Pub­li­ca­tions

Avoid­ing redun­dan­cy pay where the employer obtains oth­er accept­able employ­ment” for the employ­ee: four recent cases

As most employ­ers will be aware, the Fair Work Act 2009 (Cth) (Act) con­tains pro­vi­sions requir­ing busi­ness­es to pay eli­gi­ble employ­ees a set amount of redun­dan­cy pay where the employ­ee los­es their employ­ment due to their role being made redundant.

What is per­haps less well known is, the pro­vi­sion at sec­tion 120 of the Act which allows an employ­er who would oth­er­wise be liable for pay­ment of redun­dan­cy pay, to apply to the Fair Work Com­mis­sion (Com­mis­sion) for an order that no redun­dan­cy pay (or a reduced amount of redun­dan­cy pay) is payable.

Sec­tion 120 pro­vides as follows:

Vari­a­tion of redun­dan­cy pay for oth­er employ­ment or inca­pac­i­ty to pay 

(1) This sec­tion applies if: 

(a) an employ­ee is enti­tled to be paid an amount of redun­dan­cy pay by the employ­er because of sec­tion 119; and 

(b) the employer: 

(i) obtains oth­er accept­able employ­ment for the employ­ee; or 

(ii) can­not pay the amount. 

(2) On appli­ca­tion by the employ­er, the FWC may deter­mine that the amount of redun­dan­cy pay is reduced to a spec­i­fied amount (which may be nil) that the FWC con­sid­ers appropriate. 

(3) The amount of redun­dan­cy pay to which the employ­ee is enti­tled under sec­tion 119 is the reduced amount spec­i­fied in the determination.

It might be not­ed that s120 of the Act is a sep­a­rate and dis­crete pro­vi­sion from s122, the lat­ter being a pro­vi­sion which address­es a trans­fer of busi­ness sit­u­a­tion and whether an employer’s oblig­a­tions to pay redun­dan­cy can be affect­ed in those cir­cum­stances. This arti­cle is direct­ed sole­ly to the appli­ca­tion of s120 of the Act.

In August 2018 there were at least four report­ed deci­sions, where the Com­mis­sion was called upon to make a deter­mi­na­tion pur­suant to sec­tion 120(1)(b)(i) of the Act, ie where the employ­er claimed that they had found oth­er accept­able employ­ment” for the redun­dant employee.

The ratio­nale of the sec­tion is eas­i­ly under­stood. If redun­dan­cy pay is to com­pen­sate an employ­ee for their loss of the job through no fault of their own, and per­haps the prospect of fac­ing a peri­od of unem­ploy­ment, then it makes sense that the employ­er should be able to avoid lia­bil­i­ty for any such pay­ment (or at least have the amount reduced) if it is able – through its own efforts – to find oth­er accept­able employ­ment for the employ­ee. In this sce­nario, the employ­ee is unlike­ly to face a sig­nif­i­cant reduc­tion in earn­ings (or peri­od of unem­ploy­ment) for which they need to be compensated. 

The four deci­sions dis­cussed below, illus­trate how the Com­mis­sion approach­es appli­ca­tions con­cern­ing obtains oth­er accept­able employ­ment” and high­lights the dif­fi­cul­ty employ­ers face in achiev­ing suc­cess before the Commission. 

It will be not­ed that the employ­er was suc­cess­ful in only one of the four applications.

Elec­tric­i­ty Wiz­ard Pty Ltd v Pasi­li­ka Tauili­ili [2018] FWC 4556 – Deputy Pres­i­dent Colman

Mr Taulili­ili was employed by Elec­tric­i­ty Wiz­ard as a Team Leader, over­see­ing sales staff.

On 2 March 2018 Mr Tauili­ili was advised that the busi­ness could not sup­port the cur­rent Team Leader roles and that Mr Tauili­ili and anoth­er Team Leader would need to under­take sales work or accept redundancy.

There was a fur­ther meet­ing on 9 March 2018 where it was explained to Mr Tauiliili:

[10]…Mr Tauiliili’s cur­rent role of team leader was redun­dant… Elec­tric­i­ty Wiz­ard need­ed to change the team leader role because cer­tain func­tions were no longer required, and the sales force had reduced in size…. there was anoth­er role he could per­form, to be called team leader’, but which would involve inter­act­ing with cus­tomers, assist­ing them to choose the right ener­gy plan, and con­tribut­ing to sales…. the new role would entail the same hours of work and the same salary, togeth­er with nec­es­sary upskilling and retrain­ing where nec­es­sary…. there was no posi­tion descrip­tion for the role, and that cer­tain details of the role remained to be finalised.” (our emphasis)

In the meet­ing Mr Tauili­ili advised that he was not inter­est­ed in the alter­na­tive role and wished to be paid his redun­dan­cy entitlements.

There was a dis­pute between the par­ties as to when Mr Tauiliili’s employ­ment end­ed, but the Com­mis­sion ulti­mate­ly found that his employ­ment ter­mi­nat­ed on 9 March 2018.

There was a fur­ther meet­ing between Mr Tauili­ili and his (for­mer) employ­er on 20 March 2018 where he was giv­en fur­ther details about the alter­na­tive role includ­ing doc­u­ments detail­ing the posi­tion descrip­tion, key per­for­mance indi­ca­tors and details of remu­ner­a­tion. Mr Tauili­ili again said that he was not inter­est­ed in the role.

The Com­mis­sion record­ed Mr Tauiliili’s evi­dence on the accept­abil­i­ty of the alter­na­tive role as follows:

[20]… He says it was of a dif­fer­ent char­ac­ter, being fun­da­men­tal­ly sales-based, rather than super­vi­so­ry. He also sub­mit­ted that although the salary and title were the same, the alter­na­tive role would have been a demo­tion. He also said that he would have had a reduced capac­i­ty to earn com­mis­sions; the com­mis­sion struc­ture meant he would need to cov­er his base salary by mak­ing a cer­tain num­ber of sales before receiv­ing any com­mis­sion, where­as in his pre­vi­ous role he sim­ply made a $10 com­mis­sion for every sale.”

The first mat­ter the Com­mis­sion had to deter­mine was whether Elec­tric­i­ty Wiz­ard had obtained” alter­na­tive employ­ment for Mr Tauili­ili. The Com­mis­sion had this to say:

[23] Many of the cas­es that come before the Com­mis­sion under s.120 of the Act con­cern efforts that have been made by the appli­cant-employ­er to obtain oth­er accept­able employ­ment’ for the employ­ee with anoth­er employ­er. How­ev­er, it is also pos­si­ble for the employ­er to obtain’ oth­er employ­ment with­in its own organ­i­sa­tion. It is clear that in the present case, Elec­tric­i­ty Wiz­ard obtained’ oth­er employ­ment for the respon­dent. But when did it obtain this employ­ment for him? 

[24] Dur­ing the meet­ing on 9 March 2018 the com­pa­ny gave Mr Tauili­ili a good indi­ca­tion of the alter­na­tive role that would be avail­able. It told him that the role would be cus­tomer-fac­ing with a lead­er­ship ele­ment, and that the posi­tion title and remu­ner­a­tion would be the same. How­ev­er, the alter­na­tive role dis­cussed at this meet­ing lacked impor­tant details. The posi­tion descrip­tion and the infor­ma­tion about the bonus and com­mis­sion struc­ture were not pro­vid­ed to Mr Tauili­ili until the meet­ing on 20 March 2018, after his employ­ment with the com­pa­ny had ceased. In my view, for an employ­er to avail itself of s.120, the oth­er accept­able employ­ment must be obtained’ and offered to the employ­ee while she or he is still employed by that employ­er. The sec­tion speaks of an employ­er obtain­ing oth­er accept­able employ­ment for the employ­ee. This can­not occur once the rel­e­vant employ­ment rela­tion­ship has come to an end. In the present case, the oth­er employ­ment was not obtained until after Mr Tauiliili’s employ­ment with Elec­tric­i­ty Wiz­ard end­ed.” (our empha­sis and foot­notes omitted)

In the Commission’s view the fact that alter­na­tive employ­ment was only offered to the employ­ee after his employ­ment had end­ed was fatal to the employer’s application. 

How­ev­er, the Com­mis­sion also briefly addressed the ques­tion of whether the offer of employ­ment was accept­able”. In doing so, the Com­mis­sion made clear that it is pos­si­ble for the employ­er to rely on sec­tion 120(b)(i) whether or not the employ­ee accepts the offer of employment 

[25] …It is clear that Mr Tauili­ili did not accept the oth­er employ­ment. How­ev­er, whilst rel­e­vant, this is not deter­mi­na­tive of whether the employ­ment was accept­able’ for the pur­pos­es of s.120. Accept­able’ means able to be agreed to’, but it also means suit­able’. A per­son might not accept objec­tive­ly accept­able’ employment. 

[26] It is well-set­tled that the ques­tion of whether oth­er employ­ment is accept­able’ is to be approached objec­tive­ly, and with regard to all the cir­cum­stances, includ­ing the terms and con­di­tions of employ­ment and duties. In the present case, the alter­na­tive role offered the same salary and hours of work. The role had the same title, and involved lead­er­ship. It required assis­tance to be pro­vid­ed to agents, as well as coach­ing. How­ev­er, Mr Tauili­ili would have been required to go onto the phones, deal direct­ly with clients and work on sales. The alter­na­tive role was essen­tial­ly sales-based, with a lead­er­ship ele­ment; it was not pri­mar­i­ly super­vi­so­ry. It was there­fore of a dif­fer­ent nature. Fur­ther, the pos­si­bil­i­ty of earn­ing com­mis­sions was dimin­ished. These two con­sid­er­a­tions togeth­er, on bal­ance, lead me to con­clude that the alter­na­tive employ­ment was not oth­er accept­able employ­ment’ for the pur­pos­es of s.120(1)(b)(i).” (foot­notes omitted)

Stan­ley Inter­na­tion­al Col­lege Pty Ltd T/A Stan­ley Col­lege [2018] FWC 4843 – Com­mis­sion­er Williams

In Stan­ley Col­lege the facts were per­haps more straight forward. 

Ms Akhter was an Accounts Offi­cer work­ing 30 hours over four days per week.

Her posi­tion was to be made redun­dant and she was offered, and accept­ed, an alter­na­tive posi­tion, iden­ti­cal to her cur­rent role apart from the fact that her hours were reduced to 15 hours over two days per week.

The Com­mis­sion dealt with the employer’s appli­ca­tion that it had obtained alter­na­tive accept­able employ­ment in the fol­low­ing way:

[16] The alter­na­tive posi­tion that Stan­ley Col­lege obtained for the Respon­dent is the same Accounts Offi­cer role but with the work­ing hours and num­ber of days per week reduced. 

[17] The only dif­fer­ence between the redun­dant posi­tion and the oth­er employ­ment obtained is that the redun­dant posi­tion was for 30 hours worked over four days per week where­as the oth­er employ­ment is only 15 hours worked over two days per week.

[18] The oth­er employ­ment obtained for the Respon­dent reduces the hours and days per week she works and her result­ing remu­ner­a­tion by 50%.

[19] Where an employ­er has obtained oth­er employ­ment for an employ­ee whose posi­tion has been made redun­dant but the employ­ee will then only be paid half the remu­ner­a­tion they had been receiv­ing in the redun­dant posi­tion that oth­er employ­ment objec­tive­ly is not oth­er accept­able employ­ment”. The fact the 50% reduc­tion in remu­ner­a­tion is because that employ­ee will only be required to work 50% of the hours and days per week of the redun­dant posi­tion does not change this conclusion.

[20] In all the cir­cum­stances here Stan­ley Col­lege has not obtained oth­er accept­able employ­ment for Ms Akhter. Con­se­quent­ly the appli­ca­tion to reduce the redun­dan­cy pay­ment that would oth­er­wise be payable to her will be dismissed.”

The ORS Group Pty Ltd T/A The ORS Group [2018] FWC 4820 – Com­mis­sion­er Williams

ORS was in the busi­ness of pro­vid­ing work­place reha­bil­i­ta­tion to injured work­ers and relat­ed ser­vices. In March 2018 it informed its employ­ees that there may be redun­dan­cies in the organ­i­sa­tion but that a sep­a­rate busi­ness (APM) had agreed to employ a sig­nif­i­cant num­ber of the staff.

In May 2018 Ms Kaur was advised that her posi­tion as Site Man­ag­er was to be made redun­dant but ORS had obtained oth­er employ­ment for her at APM as an Employ­ment Consultant”.

The let­ter of offer she received indi­cat­ed that her pay would remain the same and that the new employ­er would recog­nise her pri­or ser­vice with ORS for the pur­pose of cal­cu­lat­ing enti­tle­ments. The new role was also in the same loca­tion and with the same hours.

Ms Kaur did not accept the offer of employ­ment with APM. OSR sub­se­quent­ly applied to the Com­mis­sion to reduce the redun­dan­cy pay payable to her on the grounds of obtain­ing oth­er accept­able employ­ment for her.

As part of its analy­sis of the role Ms Kaur per­formed for ORS and the role she was offered with APM, the Com­mis­sion com­pared the posi­tion descrip­tions and KPIs for both roles. It then made the fol­low­ing observations:

[15] It is appar­ent from the above that the pur­pose and key respon­si­bil­i­ties of the two posi­tions are very dif­fer­ent. This is rein­forced by the fact that the KPIs for the two posi­tions are also very different.

[16] The redun­dant posi­tion of Site Man­ag­er was a man­age­r­i­al and lead­er­ship role. The oth­er employ­ment at APM, as an Employ­ment Con­sul­tant, was a role deal­ing direct­ly with participants.

[17] Both posi­tions are cov­ered by the Labour Mar­ket Assis­tance Indus­try Award 2010 [MA000099] (the Award).

[18] The oth­er employ­ment, as an Employ­ment Con­sul­tant, was clas­si­fied under the Award as a Train­ing and Place­ment Offi­cer Grade 2 where­as the redun­dant Site Man­ag­er posi­tion was clas­si­fied under the Award as a Man­ag­er Grade 1 1. The oth­er employ­ment was two clas­si­fi­ca­tions below the rel­e­vant Award clas­si­fi­ca­tion of the redun­dant position.

[19] Sched­ule B- Clas­si­fi­ca­tion Def­i­n­i­tions of the Award includes the following,

B.4.1 Train­ing and Place­ment Offi­cer Grade 2 means a mul­ti­func­tion employ­ee who is engaged to pro­vide direct ser­vices to par­tic­i­pants and train­ing cours­es, place­ment or sup­port ser­vices and oth­er pro­grams and activ­i­ties pro­vid­ed by the employer.”

and

B.6.1 Man­ag­er Grade 1 means a per­son engaged to man­age the oper­a­tions of a small to medi­um size ser­vice with a total week­ly staffing of the ser­vice is less than 285 hours.”

[20] ORS sub­mit that whilst Ms Kaur was the Site Man­ag­er she had no direct nor indi­rect reports. In this sub­mis­sion they did con­firm that, con­sis­tent with the ORS job descrip­tion, her duties includ­ed train­ing and staff devel­op­ment, claims, PPS, mon­i­tor per­for­mance and gen­er­al site duties.

[21] Ms Kaur has been a Site Man­ag­er for over two years. 

[22] The qual­i­fi­ca­tions spec­i­fied for the Site Man­ag­er posi­tion were that a Cert IV in employ­ment ser­vices, dis­abil­i­ty or sim­i­lar were pre­ferred but not essen­tial and that a Cert IV in Front­line Man­age­ment or sim­i­lar was also pre­ferred but not essential.

[23] There are no qual­i­fi­ca­tions spec­i­fied for the Employ­ment Con­sul­tant posi­tion as being essen­tial or preferred.

[24] Ms Kaur has a Bach­e­lor of Arts Degree major­ing in Psychology.

[25] Con­sid­er­ing all of the above I find that the Employ­ment Con­sul­tant posi­tion was a sig­nif­i­cant­ly less senior role than the Site Man­ag­er position.

On bal­ance the Com­mis­sion found that the alter­na­tive role was not accept­able” oth­er employ­ment and dis­missed the employer’s application.

The ORS Group Pty Ltd T/A The ORS Group [2018] FWC 4809 – Com­mis­sion­er Williams

Anoth­er of ORS’s appli­ca­tions to the Com­mis­sion, con­cerned a Ms Zhang, employed as an Employ­ment Con­sul­tant by ORS and offered an alter­na­tive role with APM with the same posi­tion and title.

As was the case with Ms Kaur, it was clear that the hours, salary and loca­tion would all be iden­ti­cal and that pre­vi­ous ser­vice would be recog­nised for the pur­pos­es of leave and entitlements.

Some­what frus­trat­ing­ly the Commission’s deci­sion does not go into detail about Ms Kaur’s sub­mis­sions about the dif­fer­ences between the roles. How­ev­er, the Com­mis­sion held that on bal­ance it was sat­is­fied that the offer of employ­ment was accept­able”. The rel­e­vant part of the deci­sion was:

[37] The oth­er employ­ment at APM was a sim­i­lar role to Ms Zhang’s pre­vi­ous posi­tion with ORS. She would con­tin­ue to be employed as an Employ­ment Con­sul­tant how­ev­er her client case­load rather than being only DMS (Dis­abil­i­ty Man­age­ment Ser­vices) would be both DMS and ESS (Employ­ment Sup­port Ser­vices). The loca­tion where she would work was the same. The annu­al salary she would be paid was the same. Both posi­tions were full-time. There would be no loss of leave accru­als, these would be car­ried over to APM and hon­oured by her new employ­er. Her length of ser­vice with ORS was to be hon­oured by APM.

[38] Ms Zhang in her sub­mis­sion iden­ti­fied a num­ber of dif­fer­ences between ORS and APM. I accept there will cer­tain­ly be some dif­fer­ences between the two employ­ers oper­a­tions and there will be some dif­fer­ences between the two roles and some employ­ment entitlements.

[39] The ques­tion for the Com­mis­sion how­ev­er is to con­sid­er objec­tive­ly whether the posi­tion obtained for her at APM was oth­er accept­able employ­ment. The fact that Ms Zhang’s redun­dant posi­tion and the oth­er employ­ment obtained for her at APM are not iden­ti­cal does not pre­vent the oth­er employ­ment from being oth­er accept­able employment. 

[40] In the cir­cum­stances of this case I accept there were some dif­fer­ences between Ms Zhang’s for­mer posi­tion and the oth­er employ­ment ORS had obtained for her. I also accept some of these dif­fer­ences would have involved some detri­ment to her how­ev­er this was rel­a­tive­ly limited.

[41] Con­se­quent­ly I am sat­is­fied that the oth­er employ­ment ORS had obtained for Ms Zhang at APM was oth­er accept­able employment.

[42] Con­sid­er­ing the par­tic­u­lar cir­cum­stances here I agree it is appro­pri­ate to reduce the redun­dan­cy pay to which Ms Zhang would have oth­er­wise been enti­tled to nil.” (our emphasis)

Con­clu­sion

From the above deci­sions the fol­low­ing points emerge:

  • For an employ­er to rely on the obtains oth­er accept­able employ­ment” exemp­tion, the alter­na­tive employ­ment can be with­in the same organ­i­sa­tion or with a dif­fer­ent employer.
  • The employ­ment must be obtained pri­or to the employee’s redun­dan­cy tak­ing effect (ie before the employ­ment is terminated). 
  • Employ­ers should there­fore ensure that they give all the rel­e­vant infor­ma­tion to the employ­ee about the new role before the employ­ment ends. Only giv­ing them par­tial infor­ma­tion is unlike­ly to be seen as suf­fi­cient for the employ­er hav­ing obtained” anoth­er role.
  • The assess­ment of whether an alter­na­tive role is accept­able” or not is an objec­tive one – the employee’s views are not determinative.
  • An employ­er is able to seek to rely on the exemp­tion whether or not the employ­ee in fact accepts the alter­na­tive role.