Employer's redundancy reduction application denied

12 January 2022

The Fair Work Commission has rejected an employer’s application to reduce redundancy pay after failing to prove the organisation had secured “acceptable” alternative employment for its departing employees.

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Background  

After learning it had been unsuccessful in securing a contract, the business found it was no longer viable to continue employing a number of its workers. 

The General Manager of the opposing business that had secured the contract offered to transition the employees across. After being advised of the lost contract, the business was happy to support the transition and encouraged employees to apply for online job advertisements.  

 Some employees were successful in gaining roles; however, prior to commencing their positions they were made redundant. Formal notification of the termination of employment was provided in a letter, which confirmed the employment was coming to an end by reason of redundancy. It also stated, “staff successfully redeployed and who accept employment with the new provider will be subject of an application to the Commission that redundancy severance pay not be paid.” 

When an application to reduce a redundancy payment can be made 

The business proceeded to make an application to the Commission under s. 120 of the Fair Work Act 2009 (Cth) seeking a reduction in redundancy pay on the basis that it obtained acceptable alternative employment. 

The business incorrectly considered it was able to use the s.120 jurisdiction, arguing its enterprise agreement had passed its nominal expiry date and, consequently, employees were covered by the relevant modern award and National Employment Standards.  

The Commission confirmed the enterprise agreement was still active as it had not been terminated or replaced. In view of this, the Commission had no jurisdiction under s.120; however, it continued to review the application on the basis the enterprise agreement contained a mechanism for the Commission to amend a redundancy payment if acceptable employment was found.  

The decision 

Ultimately, the application was dismissed. The Commission rejected the argument that the business was the driving force in securing the new roles. The evidence indicated it was the other organisation that contacted the business to discuss acquiring its staff. Interested staff were required to submit online applications, and those who had secured alternative employment did so to their detriment.   

When assessing whether the alternative employment was “acceptable,” the Commission noted the hourly rate was $5.17 less, while the work location, rostering arrangements and the loss of non-transferable employment credits derived from the length of service were also less attractive in the new role.  

Learnings for business 

When considering redeployment for those facing redundancy, businesses need to take into consideration a range of factors including the type of role, level of pay, as well as the employee’s responsibilities and family circumstances.  

Businesses must be aware of the terms and conditions included in their industrial instrument and understand when they apply. Getting it wrong may mean a wasted application and an expensive exercise.  

How we can help 

It is important for businesses to follow a fair process when making a role redundant, as well as understand each employee’s redundancy entitlements. Our experienced consultants at the Victorian Chamber can support business in representing and advocating for members to assist in negotiating in the Fair Work Commission proceedings.  

The Workplace Relations Advice Line offers general advice on a range of workplace issues, including: 

  • Award interpretation, classification and minimumentitlements;
  • Disciplinary processes, performance management andtermination;
  • Personal illness andinjury;
  • Parental leave and flexible workingarrangements;
  • Redundancy;
  • Occupational Health and Safety andWorkCover.

For assistance on any aspect of your employment obligations, please call the Victorian Chamber Workplace Relations Advice Line on 8662 5222. 

 

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