Circumstances can range from offers of employment with employers in the same industry to redeployment within an organisation or an associated corporate entity of the employer. While such offers are made with the best of intentions, an employee who refuses an employer’s offer of alternative employment may trigger an entitlement to redundancy pay despite the employer’s efforts to gain other employment for the employee(s).

Where an employer does not pay redundancy pay in this circumstance, the Fair Work Commission (Commission) will need to determine the matter.

 

Redundancy and suitable alternative employment

Under the s120 of the Fair Work Act 2009, the amount of redundancy pay may be varied by the Commission where an employer arranges other acceptable employment and the terms and conditions offered with respect to the other employment are deemed to be fair. This section applies if an employee is entitled to be paid an amount of redundancy pay by the employer under the Act (s119), and:

  • the employer obtains other acceptable employment for the employee; or
  • the employer cannot pay the amount.

On application by the employer, the Commission may determine that the amount of redundancy pay is reduced to a specified amount (which may be nil) that it considers appropriate.

 

What is considered suitable alternative employment?

In relation to the question as to what constitutes ‘acceptable alternative employment’, the (then) Australian Industrial Relations Commission said that this is a matter to be determined on an objective basis.

It stated: ‘Alternative employment accepted by the employee (and its corollary, alternative employment acceptable to the employee) cannot be an appropriate application of the words because that meaning would give an employee an unreasonable and uncontrollable opportunity to reject the new employment in order to receive redundancy pay. Yet the use of the qualification “acceptable” is a clear indication that it is not any employment which complies but that which meets the relevant standard.’ The principles established in that case have been applied in cases before FWA in considering s120 of the Fair Work Act.

See: Derole Nominees Pty Ltd v The Australian Chamber of Manufactures (1990) 140 IR 123.

FWA (and its predecessors) have determined these standards (or factors) for redundancy and suitable alternative employment in several subsequent cases.

 

Redundancy and alternative employment factors

The Commission will consider several factors when determining the acceptability of an employer’s offer of alternative employment to an employee whose position has become redundant and where the offer of alternative employment is rejected by the employee(s).

The test should take into account each individual employee’s circumstances. This test should be applied when an employer is either attempting to organise employment with another employer or attempting to arrange redeployment within the organisation.

Factors considered when an employer applies to vary the amount of redundancy pay include:

  • Pay levels: If the salary offered for an alternative job is similar to or the same as the redundant position, this could be viewed as suitable for the acceptability of the offer. 
  • Hours of work: Where the offer involves a change of starting time and/or finishing time, a change from shift work to day work or vice versa, or work on different days of the week, it may be deemed unsuitable, depending on the circumstances of the individual employee. An employee’s family responsibilities may be considered when determining an offer's suitability.
  • Nature of employment: An offer of part-time or casual employment to a current employee may be deemed unsuitable. This offer may also fail because of the lower salary level associated with this type of employment.
  • Employment status/seniority: An offer of a non-managerial position to a manager may be unsuitable because the current position is associated with a certain ‘status’. This could be viewed as a demotion.
  • Skills and qualifications: Does the offer involve a position for which the employee has the necessary skills and/or qualifications? If not, the employer must have offered to provide the necessary training for the employee to acquire the necessary skills and/or qualifications.
  • Location of offered position: where the offered position involves a relocation, factors to be considered include:
    • the similarity of the job at the new location 
    • the amount of notice given to the employee(s) of the new location 
    • whether the new location offers similar transport facilities
    • the amount of additional time, if any, travelled by the employee to the new location.
  • Loss of fringe benefits: Where relevant, the Commission may look at the overall impact of the offer of alternative employment on an employee’s employment contract. The loss of benefits such as the provision of a company motor vehicle, share option plan, shift or penalty rates, bonus and commission payments, or regular overtime payments may make the offer unacceptable despite the base salary remaining the same.
  • Job security: This can be a factor in offering casual work to an employee because, with casual employment, there is no guarantee of continuing employment. Also, if the new position offered is temporary, this could be viewed as unacceptable.

 

Redundancy pay reduced to nil.

The Fair Work Act (s120) provides that the commission may vary the amount of redundancy pay (which may be varied to nil) payable to an employee where other acceptable employment has been arranged by the employer.

 

Redeployment

Under the Fair Work Act (s389(2)), a redundancy is not genuine if it would have been reasonable in all the circumstances for the person to have been redeployed within the employer’s enterprise or the enterprise of an associated entity of the employer.

It is not sufficient for an employer to find another job for an employee in danger of retrenchment (e.g. a lower level or lower paid job), unless the employee agrees to accept it. Otherwise, a demotion or employment conditions that are substantially less favourable to an employee will amount to a breach of the employment contract, and therefore may result in either an unfair dismissal or a genuine redundancy (with the payment of redundancy pay).

The factors taken into account when determining the reasonableness of any proposed redeployment in relation to a redundancy are the same as with other acceptable employment.

The commission will usually consider whether the redundant employee has been placed in another job in an employer’s enterprise as an alternative to termination of employment. The job must be suitable in the sense that the employee has the skills and competence required to perform it to the required standard either immediately or with a reasonable period of retraining.

 

The opportunity to apply for other jobs

Other considerations may be relevant, such as the job's location and the remuneration attached to it.

See: Ulan Coal Mines Ltd v A. Honeysett & Ors [2010] FWAFB 7578. This case ruled that giving employees the opportunity to apply for other jobs by competing with job applicants did not amount to redeployment because it was not a guarantee of another job.

 

Redeployment not termination

Under the Fair Work Act (s119), redundancy pay is payable when an employee’s employment is terminated by the employer because the employee’s position is redundant or because of the insolvency or bankruptcy of the employer. Where an offer of redeployment is accepted, the employee would not be entitled to payment of redundancy pay because the employer has not terminated the employment.

 

Accepting redeployment

A modern award may contain a provision which states that an employee who is transferred to lower paid duties due to their position becoming redundant must be given the same period of notice as would have been entitled to receive as if their employment had been terminated.

The employer may choose to pay an amount equal to the difference between the former ordinary time rate of pay and the new ordinary time rate of pay for the number of weeks' notice still owing.