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
- This section applies if:
- an employee is entitled to be paid an amount of redundancy pay by the employer because of section 119; and
- the employer:
- obtains other acceptable employment for the employee; or
- cannot pay the amount.
- 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.
- 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.
For further information please contact:
Richard Ottley, Partner
PHONE: +61 2 9233 5544
EMAIL: RBO@SWAAB.COM.AU
Simon Obee, Associate
PHONE: +61 2 9233 5544
EMAIL: SRO@SWAAB.COM.AU
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.