Issue 31 2021 - Redundancy: how to assess ‘acceptable’ alternative employment

Updated: Jun 28


In assessing whether to reduce redundancy pay, the Fair Work Commission (“FWC”) has determined that a job with an additional 40-minute daily commute was not acceptable, but that the employee should have accepted a different three-month redeployment.[1] The case neatly reviews the case law on how to determine whether an offer of alternative employment is ‘acceptable’ such as to enable the redundancy pay to be avoided or reduced. There is no one determinative factor that applies in every case.

 

The facts

There was no dispute that the employee’s job as a vehicle salesperson was genuinely redundant (along with some others). The employer had obtained various redeployment options, including one with an additional 40-minute commute, and one that was not permanent as it was replacing an employee on medical leave for what was indicatively a three-month period.


The employee had 19 years of service and declined both offers as he wished to find permanent employment closer to home. The employer applied to the FWC have his redundancy pay varied to nil because it had obtained other acceptable employment, notwithstanding his rejection of it.


The principles

The Fair Work Act 2009 (Cth) provides that if an employee is entitled to be paid an amount of redundancy pay under the National Employment Standard and the employer “obtains other acceptable employment for the employee”, the employer may apply to the FWC to determine that the amount of redundancy pay be reduced (potentially to nil).[2]


Commissioner Hunt summarised the precedent case law on assessing whether an offer is ‘acceptable’ employment for these purposes. The following principles apply:[3]

  • The test of what constitutes ‘acceptable employment’ is an objective one. It does not mean it must be acceptable to the employee.

  • ‘Acceptable employment’ is not identical employment, as no two jobs could be exactly the same.

  • An employee must meaningfully cooperate with the employer in exploring or considering options for alternative positions.

  • An employee’s prima facie entitlement to redundancy pay may be at risk if the employee refuses a role or position, which is found to be objectively ‘acceptable’.

  • The acceptance of alternative employment by one or more persons in a group of redundant employees, does not necessarily make the alternative employment ‘acceptable’ for all of them. Each employee’s individual circumstances must be taken into account.

  • There are a range of factors of varying weight, according to an employee’s particular circumstances, which may be taken into account to assess the acceptability of alternative employment.”


The outcome

When assessing whether the alternative jobs were acceptable in the circumstances, the Commissioner decided that:

  • the additional travel time in the first role would have been inconvenient and onerous because it added 40 minutes to an already 40-minute commute. This meant the role did not amount to other acceptable employment; but

  • the offer of the other temporary role was acceptable alternative employment even though it was not guaranteed to become permanent. This was because if “on the incumbent’s return to work he was left without a role and redeployment was not possible, he would have been entitled to 12 weeks’ severance pay”.

The FWC reduced the employee’s redundancy pay from 12 weeks to four weeks after taking everything into account, including that the employee had been released from the requirement work his notice period, and that he had found another job.


Power of the FWC to reduce redundancy pay

Employers must remember that if they terminate an employee’s employment for redundancy but find them another role, they cannot unilaterally decide that redundancy pay is not payable. Unless there is a legal transfer of business and transfer of employment, an application must be made to the FWC. The FWC then has the discretion as to whether it will reduce the payment, and if so to what level.


In assessing whether the alternative is “acceptable” each case must be decided on its own circumstances.


If there is transfer of business, different rules apply and employers should take specific advice.


Require further information/assistance?

If you require further information or advice, please contact your Consultant.


 

[1] Eagers Automotive v Trevor Varcoe [2021] FWC 6602 (14 December 2021) [2] Fair Work Act 2009 (Cth) s 120 [3] Cited at para [26]

 

EMA Consulting is not a law firm and therefore does not provide legal advice or services. The information contained within this document and associated material is general in nature and should not be relied upon. If you require specific advice on a particular matter, we recommend that you contact EMA Consulting on 08 8203 1700. Subject to the matter at hand, your EMAC Consultant may recommend that you obtain formal legal advice. If formal legal advice is required, upon your written instruction EMAC will brief your matter to a legal practitioner for this purpose. The contents of this document and associated materials do not represent legal advice.

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