In the recent Fair Work Commission appeal case of DL Employment Pty Ltd v Australian Manufacturing Workers' Union  FWCFB 7946, the Full Bench ruled that six employees of a Darrell Lea sweet manufacturing facility at Kogarah were entitled to redundancy payments when they refused to move to a new site 34km away.
In 2012, Darrell Lea went under voluntary administration. DL Employment Pty Ltd (DLE) purchased the business and made offers of employment to transferring employees (Contracts), who were also covered by an enterprise agreement (Darrell Lea Agreement). The Contracts contained a clause that allowed DLE to require the employees to work at a different site if the company's operations were moved (Location Clause). Relevantly, the Darrell Lea Agreement contained a "no extra claims" clause, a collective bargaining clause (relating to renewal, extension, variation or renegotiation of the agreement) and a clause that stated no employees shall be employed other than under the terms of the DLE Agreement (Comprehensive Clause). However, it did not contain any specific provision regarding location of work.
In 2014, DLE notified its employees that the Kogarah site would be closed and workers relocated to Ingleburn. A $70 travel allowance and bus service was to be provided for dayshift workers for 12 months. A number of the employees objected to working at Ingleburn but DLE maintained that it had a contractual right to require the relocation.
The AMWU subsequently notified a dispute to the Fair Work Commission (FWC), contending that:
- the employees positions were redundant as a result of the closure of the Kogarah site;
- the offers of alternative employment at Ingleburn was not acceptable alternative employment within the meaning of section 120 of the Fair Work Act 2009 (FW Act), which deals with variations to redundancy pay obligations when an employer obtains acceptable alternative employment; and
- certain production employees who could not relocate to Ingleburn due to personal circumstances were entitled to redundancy pay.
Senior Deputy President Lea Drake agreed with the AMWU and six employees were awarded redundancy pay. DLE appealed to the full bench of the FWC.
The Full Bench decision
Was DLE permitted to direct the employees to relocate?
The Full Bench stated that the Comprehensive Clause was a "permitted matter" (for the purposes of being valid under the FW Act) in the Darrell Lea Agreement and that the clause validly operated to displace any contractual rights and obligations that were inconsistent with or not contained in the Darrell Lea Agreement. When considered in conjunction with the "no extra claims" clause, the Full Bench held that the Darrell Lea Agreement was intended to set out in a "comprehensive and prescriptive fashion" the terms and conditions of employment. However, the Darrell Lea Agreement did not displace the employment contract that "created" the employment relationship.
As a result, the Location Clause was displaced and rendered inoperative because it conferred a right upon DLE which was not contained in the Darrell Lea Agreement and it was also inconsistent with the terms of the Agreement (which contained a number of "strong textual and extrinsic indications" that it did not contemplate relocation from Kogarah).
Did DLE repudiate the contract of employment?
The Full Bench ruled that the closure of the Kogarah facility and DLE's "purported direction" for the employees to transfer to Ingleburn constituted a repudiation of their contracts of employment because the breach went to the root of the employees' contracts. In coming to this conclusion, the FWC considered factors such as the additional distance, the significant additional travelling time (40-55 minutes one-way with traffic) and the extent of the "consequential disruption to the long-established patterns of the [employees'] personal lives and circumstances" (e.g. being close to home to assist elderly or disabled family members at short notice).
The employees were entitled to redundancy payments
It was held that the employees' contracts of employment were repudiated and this repudiation was accepted when the employees refused to comply with the direction to relocate. As a result it was further held that their employment was terminated due to redundancy. Accordingly the employees were entitled to redundancy payments under the relevant enterprise agreement.
Did DLE obtain acceptable alternative employment for the employees?
Often enterprise agreements contain clauses which allow an employer to apply to the FWC to vary the redundancy pay obligation if the employer obtains acceptable alternative employment for the employee. Section 120 of the FW Act also contains a similar provision but it only applies to NES redundancy entitlements, not more generous redundancy entitlements prescribed in an enterprise agreement. As the relevant enterprise agreement did not include such a provision, the term requiring a redundancy entitlement to be paid to the employees was "unencumbered" by section 120 of the FW Act and there was no mechanism by which to reduce it even if acceptable employment was obtained. Therefore the question as to whether the employees had been offered reasonable or acceptable alternative employment was irrelevant.
Implications for employers
This case highlights the importance of:
- ensuring that contracts of employment are consistent with the terms of an enterprise agreement;
- understanding the significant impact that clauses like the Comprehensive Clause can have on operational matters, including the securing of additional rights under employment contracts; and
- ensuring that any enterprise agreement that provides for redundancy entitlements more generous than statutory redundancy payments includes a provision which allows application to the FWC to vary redundancy pay when the employer has obtained acceptable or reasonable alternative employment.
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