If the requirements for redundancy, as set out in the Fair Work Act, are met, an employee is ordinarily entitled to redundancy pay depending on the size of their employer and their length of service. However, employers are increasingly attempting to utilise a provision of the Act to reduce an employee's entitlement to their redundancy pay. In this blog, we look at when a redundancy payment can be reduced or varied and under whose authority this can be done.
What is redundancy?
A redundancy occurs when your employer has determined that they no longer require your job to be done by anyone for reasons such as changes in the structure of the business, impacts on the business due to the economy or the introduction of new technologies into the workplace.
The Fair Work Act 2009 (Cth) ('the FW Act') states that for a dismissal due to redundancy to be fair, the redundancy must be genuine and it then sets out what a genuine redundancy necessitates. This includes three requirements:
- The employer no longer requires the employee's job to be performed by anyone due to the business operational requirements;
- Consultation with the affected employee if any obligation arises by an award or enterprise agreement; and
- The employer has determined it was not reasonable in all the circumstances for the employee to be redeployed within the employer's enterprise, or the enterprise of an associated entity of the employer.
Can my employer vary the redundancy pay?
An employer can apply to the Fair Work Commission ('FWC') to vary an employee's entitlement to redundancy pay where the employer:
- obtains other acceptable employment for the employee; or
- cannot pay the amount of the employee's entitlement.
The FWC must make a determination according to the circumstances of each individual case and may then order the redundancy pay to be reduced to a specific amount, or even in some cases removed entirely.
It's important to note that only the FWC can vary or reduce an employee's redundancy entitlement unless otherwise agreed between an employee and employer. The employer cannot vary the amount without an order from the FWC.
If your employer is attempting to reduce your redundancy entitlement, you should seek legal advice.
Case example - Greener Grocer v Nicola Hawkins
In the recent case of Aisle 4 Pty Ltd T/A Greener Grocer v Nicola Hawkins  FWC 4185 (16 July 2021) the FWC was required to consider an employer's application to reduce an employee's redundancy on the basis that they had obtained other acceptable employment for the worker.
The employer, Aisle 4 Pty Ltd T/A Greener Grocer ('Greener Grocer'), sought to reduce the employee, Ms Nicola Hawkins ('Ms Hawkins') redundancy payment from 11 weeks' pay to 2 weeks on the basis that they had obtained other acceptable employment for Ms Hawkins at an alternative employer, Harris Farm Markets ('HFM').
Green Grocer submitted that they should only be required to pay Ms Hawkins 2 weeks' pay as this was the period of time between Ms Hawkins employment ending with Greener Grocer and her new employment commencing with HFM.
The FWC decision
The FWC analysed the relevant criteria as mentioned above in determining the issue of reduction or variation and made the following comments:
- The employer has the onus to demonstrate how they 'obtained' the other acceptable employment;
- 'Obtains' means the employer obtains other acceptable employment when it acquires or gets the employment by its conscious, intended acts;
- What constitutes 'acceptable alternative employment' is an objective assessment.
- The use of the term 'acceptable' is a clear indication that it is not any employment that meets the relevant standard;
- The assessment of 'acceptable employment' will include consideration of the following non-exhaustive list:
- the new work being of similar nature;
- the location of the new workplace and whether it is unreasonably distant;
- whether pay and conditions are comparable;
- hours of work;
- job security in relation to the new position;
- seniority if applicable;
- fringe benefits;
- continuity of service;
- the pay arrangements complying with award requirements;
- probationary periods;
- carer's responsibilities; and
- family circumstances.
The FWC also importantly highlighted that:
- if one of the persons out of a group accepted the alternative employment, it does not make the employment acceptable for the others in a group;
- an employee must meaningfully cooperate with the employer in exploring or considering options for alternative positions; and
- 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'.
In applying the above and considering the criteria, the FWC was not satisfied that Ms Hawkins redundancy pay should be reduced or varied, as explained below.
Did the Applicant 'obtain' other employment for Ms Hawkins?
The FWC was satisfied that Green Grocer did 'obtain' other employment for Ms Hawkins with HFM by:
- meeting with Ms Hawkins;
- meeting with the new employer HFM at the earliest opportunity;
- inviting HFM to meet with Ms Hawkins and other employees;
- encouraging the employees to be well-presented; and
- paying employees attendance at up to three meetings with the new employer.
Was the employment 'acceptable'?
The FWC was not satisfied however that the other employment at HFM was acceptable for the following reasons:
- Ms Hawkins suffered a significant reduction in her hourly rate of pay with her new employer HFM;
- She had also lost continuity of service, such that her service with Greener Grocer did not carry over to her service with her new employer (which could impact on, for example, entitlements to parental leave and notice of termination); and
- She missed out on her entitlement to pro-rata long service leave due to her service resetting with her new employer HFM.
Employer's application to vary redundancy pay declined
The FWC declined the employer's application to reduce or vary the redundancy payment and ordered that the employer pay to Ms Hawkins the full amount of her redundancy pay.
The above illustrates that the issue of reducing or varying redundancy pay can be complex and requires a determination from the Fair Work Commission.
If your employer has unilaterally decided to vary or reduce your redundancy pay, or is requesting that you agree to a variation, you should urgently seek legal advice.
Even if you are agreeable, with your employer, to reduce your redundancy pay, it is important to seek legal advice first to ensure you protect any other entitlements you may have.
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.