Australia: Minimising employer redundancy obligations

A provision exists in the Fair Work Act, which enables employers to apply to the Fair Work Commission to minimise their statutory redundancy obligations to staff whom they retrench. The basis for such an application (which is made under s. 120 of the Act) is that the employer has found other acceptable employment for the employee or cannot pay the amount.

A number of such applications have met with little or limited success in the past and the recent decision of the Fair Work Commission in the matter of Sodexo Australia Pty Ltd T/A Sodexo (C2015/8064) is the latest in this series of decisions.

As indicated above, s. 120 allows an employer who has made an employee's position redundant, to apply to the Fair Work Commission to reduce (or avoid all together) the obligation to pay redundancy pay where they have obtained other acceptable employment for the employee.

It is also important to note that s. 120 is separate to the provisions in s. 122 of the Act which deal with redundancy pay in "transfer of business" situations. Under s. 122 in "transfer of business" situations, an employee will not be entitled to redundancy pay if they accept employment with the new employer and their period of service is recognised. An employee in a "transfer of business" situation who rejects an offer of employment with the (potential) new employer will usually not be entitled to redundancy pay if:

  • they were offered terms and conditions that were substantially similar and no less favourable than in their previous role; and
  • the new employer agreed to recognise their period of service with the previous employer for the purposes of (future) entitlements to redundancy pay.

In essence, s. 120 is concerned with a situation (other than a "transfer of business" situation) where an employer who is making an employee redundant, is responsible for that employee "obtaining" acceptable alternative employment (with another employer).

The rationale, presumably, is that where an employer has been instrumental in procuring new employment for a redundant employee, the employee will have less need to be compensated by way of redundancy pay.

As one would expect, it is not enough that the outgoing employer finds the employee employment of any type – s. 120 provides that the employment must be "acceptable" (not defined further). In particular, it is noted that in these circumstances there is no specific requirement in the legislation that the new employer must recognise previous service with the old employer (compare the "transfer of business" provisions referred to above). The Sodexo case provides some clarity on the issue.

There is a body of case law which deals with the considerable lengths an outgoing employer has to go to be considered to have "obtained" the new employment [please see our Article of 28 August 2015 entitled "Redundancy – can an employer avoid payouts by getting their employees another job?"]

However, in Sodexo all the parties appear to have accepted that the employer had "obtained" the new employment. The question in this case was whether that employment was "acceptable" within the meaning of the Act.


Sodexo held a cleaning contract for two hotels – the Crowne Plaza Coogee and the Crowne Plaza Potts Point.

After losing the cleaning contracts to Challenger Hospitality Pty Ltd, Sodexo decided it would need to make those of its employees who cleaned those hotels redundant (as it had no alternative roles it could allocate to them).

It made efforts to obtain employment for the redundant employees with Challenger. A number of its employees accepted employment with Challenger.

Sodexo then made an application to the Fair Work Commission under s. 120 of the Act to reduce its obligation to pay its terminated employees redundancy pay, on the basis that it had obtained "acceptable" employment for them.


Deputy President Sams who heard the matter, examined earlier decisions and noted common features included:

  • 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.

He also noted that notwithstanding the above general principles, whether the alternative employment is acceptable, will likely include consideration of the following matters:

  • rate of pay;
  • hours of work;
  • work location;
  • seniority;
  • fringe benefits;
  • workload;
  • job security;
  • continuity of service;
  • accrual of benefits;
  • probationary periods;
  • carer's responsibilities; and
  • family circumstances.

He then considered the arrangements under which the ex-Sodexo employees were engaged by Challenger. In particular he focused on the fact that their past periods of service with Sodexo were not recognised and the impact this had on certain aspects of their employment, namely:

  1. All employees were subject to a six month probationary period

The six month probationary period meant that, regardless of their previous period of service with Sodexo, they could be dismissed during that time without recourse to the unfair dismissal laws. Two employees were dismissed during this period, with a further two resigning because of changes to their hours.

None of these employees were able to claim unfair dismissal (or constructive unfair dismissal) because they had not been employed for the requisite minimum period of service stipulated in the Fair Work Act. On this basis, the Deputy President found that their engagement by Challenger was not "acceptable employment" within the meaning of the Act and ordered Sodexo to pay the four employees 100% of their redundancy pay entitlements.

  1. Loss of ability to claim flexible working arrangements

The Deputy President also noted that a number of employees claimed that they were adversely affected by their past service not being recognised for the purpose of being able to claim flexible working arrangements under s. 65 of the Act (which requires a minimum of 12 months service).

The Deputy President considered that this meant their employment with Challenger was not "acceptable employment" and ordered that Sodexo pay the affected employees 40% of their redundancy pay.

Although the Deputy President's reasoning was not entirely clear as to why he awarded the employees only 40% of their redundancy pay, it is noted that it was Sodexo's case that even if the employees had a right to request flexible work arrangements there is no absolute obligation on an employer to agree to them – and it may be that this was the reason that they were not awarded their full redundancy pay.

  1. Loss of accrued personal leave

However, on the question of a loss of accrued personal leave, the Deputy President noted that the normal position on termination of employment is that accrued personal leave is not paid out. He further noted that whilst some employees had expressed concerns in the case that they may become ill or injured in the future and had lost out on their "bank" of personal leave accrued over their period of service with Sodexo, their need to utilise such leave was speculative.

In the circumstances, he ordered that those employees who relied solely on the loss of accrued personal leave for arguing their employment was not acceptable, should have their redundancy payments reduced to nil.

  1. Loss of parental leave

The Deputy President noted that two employees who were pregnant were in a much more unstable and precarious position. They would have been eligible for paid parental leave under the terms of an enterprise agreement with Sodexo (and the right to unpaid parental leave and a return to work guarantee under the Fair Work Act). However they lost these rights (which are contingent on a minimum period of 12 months' service) when they became employed by Challenger.

In the circumstances their employment could not be said to be "acceptable employment" and they were awarded 80% of their redundancy pay.


The decision provides a valuable insight into factors which the Commission will look at when an employer argues that it should be relieved of some or all of its redundancy obligations to those staff for whom it obtains other "acceptable employment". What "acceptable employment" is, will need to be considered in the context of the impact of the proposed arrangements with the new employer on transitioning employees' rights including: unfair dismissal rights, flexible working arrangements and loss of parental leave. There are of course many other factors the Commission will look at as noted in this article.

Employers therefore need to carefully look at the individual circumstances of each affected employee and seek to secure as beneficial an arrangement as possible for their proposed employment with their new employer, in order to enhance the prospects of making a successful application under s. 120 of the Fair Work Act.

For further information, please contact:

Richard Ottley, Partner
Phone: +61 2 9233 5544

Simon Obee, Associate
Phone: +61 2 9233 5544

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.