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[2021] FWC 2779
General information, not legal advice.
Fair Work Commission
2021-05-24
Original judgment source is linked above.
s.120 - Application to vary redundancy pay for other employment or incapacity to pay
Variation of redundancy pay - whether employer obtained acceptable alternative employment - application granted in part - redundancy pay reduced.
[1] On 8 April 2021, Heath Family Trust T/A Focus People Pty Ltd (the Employer) made an application to the Fair Work Commission (the Commission) pursuant to s.120 of the Fair Work Act 2009 (the Act) to vary the redundancy pay otherwise due to Mrs Trudy Morrison (the Employee). The Employer seeks that the Commission make a determination that the amount of redundancy pay is reduced from 7 weeks' pay to 4 weeks' pay. The application is made on the basis that the Employer had obtained other acceptable employment for the Employee.
[2] There was a Mention/Directions Hearing before me on 20 April 2021, where I exercised my discretion and granted Ms Ashleigh Warren permission to appear for the Employee. Directions were subsequently issued for the filing of submissions and evidence. A significant amount of the evidence is not in contest. The parties indicated that they were content for the matter to be determined on the papers. I am satisfied that the matter can be determined on the papers without the need for a hearing.
[3] The Employer is a market research recruitment agency. The Employee was employed by the Employer as an Account Manager for almost four years. The Employee was engaged on a part-time basis in a job-share role and worked 22.5 hours over three days per week. The Employee's position was terminated by way of redundancy effective 21 May 2021. The Employee is entitled to 7 weeks redundancy pay pursuant to s.119 of the Act as a result.
[4] On 19 March 2021, the Managing Director for the Employer, Ms Sarah Heath, had a meeting with the Employee to notify her of the potential redundancy. The matters discussed during that meeting were put in writing as follows:
As discussed, we are presently considering a restructure of the area in which you work to improve upon operational efficiencies.
In the circumstances, we confirm that we are considering making your role as Account
As such, we would like to meet with you on Wednesday 24th March at 3pm to discuss the potential redundancy and any suggestions you may have to avoid this, or any other matters that you would like to raise with us in respect of this proposal.
You are of course welcome to bring a support person or representative to this meeting
Before we make a final decision in this regard, we will consider any suggestions or matters raised by you. We will also consider whether you can reasonably be redeployed into any other roles within the Company.
Should you have any queries or concerns throughout this process, please contact me.
[5] On 24 March 2021, the Employee and Ms Heath had further discussions regarding the redundancy. The Employee asked for the details of any redeployment offers in writing, which were subsequently provided as follows:
We refer to our discussion on Wednesday 24th March.
During this discussion I provided an overview of the current position, summarised the matter to date, and sought your comments in relation to this matter.
We confirmed that, having reviewed other areas within the business, there is currently an opportunity for redeployment within the business.
Please feel free to respond to this letter before Tuesday 30th March if you can. We can then meet again on Wednesday 31st March at 2pm to discuss further.
We sincerely thank you for your patience during this process. We hope that you appreciate that the Company's decision to restructure its operations has been made to ensure the future success of the business.
[6] On 31 March 2021, the Employee verbally rejected both offers, and requested the redundancy pay. The Employee subsequently put this in writing as follows:
Further to our conversations and your attached letter, unfortunately the two potential redeployment opportunities are not consistent or commensurate with my current role, total hours and days per week.
Based on this, neither of the redeployment options presented are viable.
As discussed, I am happy to remain in my current role with current hours and days of the week for as long as this role is required.
[7] On 21 April 2021, the Employer sent a letter to the Employee confirming the redundancy. The relevant parts of that letter are outlined below:
At this meeting the Company again provided an overview of the current position, summarised the matter to date, and sought your further comments and proposals in relation to this matter and to the other job offers within our department made to you.
You have rejected these 2 jobs offers and we have reviewed other areas within the business, but there are currently no vacancies or opportunities for redeployment within the business in other departments.
Consequently, we confirm that your position is redundant, effective Friday 21st May 2021.
As a result of this redundancy, you will be entitled to the following:
Your final pay will be prepared on Monday 24th May (unless there is a hold up from a decision from the Fair Work Commission hearing). We hope to be able to finalise everything for you on this date.
[8] It is apparent that the Employee was offered two alternative positions. A full-time Account Manager position (the first position) and a part-time, two days per week position dealing with quotes and undertaking some new business work (the second position).
[9] The Employer provided submissions by way of some commentary on the emails exchanged during the lead up to the redundancy of the Employee, as well as an email submission in response to the material filed by the Employee. The Employee provided a witness statement and submissions.
[11] The Employee provided submissions and a witness statement which are summarised as follows:
"I have two children aged 15 and 11. On the weekdays that I do not currently work, I take my 11 year old autistic son to his psychology and occupational therapy appointments. I have elderly parents and parents in-law who regularly rely on me to visit them and take them to medical appointments during the week. Given my current family situation it is not possible for me to take up full-time employment."
[12] Sections 119 and 120 of the Act provide as follows:
(1) An employee is entitled to be paid redundancy pay by the employer if the employee's employment is terminated:
(a) at the employer's initiative because the employer no longer requires the job done by the employee to be done by anyone, except where this is due to the ordinary and customary turnover of labour; or
(b) because of the insolvency or bankruptcy of the employer.
Note: Sections 121, 122 and 123 describe situations in which the employee does not have this entitlement.
(2) The amount of the redundancy pay equals the total amount payable to the employee for the redundancy pay period worked out using the following table at the employee's base rate of pay for his or her ordinary hours of work:
Employee's period of continuous service with the employer on termination
(3) A reference in this section to continuous service with the employer does not include periods of employment as a casual employee of the employer.
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."
[13] In the decision of Southern Cross Protection Pty Ltd T/A Southern Cross Protection,[2] Deputy President Clancy made the following observations:
"In the 2004 Redundancy Case,[3] the Full Bench of the Australian Industrial Relations Commission confirmed the purpose of redundancy pay is to compensate an employee for matters such as the trauma associated with the termination of employment, the loss of non-transferable credits such as sick leave, the loss of security and seniority, lower job satisfaction and diminished social status and conditions.
In applications such as these, the onus lies on the employer company seeking the exemption from redundancy payment obligations and the discretion exists for the Commission to make an order to reduce or remove an employee's statutory entitlement to redundancy pay to an amount, which may be nil, that it considers appropriate.
The Full Bench of the Commission in Australian Commercial Catering Pty Ltd v Powell and Togia; _Powell v Australian Commercial Catering Pty Ltd[4]_outlines the approach that I intend to follow in considering SCP's application to reduce Mr Richmond's redundancy pay:
"[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 34 to introduce an entitlement to severance pay for all employees under federal awards whose employment had been terminated because of redundancy".[5] Cases decided in relation to award provisions established pursuant to those test case provisions are therefore relevant in the consideration of s.120."
[14] The Full Bench in The Maritime Union of Australia v FBIS International Protective Services (Aust) Pty Ltd[6] made clear that even in circumstances where it is found that the employer has obtained acceptable alternative employment, discrete consideration needs to be given to the circumstances of each employee in exercising the discretion to reduce the amount of redundancy pay.
[15] I will apply the authorities cited above where relevant to the facts in this matter.
Section 119(1)(a) of the Act
[16] I am satisfied that the Employee is entitled to be paid an amount of redundancy pay. Her employment was terminated by the Employer on 21 May 2021 as it no longer requires the job to be done by anyone. That this is the case was not in dispute between the parties. As the Employee has worked for the Employer for more than three years and less than four years, she is entitled to seven weeks redundancy pay.
Section 120(1)(b)(i) of the Act
[17] It is not in contest that the Employer obtained both options for alternative employment. Both the first and second positions were created as part of the restructure that was undertaken by the Employer. It is apparent on the evidence that while the Employee claims that there was some confusion around the process, it is clear that she was offered both job opportunities and could have taken either one of them. On any view, the other employment was obtained by virtue of the Employer's conscious and deliberate acts.
Section 120(1)(b)(ii) of the Act
[18] This section of the Act provides capacity for reduction of the redundancy payment in circumstances where the employer cannot pay the amount. While this was not expressly set out as a basis for seeking the reduction, the Employer referred to the cost of the pay-out being "huge" and potentially leading to more job losses. Out of an abundance of caution, I will deal with the proposition that in making that submission, the Employer sought to argue that, in effect, it cannot pay the amount. Having considered the submissions and evidence, there is insufficient evidence to support this claim. The suggestion that the pay-out will potentially lead to more job losses appears to be wildly exaggerated based on the evidence that I do have. While the Employer may have suffered as a result of the COVID-19 pandemic and qualified for the jobkeeper scheme as a result, that is not of itself an indication that it cannot pay the amount. In short, to the extent that the submission made is a claim that the Employer cannot pay the amount, that claim is rejected.
[19] As set out above, there were two positions that were offered to the Employee, the first position which was a full-time position and the second position that was a part-time position, but with less hours and one less day than the part-time position the Employee currently occupies.
[20] In respect to the first position, the analysis as to whether the position was acceptable employment is relatively straightforward. Consideration of almost all matters relevant to considering whether the first position was acceptable, point towards a finding that the first position was an acceptable position. The work to be undertaken is the same work, the rate of pay is unchanged, the location, seniority, fringe benefits, workload, job security, continuity of service and accrual of benefits are all unchanged. However, I accept that the only difference is a significant difference, and it is that the first position required the Employee to work full-time rather than the 22.5 hours per week over 3 days that she was working in the job-share position. The evidence of the Employee is that on the days that she does not currently work she takes her son, who is autistic, to necessary appointments. Further, that she has elderly parents and parents-in-law who rely on her to take them to medical appointments. Therefore, the Employee states that it is not possible to take up full-time employment.
[21] I was referred by the Employee's representative to the decision of Commissioner Hampton in P&R Electrical Wholesalers Pty Ltd.[7] Given the factual circumstances in that matter, when assessing the acceptability of alternative employment, the Commissioner took into account the loss of flexibility for the employee to attend to caring responsibilities, such as working from home or attending work with children as required. The Commissioner found these to be important considerations given the object of the Act including to "'(assist) employees to balance their work and family responsibilities by providing for flexible working arrangements'."[8] I agree with the Commissioner that family and carer considerations are important matters, including for the reasons stated by the Commissioner.
[22] However, the test of what constitutes acceptable employment is an objective one. It does not mean it must be acceptable to the employee. Objectively, the first position offered, given that it is the same position with the same benefits, in the same location and with no change in other key factors, is a strong indicator that the first position is acceptable. There is additional pay, albeit by virtue of the fact that the Employee would be required to work an additional 2 days. On an objective basis, the first position offered to the Employee, the full-time position, was acceptable employment for the Employee.
[23] In respect to the second position offered, the position enjoyed the same hourly rate of pay and, similar to the first position, key elements such as location, job security, continuity of employment and accrual of benefits would not change. Further, it is likely that the Employee's caring responsibilities could be accommodated while working the second position. These factors indicate that the second position was also acceptable employment. However there is, on the evidence, significant differences between the Employee's current position and the second position. The unchallenged evidence of the Employee is that it would represent a reduction of weekly pay by one third (by virtue of working one less day). It also involves half of the current duties. The lack of client management would hinder her career progression given her current levels of seniority, skills and experience. These are significant factors. On balance, I do not consider the second position offered to constitute acceptable employment to the Employee.
[24] Therefore, I am satisfied in respect to the first position offered to the Employee, the Employer had obtained acceptable employment for the employee as contemplated in s.120(1)(b)(i).
Section 120(2) of the Act
[25] Having concluded that s.120(1)(b)(i) of the Act applies in the circumstances, I must consider whether it is appropriate to exercise the discretion to reduce the amount of redundancy pay that is payable to the Employee. In all the circumstance in this matter, I consider that I should do so.
[26] I consider that the Employer was genuine in its offers of alternative employment. While the part-time position was not acceptable employment, nevertheless, that position took into account the Employee's caring responsibilities and associated need for flexibility. Further the Employer was prepared to maintain the rate of pay not withstanding that the position was less senior than the one the Employee occupied. The Employee was employed for close to four years, which is a reasonable length of time, and the associated loss of accrued entitlements needs to be taken into account. I have also taken into account that while the first position was acceptable employment, that the Employee's caring responsibilities are a significant factor in explaining her declining to accept that position.
[27] The Employer has requested that the amount of redundancy pay be reduced from 7 weeks to 4 weeks' pay. Having taken into account all the circumstances, I consider that reduction to be slightly excessive. I consider it appropriate to reduce the Employee's redundancy pay entitlement by the amount of 25%. The Employee's representative submitted that the value of the redundancy pay entitlement for the employee was $4,725. If that is correct, a 25% reduction on this amount is $1,181.25. Therefore, the amount of redundancy pay to which the Employee is entitled under s.119 of the Act will amount to $3,543.75.[9]
[28] I consider, having regard to the matters discussed above, that the offer of the first position of employment that the Employer made to the Employee was "acceptable employment" within the meaning of s.120(1)(b)(i) of the Act and was obtained by the Employer for the Employee. Therefore, one of the circumstances set out in s.120(1) is engaged, and my discretion under s.120(2) may be exercised. For the reasons given, I consider that a lesser amount should be payable.
The Employee had been employed for more than 3 years but less than 4 years. Her redundancy pay entitlement under s.119 was 7 weeks' pay. I consider the Employer's obligation to make a redundancy payment to the Employee should be reduced by 25%. The amount of redundancy pay payable to the employee after the 25% reduction is made will be stipulated in the draft order issued concurrently with this decision. That amount must be paid to the Employee within 7 days of the order which I will make. The parties are required to advise if they have any concerns with the draft order by 5:00pm today. In the absence of any concerns, the final order will be issued.[10]
Ms S Heath for Heath Family Trust T/A Focus People Pty Ltd
[1] Commissioner Hampton considered this an important consideration in P&R Electrical Wholesalers Pty Ltd [2017] FWC 400 at [33].
[2] [2018] FWC 924 at [36] - [38].
[5] [2015] FCAFC 189 at [12].
[9] Section 120(3) of the Act.
Printed by authority of the Commonwealth Government Printer
Heath Family Trust T/A Focus People Pty Ltd
Trudy Morrison [2021] FWC 2779
(1984) 8 IR 34
(2004) 129 IR 155