s.120 - Redundancy pay

Application to vary redundancy pay for other employment or incapacity to pay - whether acceptable alternative employment obtained - alternative employment offer objectively acceptable - discretion exercised to reduce NES redundancy payment - order made

• [1] On 20 March 2025 MCNAUTHTANS PTY. LTD. (the Applicant) made an application pursuant to s.120 of the Fair Work Act 2009 (the Act) seeking a reduction to zero, or another amount as determined by the Commission, in the redundancy pay otherwise due to Mr Terence Pavitt, a former employee (the Respondent).

• [2] Mr Pavitt was employed by the Respondent as Warehouse Operations Manager at its Brunswick facility. Mr Pavitt is 56 years old and has worked there in his role since 21 January 2007. Previously he was employed by Concept Latch, Lock and Hinge (CLLH) directly.

• [3] Through a business acquisition he has continued working for the Respondent for the past 2 years. The Applicant recently made the decision to close its operations in Brunswick and relocate to Laverton, making Mr Pavitt's role in Brunswick redundant.

• [4] Because of this decision, Mr Pavitt has an entitlement under s.119 of the Act to 12 weeks redundancy pay. His base rate of pay at the time of being made redundant was $86,944.00 per annum, not inclusive of superannuation or allowances.

• [5] The basis of the Application is that Mr Pavitt was offered comparable alternative employment on terms and conditions on less favourable, with increased allowances, which he has refused.

• [6] The application has been made under s.120 of the FW Act.

• [7] Mr Pavitt opposes the application and seeks full payment of his redundancy entitlements.

• [8] The redundancy payments provided by s.119 of the Act as part of the NES are established in the following terms:

(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

"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."

• [9] There is no dispute that Mr Pavitt was employed by the Applicant, that his previous position with the Applicant has been made redundant and that he is otherwise entitled to redundancy pay in accordance with the National Employment Standards (NES) and s.119 of the Act.

• [10] Further, there is no dispute as to the Applicant's eligibility to bring this application, and I am satisfied this is the case. The application has been made in accordance with the Act.

• [11] To address these matters before the Commission, on 28 March 2025 I issued Directions for both parties to file any submissions and documentation in support of their positions with respect of the application by 18 April 2025. On review of the submissions, I sought views on whether the parties wanted to be heard or consented to the matter being determined on the material filed.

• [12] There being no request to be heard, with the parties consent I have considered this matter in full. For the reasons set out below, I have determined, on balance, that the new position obtained by the Applicant for Mr Pavitt was acceptable employment and that a reduction in the amount of redundancy payments due to him should be ordered.

• [13] The Applicant submits its decision to relocate from Brunswick was based on a requirement for a more suitable location for its operation. Once this decision was made, it identified suitable premises in Laverton. Subsequently confirming the decision to close Brunswick, merge with Laverton and move Mr Pavitt to Laverton on 5 January 2025.[1]

• [14] Following this decision, on 21 January 2025, the Applicant made a genuine offer to Mr Pavitt to relocate him to Laverton in the hope it would be able to retain his experience. The terms of the offer including a 10% salary increase, a new $1000 a month car allowance along with a further $400 monthly petrol allowance. Mr Pavitt's role as Warehouse Manager would be relocated to Fitzgerald Road, Laverton. These additional terms were offered in compensation to Mr Pavitt for the relocation of his position, and the additional travel time and distance required from him to commute.[2]

• [15] On the same day, Mr Pavitt responded to this offer in the following terms:[3]

"I have worked at CLLH in Brunswick for 18 years from 22/01/2007.

McNaughtans have taken over in 2023. Now they have just informed myself they are going to move CLLH to Laverton & have offered myself a package to relocate.

My employer Rodney Meaker has also offered myself a verbal package in regards to a redundancy package & also said he would look after me.

I have stated I not interested in moving to Laverton. I wish to be paid what I am entitled to.

Laverton is not suitable or reasonable to my future. The commute would be far long and the area is virtually a shit hole.

The smell & fumes around the Laverton worksite & clearly a health concern.

This industrial area is toxic as is much of the western suburbs.

Travelling on the western ring road is just another negative with highly dangerous accidents and death rates."

• [16] When Mr Pavitt rejected the Applicant's request to relocate to Laverton, the Applicant had to reconsider its Laverton option as they did not have a suitable staff member to manage the warehouse work available without Mr Pavitt. Taking this into account, the Applicant identified an additional staff member at its Keysborough facility able to manage its warehouse operations. On this basis, the Applicant decided to switch its relocation decision from Laverton to Keysborough, giving notice it would be vacating the Brunswick premises at the end of February 2025.[4]

• [17] The Applicant argues in identifying and making an offer of acceptable alternative employment for Mr Pavitt at Laverton it has met the requirements of section 120(1)(b) that provides the Commission may determine redundancy pay is not payable where "the employer obtained other acceptable employment for the employee." That this offer was unreasonably refused by Mr Pavitt and that the Commission should make an order that redundancy is not payable.[5]

• [18] Mr Pavitt does not accept he was provided with a real offer of employment on no less favourable terms at Laverton. That he has been provided nothing more than proposals to compensate him for the additional commute because of the relocation. He was not provided with a new proposed contract. That he would be doing additional work at Laverton, working in a less pleasant and safe workplace, in addition to being confronted with a longer, more dangerous commute.[6]

• [19] He does not accept the Laverton offer was nothing more than a "fake" designed to deny him redundancy entitlements and that due to his age, high blood pressure and poor health it was not an acceptable offer. Further that commuting to Laverton would mean driving an extra 250km per week or facing a 2 hour commute each way on public transport.

• [20] He also argues, Laverton was not a real offer because the Applicant never relocated there and that he was never offered any proposed terms or offers to relocate to Keysborough. That he was never advised he could be putting his redundancy payment at risk if he rejected the relocation offer. Rather, that he relied on the Managing Director, Mr Rodney Meaker's assurances he would be looked after.[7]

• [21] In the 2004 Redundancy Case,[8] 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.

• [22] 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.

• [23] The Full Bench of the Commission in Australian Catering Pty Ltd v Powell and Togia; Powell v Australian Commercial Catering Pty Ltd [9] outlines the approach I intend to follow in considering this application.

"In considering an application made by an employer under s120, the Commission must first consider whether 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 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."

• [24] As was identified in the Federal Court decision, "[t]he 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) 8 IR 34 to introduce an entitlement to severance pay for all employees under federal awards whose employment had been terminated because of redundancy."[10] Cases decided in relation to Award provisions established pursuant to those test cases are therefore relevant in the consideration of s.120.

• [25] In relation to s.120(1)(b)(i), whether alternative employment obtained by the employer is "acceptable", the question is to be determined objectively, not by reference to whether the employment is subjectively acceptable to the employee.[11] The determination of whether alternative employment is acceptable requires an assessment and value judgment on the part of the decision maker.[12] The employer "obtains" other acceptable employment when it acquires or gets employment by its conscious, intended acts.[13]

• [26] Once it is concluded that the pre-conditions 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.[14] Any determination by the Commission for a reduced amount of redundancy pay then becomes the employee's entitlement under s.119 in accordance with s.120(3).

• [27] There is no dispute that at its own initiative, MCNAUGHTONS' has made Mr Pavitt's position redundant within the meaning s.119(1)(a) and I am satisfied that Mr Pavitt is entitled to be paid an amount of redundancy pay.

• [28] As identified, the established test here is twofold. Firstly, whether the Applicant "obtained" employment by their own conscious and intended acts. And secondly, whether the alternative position is "acceptable".

• [29] It is a fact in this case, that the alternative position the Applicant claims to have "obtained" for Mr Pavitt of Warehouse Manager at Laverton does not exist. It did not exist at the time Mr Pavitt was offered the role, and nor does it exist now given the Applicant decided to move its relocation to Keysborough, not Laverton.

• [30] Mr Pavitt argues the offer to move him to Laverton was never more than a fake offer made to deny him his redundancy. There is no evidence to support this assertion, and I do not accept this to be the case. Rather, as evidenced in submissions, I accept what occurred was the Applicant went out of its way to construct a "genuine offer" offer and proposal of a Warehouse operation and Managers position to put to Mr Pavitt in the hope of retaining his experience.[15]

• [31] It is clear to me that the Applicant "by its own conscious and intended acts" took active steps to "obtain" Mr Pavitt's employment. In doing so, it had regard to the additional time he would be required to travel to Laverton, and the associated costs. Its proposal sought to provide compensation for these factors. On this basis, I am satisfied in making its offer of proposed employment to Mr Pavitt in Laverton the Applicant has taken steps to "obtain" acceptable alternative employment.

• [32] The next question is whether the proposed alternative position was "acceptable".

• [33] It is well established in this jurisdiction that the concept of acceptable alternative employment is to be determined objectively. And that the mere rejection of the alternative does not make it objectively unacceptable. As noted by the Full Bench in Derole:[16]

"What constitutes "acceptable alternative employment" is a matter to be determined, as we have said, on an objective basis. 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; the exemption provision would be without practical effect.

• [34] 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. In our opinion there are obvious elements of such a standard including the work being of like nature; the location being not unreasonably distant; the pay arrangements complying with award requirements. There will probably be others."[17]

• [35] The onus of establishing that the alternative employment in question is acceptable rests with the Applicant employer [18] and it is a serious step for the Commission to make an order to limit or remove an employee's statutory entitlement to redundancy payments.[19]

• [36] In order to establish whether the alternative employment obtained by the employer is acceptable, it is necessary to have regard to all relevant matters including factors such as pay levels, hours of work, seniority, fringe benefits, workload and speed, job security and other matters including the location of the employment and travelling time.[20] An employee must also meaningfully cooperate with the employer in exploring or considering options for alternative positions.[21]

• [37] It is also clear that acceptable employment does not mean identical employment; however, it has been held by the Commission that:

"...the objective test of acceptability appears to be that the alternative work bears a sufficient comparability to the original work and is not unreasonably removed from the employee's original duties, skills set, qualifications, experience and other terms and conditions of employment. The test is not whether or not the employee is capable of carrying out the new employment as such, it is whether there is sufficient correlation between the relevant indicia of the current work and the alternative employment as proposed."[22]

• [38] As observed by Bissett C,[23] this approach is consistent with other authorities.[24]

• [39] If the Commission is satisfied that acceptable alternative employment has been obtained, a discretion arises to reduce all or some of the redundancy pay having regard to all of the relevant circumstances.[25]

• [40] The question to be determined is, was the proposed Laverton position objectively acceptable. Mr Pavitt does not accept this to be the case.

• [41] I have considered all the materials presented by both parties in this matter. On this basis I am satisfied that the Laverton position is substantially the same position of Warehouse Manager held by Mr Pavitt in Brunswick. That the level of remuneration for the proposed position is no less than he was receiving for working in Brunswick, but in fact is proposed to increase 10%.

• [42] I accept that there is a difference between working in Brunswick and working in Laverton. Also, that for Mr Pavitt a workplace in Laverton may have been less pleasant to that he had experienced of the last 18 years. I further accept that there a longer commute for Mr Pavitt associated with a relocation to Laverton.

• [43] I do not accept there is any basis to Mr Pavitt's objections to Laverton by virtue of its location, industrial nature, or because it is in the Western suburbs. I appreciate commuting to Laverton would have had some impact on Mr Pavitt.

• [44] I do not accept however, that an additional commute of no more that 30kms a day, is onerous or unreasonable in the circumstances. I am further confident in reaching this conclusion considering the additional $1000 car allowance and $400 petrol allowances, per month, proposed to be paid to Mr Pavitt for working in Laverton.

• [45] I have considered Mr Pavitt' further reasons to reject the Laverton position on account of his age, and overall health condition. Mr Pavitt is 56. He has not provided Commission any independent evidence to consider why this age, or his health, are factors why he would not be able to work from Laverton apart from the inconvenience, his objections to a workplace in that location, and a longer commute. In the circumstances of this case, I do not accept these objections are reasonable.

• [46] Considering all these factors, on balance, I am satisfied that the alternative position proposed bears a sufficient comparability to the original work and is not unreasonably removed from the Respondent employee's original duties, skills set, qualifications, experience and other terms and conditions of employment.

• [47] Having regard to this, and the circumstances more generally, I find on balance that the Applicant has obtained acceptable alternative employment within the meaning of s.120(1)(b)(i) of the Act.

s.120(2) - Is it appropriate for the Commission to make an order to reduce the amount of

• [48] Given I am satisfied the Applicant has obtained acceptable alternative employment for the Respondent employee, the final issue is whether there should be a reduction (including potentially to zero as sought by the Applicant) in the amount of the redundancy payments. As outlined previously, this is a matter of discretion to be exercised having regard to all the relevant circumstances of a particular matter.

• [49] In all the circumstances of this matter, I consider a reduction in redundancy payment is appropriate. In the present case, the Applicant presses a 100% reduction. In the circumstances of this case, I do not consider this to be appropriate for the reasons below.

• [50] Mr Pavitt has lost a job he has held for the past 18 years because of the decision of the Applicant. It is also the case he does not appear to be made aware in refusing a transfer to Laverton he could be putting his redundancy at risk. Rather, I accept Mr Pavitt was given an indication he would be looked after when he was told by Mr Meaker to "stop stressing, we will sort this out. Always solutions."[26] These factors weigh in Mr Pavitt's favour against a reduction of redundancy entitlements.

• [51] Furthermore, after Mr Pavitt's decision to reject the Laverton proposal the Applicant made the decision to move operations to Keysborough, but Mr Pavitt's was not provided with the opportunity to contemplate a relocation to Keysborough.

• [52] While I accept Mr Pavitt's grounds for rejecting the Laverton position were unreasonable, I am not satisfied that he failed to meaningfully cooperate with the Applicant in exploring or considering options for alternative positions.[27] As an employee of over 18 years' service in circumstances where the Applicant clearly had a level of flexibility as to its alternative warehouse operations, he deserved to be provided the opportunity to consider alternative options, including Keysborough.

• [53] There is no evidence this was the case or that Mr Pavitt was engaged in a discussion by the Applicant about options, other than Laverton, for alternative positions or locations. This evidence weighs against the Applicant in this case.

• [54] I have identified and it is not disputed Mr Pavitt has a statutory entitlement to redundancy. He has also suffered the inconvenience and hardship caused by the loss of his job because of his employer's decision. Compensation for these factors form the basis of redundancy payments and must be taken into account in considering an order to reduce the amount of redundancy pay and not lightly set aside.

• [55] In making its assessment, the Commission must exercise any discretion having regard to all of the relevant circumstances including the apparent purpose of the provision, the objects[28] of the Act and what is fair and just.[29]

• [56] Having regard to all the circumstances of this case and my reasoning above, I consider that the redundancy payments should be reduced to 6 weeks. This 50% reduction balances the steps taken by the Applicant to obtain alternative employment for Mr Pavitt that would have required him to relocate to a less pleasant workplace involving a longer commute, against the loss of job he has held in a workplace he has enjoyed for the last 18 years.

• [57] I have, on balance, found that the Laverton position is acceptable alternative employment within the meaning of s.120(1)(b)(i) of the Act. I have also found that it is appropriate to exercise my discretion to reduce the redundancy payment otherwise due to Mr Pavitt by 50%.

• [58] Mr Pavitt was paid an annual salary of $86,944, equating to a payment of $1,672.00 per week.

• [59] In all circumstances, I have determined that the redundancy payments should be reduced to 6 weeks of the NES entitlement, an amount of $10,032.00.

• [60] An Order[30] to that effect is issued in conjunction with this decision.

[1] See Applicant's submissions in reply at [3] and annexure 2.

[2] See Applicant's submissions at [3] and email 1.

[4] See Applicant's submission in reply at [3].

[9] [2016] FWCFB 5467.

[10] [2015] FCAFC 189 at [12].

[11] Clothing & Allied Trades Union of Australia v Hot Tuna Pty Ltd (1988) 27 IRC 226; Clothing Trades Award 1982(1) [1990] AIRC 980; (1990)140 IR 123.

[12] [2015] FCAFC 189 at [45].

[13] FBIS International Protective Services (Aust) Pty Ltd v Maritime Union of Australia [2015] FCAFC 90 at [20].

[14] Ibid at [21]; [2015] FCAFC 189 at [42], [60].

[15] See Applicant submissions [4]-[5].

[16] Australian Chamber of Manufacturers v Derole Nominees Pty Ltd [1990] AIRC 980; (1990) 140 IR 123.

[17] Australian Chamber of Manufacturers and Derole Nominees Pty Ltd - Clothing Trades Award 1982 (1)[1990] AIRC 980; , (1990) 140 IR 123 per Peterson J, Marsh DP and Oldmeadow C at [128].

[18] Target Australia Pty Ltd v Shop, Distributive and Allied Employees Association re Target Retail Agreement 2001 - PR916204 [2002] AIRC 369 at [6].

[19] Clothing & Allied Trades Union v Hot Tuna (1988) 27 IR 226.

[20] Clerks Salaried Staffs (Agriculture Award) 1999, Print S1216, 24 November 1999, drawing upon Derole.

[21] See also [2023] FWC 483 Oznorth Services Pty Ltd citing these authorities, including Vicstaff Pty Ltd (t/a Stratco) v May [2010] FWA 3141; (2010) 204 IR 233.

[22] Von Bibra Robina Autovillage Pty Ltd [2007] AIRC 397 (16 May 2007) at [26].

[23] In Vicstaff Pty Ltd T/A Stratco v May and McFerran [2010] FWA 3141 at [28].

[24] Clothing and Allied Trades Union v Hot Tuna (1988) 27 IR 226.

[25] Clerks Salaried Staffs (Agriculture Award) 1999, Print S1216, 24 November 1999, drawing upon Derole.

[26] Respondent's supporting materials.

[27] See Sams DP in Spotless Services Australia Limited t/a Alliance Catering [2016] FWC 4505.

[30] PR787730.

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