Australia: If you found your redundant employee another job, you still might be liable for redundancy pay

Last Updated: 28 October 2012
Article by Jennifer Teh and Stephen Trew
Most Read Contributor in Australia, September 2016

Many employers are currently under a mistaken impression that if they find their redundant employees another job, they will be off the hook for redundancy pay. This is understandable, given that a number of workplace agreements and old awards contain exemptions from the obligation to pay redundancy pay to an employee, where the employer has secured "acceptable alternative employment" for the employee. While the position is similar under the Fair Work Act 2009 (Cth) (Act), it is not an automatic exemption and an employer must first apply to Fair Work Australia (FWA) to vary the redundancy pay due to the employee. If FWA is satisfied that the employer has obtained "other acceptable employment" for the employee, FWA may reduce the redundancy pay liability (including to nil) at its discretion.

In two recent cases, Fair Work Australia has dealt with two such applications.

Employer assisted but did not obtain

In Hunt Energy & Mineral Company Australia Pty Ltd v Mr Ian Thomas [2012] FWA 7845, FWA rejected Hunt Energy's application to reduce its 6 week redundancy pay obligation by 50% on the basis that it had assisted but not "obtained" alternative employment for Mr Thomas.

Mr Thomas was made redundant as a result of the closure of Hunt Energy's main operations. After being informed by Hunt Energy's HR Manager of a potential employment opportunity with another company, Harness Energy Services (Harness), Mr Thomas approached Harness directly and provided it with his resume. He ultimately got the job, so Hunt Energy applied to FWA to reduce its redundancy pay liability, arguing that it had obtained that employment for Mr Thomas.

Commissioner Hampton stated that the test was whether Hunt Energy was a "strong, moving force" behind the creation of the available opportunity taken up by Mr Thomas, which is not an absolute test but one that needed to be realistically assessed in the particular circumstances of each case. Commissioner Hampton found that at its highest, Hunt Energy's actions of informing Harness of the proposed redundancies and providing Harness with a list of relevant staff and references for many of them (including Mr Thomas), only "assisted" with the alternative employment ultimately found by Mr Thomas.

In the circumstances, Commissioner Hampton found that Hunt Energy had not gone far enough to receive the benefit of the exemption. The types of actions that Hunt Energy would need to have done included arranging contact between Mr Thomas and Harness, arranging an interview or the supply of his resume or taking a role in the formation of the new contract of employment. Commissioner Hampton also stated that there was no evidence that Hunt Energy had made or proposed any transitional arrangements in relation to Mr Thomas' employment with Harness. As a result, Hunt Energy's application was rejected because it had not "obtained" the alternative employment.

Other employment is not acceptable

In Hi-Class Composites Pty Ltd [2012] FWA 7814, Commissioner Gooley dismissed an application made by a manufacturer of caravan components, Hi-Class Composites Pty Ltd (Hi-Class) for its redundancy pay liability to a fibreglass technician to be reduced to zero.

Hi-Class submitted to FWA that it had obtained two other positions for the technician, Mr Taylor, whose position with Hi-Class was redundant. Firstly, Hi-Class submitted that it had informed a caravan manufacturer, Trakmaster-Off Road Pty Ltd (Trakmaster), that Mr Taylor was looking for work and had requested Trakmaster to interview Mr Taylor. As a result, Mr Taylor attended an interview with Trakmaster and there were subsequent discussions about a job at Trakmaster involving the assembly and construction of caravans. Secondly, Hi-Class submitted that it had offered Mr Taylor a lower paid position within Hi-Class, which would have paid Mr Taylor $9.50 per hour less than what he had previously earned.

Commissioner Gooley stated that what constitutes "acceptable alternative employment" needs to be determined on an objective basis and involves consideration of factors such as pay levels, location and travelling time, hours of work, seniority, fringe benefits, whether the work is of a like nature and job security. The onus is also on the employer who makes the application to prove that the other employment is acceptable.

In relation to the job with Trakmaster, Commisioner Gooley noted that it was not clear from the evidence that employment was ever offered by Trakmaster. Nevertheless, Commissioner Gooley found that the job was not acceptable employment because it would have been on a lesser wage and would have involved a significant career change in that it involved different work to that for which he was trained. In relation to the position offered by Hi-Class, Commissioner Gooley stated that "other acceptable employment" for the purposes of the Act did not include employment with the employer, but even if it did, the position was not acceptable employment because it involved a substantially lower rate of pay.

Transfer of Business and Transfer of Employment

It is important not to confuse the scenario in these two cases with a "transfer of employment" situation (which can occur when an employee is transferred between associated entities or where there is a "transfer of business" between two non-associated entities). Where there is a "transfer of employment", an employee will not be entitled to redundancy pay if their new employer recognises their service with their former employer for the purposes of redundancy pay. Also, an employee who rejects an offer of employment by another employer in a "transfer of employment" situation will not be entitled to redundancy pay if the offer:

  • is on terms and conditions no less favourable overall than the terms and conditions that they had with their old employer; and
  • recognises the employee's service with their former employer for the purposes of redundancy pay.

Implications for employers

These cases provide a reminder to employers that they should not assume they do not have to pay redundancy pay in circumstances where they have found a job for their redundant employees with another organisation. Employers must apply to FWA and be prepared to argue that they took the necessary steps to obtain that job and that the job constitutes acceptable employment.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Jennifer Teh
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