely because it is on terms that are less advantageous to that of the terminating position. Tontine makes it clear that there are matters of degree involved.”

In summary

In the same matter, the Commission summarised the principles regarding redundancy entitlements and the provisions of the Act for a reduction to redundancy pay as follows:

“Subsections 22(6) and (7) reinforce the notion that where there is a “transfer of employment” – a concept defined broadly in s.22(7) and present in this case –recognition of service with the outgoing employer by the incoming employer should disentitle the employee to the NES redundancy payment. That is consistent with the rational in the TCR No 1 Case and the Redundancy Case 2004 because where there is such recognition, there is no “loss of non-transferrable credits” of the sort that is one of the principal, if not primary, matters to which the redundancy entitlement in s.119 is directed.

In summary:

    • The purpose of the redundancy entitlement conferred by s.119 is primarily to compensate the employee for loss of non-transferrable credits, especially long service leave.
    • It is not the intention of s.119 to fully compensate the employee in all or even most cases. The specified amounts are manifestly inadequate for that purpose.
    • The redundancy entitlement in s.119 has no “income maintenance” purpose and is not intended to address the requirement to search for another job and/or to tide over an employee during a period of unemployment albeit that the it should be regarded as having a minor component referable to the inconvenience and hardship associated with redundancy.
    • To the extent that alternative employment is “obtained” by the outgoing employer, matters referred to Tontine (obvious including elements such as the work being of like nature; the location being not unreasonably distant; the pay arrangements complying with award requirements) are relevant in assessing whether that employment is “acceptable” which is in turn relevant in assessing what, if any, reduction is appropriate. [Note that in Tontine, the alternative employment was with the same employer and there was no loss of continuity or non-transferrable credits. Nevertheless, the alternative employment, while assessed as “acceptable” still had material disadvantages that rendered it appropriate to award a portion of the entitlement.]
    • Where there is no continuity of employment or recognition of long service and other non-transferrable credits that were not paid out by the outgoing employer then the employer should be entitled to the majority of the s.119 entitlement. To the extent that the alternative employment is disadvantageous when compared to the previous employment that will also sound in lesser reduction than might otherwise have been the case”.

Commissioner agrees with the employer

In agreeing to reduce the redundancy payment to “nil”, the Commissioner did so because:

“I am satisfied on the materials before me that the alternative position offered to [the employee] was of a similar nature to that of her position at the [other] store. Further, I am satisfied that the terms and conditions of the role offered are the same as her previous role and her length of service and entitlements would transfer to the new position. It is also conceded by [the employee] that the employee at the [other] store with whom she did not wish to work has since resigned. A disadvantage of the alternative role is that it is a further 4 km for [the employee] to travel…The employer submits this amounts to only an additional 8 minute drive. In the context of the distance already travelled each day by [the employee] to get to and from work this is not an unreasonably distant new location. I have also considered but am not persuaded by [the employee’s] concerns about [the company’s] ongoing viability; to the extent that those concerns are reasonably held…such concerns are not exacerbated through a change in employment location”.