On 15 March 2013, the New South Wales District Court handed down
a decision which illustrated the caution that must be applied when
dealing with operational change.
The Plaintiff, Kelvin Smith ("Mr Smith") had been
employed by the Second Defendant, Commonwealth Steel Company Pty
Ltd ("CSC") since 1978. He became a furnace operator in
the early 1990s and had been doing this job ever since.
In late October 2010, CSC transferred Mr Smith to the
"railway finishing line". This work involved painting
railway wheels and some other unskilled work.
Mr Smith gave CSC a letter of resignation on 9 October 2010 but
alleged at the hearing that, by the time he had done so, he had
already been terminated as a furnace operator and therefore was
entitled to redundancy payments.
Redundancy was defined in the relevant award as follows:
"redundancy" means the employer has made a
decision that the employer no longer wishes the job an employee has
been doing done by anyone, and this is not due to the ordinary and
customary turnover of labour; and that decision results in the
termination of employment.
There was an exclusion which stated, in effect:
Nothing in this clause shall be read as requiring the
employer to extend a redundancy benefit to an employee where the
employer offers the employee acceptable alternative
One of the critical questions in this case was whether Mr
Smith's role on the finishing line was "acceptable
It was not disputed that:
there was no change in Mr Smith's pay or hours; and
both the role of a furnace operator and the role on the
finishing line would have required approximately one month's
training for a new employee, such that the two roles could be
considered as requiring a relatively similar level of skill and
Mr Smith had problems with his knees which did not affect his
ability to work as a furnace operator but did affect his ability to
work on the finishing line.
The judge concluded that the question of "acceptable
alternative employment" was an objective test, such that Mr
Smith's subjective reaction or impression of the change in role
was not relevant in itself. It was, however, considered to be
relevant as evidence of the change in status between the two
In line with the finding that the test was objective, Mr
Smith's medical limitations were also held to be
Notwithstanding these findings, the judge concluded that the
role on the finishing line was not acceptable alternative
employment. He found that Mr Smith's experience and status had
been established from working for 20 years as a furnace operator
and that his position on the finishing line was essentially that of
a newly engaged trainee. This represented a significant drop in
status and therefore was not "acceptable alternative
It was also noted that CSC had not "offered" Mr Smith
acceptable alternative employment but rather had imposed it on
Accordingly, Mr Smith's application was successful and he
was awarded $153,316.39.
The case highlights the need to tread carefully when seeking to
change an employee's role. Firstly, it is critical to check
carefully any applicable industrial instrument, whether an
employment contract, an award, an enterprise agreement, an
individual flexible agreement or a combination, as there is likely
to be specific provision relating to redundancy that must be
Secondly, it cannot simply be assumed that if an employee's
wage and general conditions are unaltered that they have not been
made redundant. In this case, a drop in status was enough to take
it outside the scope of "acceptable alternative
employment", but is just one of a number of factors that need
to be considered.
Operational change is an inevitable part of business, but a
clear understanding of the business's legal responsibilities,
as well as the exercise of compassion and common sense, can assist
in avoiding costly disputes such as this.
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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