s.120 - Redundancy pay

Epichealth Pty Ltd Trading AS Epichealth Medical Clinic - Langwarrin

Variation of redundancy pay - Application to vary redundancy pay to nil - Redundancy pay varied.

• [1] Epichealth Pty Ltd T/A Epichealth Medical Clinic - Langwarrin (Epichealth) has filed an application pursuant to s.120 of the Fair Work Act 2009 (the Act) seeking to vary the redundancy pay of Ms Natalie Zanders. Ms Zanders objects to the application.

• [2] The matter was listed for a Case Management Conference. I subsequently issued Directions to the parties. The parties filed material in compliance with the Directions. The matter progressed to a Determinative Conference. Ms Zanders and Ms Peggy Leung, Director of Epichealth, gave evidence.

• [3] In its Form F45A - Application to vary redundancy pay (Form F45A), Epichealth sought to vary Ms Zanders' redundancy pay to nil on the basis that it had obtained other acceptable employment for Ms Zanders.

• [4] Epichealth sold its medical centre, at which Ms Zanders was employed as the Practice Manager, to a new owner.

• [5] Epichealth contends that it obtained other 'acceptable' employment for Ms Zanders within the meaning of s.120 of the Act. Epichealth says that 'as part of the sale, Medusa Health Care Pty Ltd (Medusa) will continue to employ the staff for the same role at the same location.'[1]

• [6] Epichealth issued a notice of termination to Ms Zanders on 15 April 2025 advising that her employment would cease on 28 April 2025. However, due to a delay in the sale of the business, the sale was not finalised until 30 May 2025. Ms Zanders did not receive any communication regarding a change to her termination date and continued to attend work at Epichealth Medical Clinic - Langwarrin until the sale of the business was complete.

• [7] On 5 June 2025, Ms Zanders was paid out her annual leave, and her accrued long service leave (LSL) was transferred to Medusa as part of the agreement for the sale of the business.

• [8] Ms Zanders says she objects to the variation of her redundancy pay because:

• She had accrued personal leave that was not paid out or transferred.

• She has less job security with Medusa as she is now subject to a 6-month probationary period with a one-week termination notice.

• There was no recognition of her prior service, and this affects her future redundancy entitlements.

• Her employment with Epichealth had not been terminated in accordance with her employment contract or the Health Professionals and Support Services Award, which required 3 weeks' notice. Ms Zanders says she received 2 weeks' notice.

• [9] Section 120 of the Act outlines as follows:

120 Variation of redundancy pay for other employment or incapacity to pay

(a) an employee is entitled to be paid an amount of redundancy pay by the employer because of section 119; and

(i) obtains other acceptable employment for the employee; or

(2) 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.

(3) The amount of redundancy pay to which the employee is entitled under section 119 is the reduced amount specified in the determination.

• [10] Section 120 of the Act confers on the Commission a discretion to reduce the amount of redundancy pay to which an employee would otherwise have been entitled under s.119 of the Act.

• [11] Section 120(1) states that the section applies if an employee is entitled to be paid an amount of redundancy pay under s.119, and the employer 'obtains other acceptable

employment' for the employee. These are the jurisdictional facts that must be established

before the Commission can exercise its discretion. Section 120(2) of the Act states that the Commission 'may determine that the amount of redundancy pay is reduced to a specified

amount (which may be nil) that the FWC considers appropriate'. If the Commission makes an order under s.120(2), the amount of redundancy pay to which the employee is entitled is the

reduced amount specified in the determination (s.120(3)).

• [12] Epichealth is not seeking to reduce the payment of redundancy pay to the affected employees because it cannot pay the amount owed. The principal questions for consideration in this matter are whether Epichealth 'obtained' employment for Ms Zanders with Medusa and whether this employment can be considered 'other acceptable employment'. If so, then I must decide whether to exercise my discretion to reduce the amount of Ms Zanders' redundancy pay.

Does Ms Zanders have an entitlement to redundancy pay?

• [13] There is no dispute that Ms Zanders has an entitlement to be paid 8 weeks of redundancy pursuant to s.119 of the Act.

• [14] The Full Bench of the Commission in Australian Commercial Catering Pty Ltd v Powell and Togia; Powell v Australian Commercial Catering Pty Ltd[2] outlined the approach to be considered in s.120 applications:

"[35] In considering an application made by an employer under s.120, the Commission must first consider whether either of the circumstances set out in paragraphs (a) or (b) of s.120(1) applies. Consideration under s.120 is enlivened upon an application being made by the employer for a reduction in the amount of redundancy pay otherwise payable under s.119. In dealing with such an application, the Commission must first determine whether the pre-conditions for the application of the section set out in s.120(1) are satisfied -that is, that the employee the subject of the application has an entitlement under s.119 to redundancy pay, and that the employer has either obtained other acceptable employment for the employee or cannot pay the redundancy entitlement.

[36] As was pointed out in the Full Court decision, "The origin of s 120 lies in the decision of the Full Bench of the Conciliation and Arbitration Commission in Termination, Change and Redundancy Case [1984] CthArbRp 284; (1984) 8 IR 34to introduce an entitlement to severance pay for all employees under federal awards whose employment had been terminated because of redundancy". Cases decided in relation to award provisions established pursuant to those test case provisions are therefore relevant in the consideration of s.120. In relation to s.120(1)(b)(i), whether alternative employment obtained by the employer is "acceptable" is to be determined objectively, not by reference to whether the employment is subjectively acceptable to the employee. The determination of whether alternative employment is acceptable requires an assessment and value judgment on the part of the decision-maker. The employer "obtains" other acceptable employment when it acquires or gets the employment by its conscious, intended acts.

[38] Once it is concluded that the preconditions in s.120(1) are satisfied so that s.120 is applicable, it will be necessary for the Commission to determine under s.120(2) whether the employee's entitlement to redundancy pay under s.119 should be reduced and, if so, by how much. This requires the exercise of a broad discretionary power. Any determination by the Commission for a reduced amount of redundancy pay then becomes the employee's entitlement under s.119: s.120(3)."

• 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.'

Has Epichealth 'obtained' other acceptable employment for Ms Zanders?

• [15] Epichealth says it obtained other acceptable employment for Ms Zanders with Medusa. At the Determinative Conference, Ms Leung said that it was a term of the contract of sale that Ms Zanders would be employed by Medusa at the Langwarrin clinic.

• [16] Ms Leung said that she had recommended that all Epichealth employees be employed by Medusa, and that she had specifically recommended Ms Zanders to Medusa as the practice manager. Ms Leung said that she knew Ms Zanders was going to be employed by Medusa when the draft contract for the sale of the business included this as a special condition in the contract. Ms Zanders said that this was around March 2025. Ms Leung said that she could not remember when she informed Ms Zanders that she had obtained other acceptable employment for her.

• [17] Ms Zanders' evidence was that when she received the contract of employment from Medusa, there were multiple errors contained within the contract including with respect to the pay rate and the hours of work specified in the contract. It was Ms Zanders' evidence that she did not realise that she could approach Ms Leung with any issues and that she had approached Medusa directly through her own volition.

• [18] For Epichealth to have obtained other acceptable employment for Ms Zanders, it must have done so through its conscious, intended acts. From Ms Leung's evidence, it appears that she played a passive role in the determination of whether Ms Zanders would be employed by Medusa. While I accept that Ms Leung recommended Ms Zanders to Medusa, I cannot be satisfied on the evidence before that she did anything more than that. I have considered the inclusion of Ms Zanders in the contract of sale but from Ms Leung's evidence at the Determinative Conference, I am unable to conclude that this was done at Ms Leung's initiative or that Ms Leung had procured employment for Ms Zanders. Ms Leung was unaware that Ms Zanders was included in the contract of sale until she actually received a draft of the contract from Medusa.

• [19] I cannot be satisfied that Epichealth 'obtained' or acquired other acceptable employment for Ms Zanders.

• [20] Even if I were to find that Epichealth had obtained other acceptable employment for Ms Zanders, I cannot be satisfied that this employment constitutes other acceptable employment. Having found that Epichealth has not 'obtained' employment for Ms Zanders, I will only briefly address this alternative argument here. The consideration of whether employment can be considered other acceptable employment must be an objective consideration involving an assessment of matters such as rate of pay, hours of work, work location, job security, accrual of benefits and probationary periods.[3]

• [21] Ms Zanders says that the employment obtained cannot be considered 'other acceptable employment' because of the matters identified above in paragraph 8. Ms Zanders acknowledges that once she had corrected the contract Medusa provided to her, that her hours of work, rate of pay and location were the same as with her employment with Epichealth. However, Ms Zanders says that the employment was not acceptable due to a lack of recognition of her prior service. Ms Zanders' accrued personal/ carer's leave was not transferred over, and she was paid out her annual leave entitlement. It was only confirmed to Ms Zanders in June 2025 that her long service leave entitlement would be transferred to Medusa, after having been previously advised that it would not. In addition, Ms Zanders' employment with Medusa is subject to a six-month probationary period with the ability to terminate with one week's notice. At the Determinative Conference, it was Ms Leung's evidence that this was acceptable alternative employment as the hours of work, location and rate of pay were the same as Ms Zanders' employment with Epichealth. However, I consider that Ms Zanders now has less job security and has lost her personal leave accrual. For these reasons, I would not consider this to be acceptable employment.

• [22] Nevertheless, having found that Epichealth did not obtain for Ms Zanders employment with Medusa, I cannot proceed to vary her redundancy pay. I therefore determine to dismiss Epichealth's application under s.120 of the Act. An Order[4] to this effect will be issued with this Decision.

[2] [2016] FWCFB 5467.

[3] Clothing & Allied Trades Union of Australia v Hot Tuna Pty Ltd (1988) 27 IR 226 (Munro and Peterson JJ, Leary C) at 230-231.

[4] PR790463.

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