s.120 - Redundancy pay

Application for a variation of redundancy pay - whether employee entitled to redundancy pay because of s.119 - whether employee's employment was terminated for the purposes of s.119 - variation to contract of employment

• [1] In this matter an application has been made to the Fair Work Commission (Commission) by Neighbourhood Central Ltd under s.120 of the Fair Work Act 2009 (Cth) (Act) to vary the redundancy entitlements of one of its current employees, Ms. Thornton. Until recently, and from approximately September 2023, Ms. Thornton had worked on a part-time basis for the applicant as social and community services employee under the terms of the Social, Community, Home Care and Disability Services Award 2010. A common law contract of employment is also in place between the applicant and Ms. Thornton.

• [2] The facts of the matter were uncontentious and the parties agreed that the matter could be determined on the papers.

• [3] At the commencement of 2025, Ms. Thornton was working 32.5 hours per week for the applicant over 5 days, Monday to Friday, in each week. During the course of 2025, the funding arrangements between the applicant and the Department of Health and Aged Care (Department) were reviewed because the contracted 'outputs' were not being met. A discussion was held between the applicant and Ms. Thornton and Ms. Thornton proposed new reduced outputs for consideration by the applicant. Agreement was reached between the applicant and Ms. Thornton that the proposed reduced outputs would be more achievable. The revised arrangements were then the subject of a discussion between the applicant and the Department. The Department requested that a formal proposal be submitted by the applicant to reflect the proposed reduced outputs. Ms Thornton was then asked by the applicant to prepare a revised funding proposal that was to be submitted by the applicant to the Department. The revised arrangement was subsequently accepted by the Department and a deed of variation to the contract between the applicant and the Department was ultimately executed on 19 June 2025.

• [4] As a result of the changes, the applicant's funding was to be reduced and Ms. Thornton's working hours were also to be reduced from 32.5 hours per week to 20 hours per week. The proposed changes were the subject of further discussion between the applicant and Ms. Thornton on 11 June 2025.

• [5] On 20 June 2025 the applicant provided Ms. Thornton with a letter summarising the outcome of recent discussions between them. The letter proposed that Ms. Thornton's contract of employment would be amended to provide that her working hours would be reduced to 20 hours per week and that she would work these hours over 3 days, Wednesday to Friday. This latter change was made at Ms. Thornton's request and agreed to by the applicant. The letter also said that the remaining terms and conditions of Ms. Thornton's employment would remain in place under her current contract of employment. The proposed changes were agreed to in writing by Ms. Thornton on the same day.

• [6] The changes took effect from 9 July 2025. Aside from the reduction of hours (and pay), Ms. Thornton remained employed in the same role as she was in prior to the change.

• [7] The applicant also sent Ms. Thornton separate correspondence titled 'Notice of Partial Redundancy' on 20 June 2025. The correspondence referred to a 'recent redundancy consultation meeting on 11 June 2025' where the effects of a 'partial redundancy' were discussed. The letter set out the changes referred to above and advised Ms. Thornton that her role would be made 'partially redundant'. This letter also said that Ms. Thornton was entitled to redundancy pay of 4 weeks' pay under the National Employment Standards (NES) and the Award.

• [8] The variation sought by the applicant to the redundancy pay of Ms. Thornton is that the entitlement to 4 weeks' redundancy pay (being 32.5 hours x 4 weeks or 130 hours), be reduced to 4 weeks x 12.5 hours (being the number of hours per week by which the working hours have been reduced) or 50 hours. The application is not opposed by Ms. Thornton.

• [9] Section 120 of the Act provides, relevantly, that the section applies if an employee is entitled to be paid an amount of redundancy pay by the employer 'because of' s.119 and the employer either obtains other acceptable employment for the employee or cannot pay the amount. Where the section does apply, the Commission may, on application, determine that the redundancy pay be reduced to a specified amount that the Commission considers appropriate and that amount becomes the amount to which the employee is then entitled under s.119.

• [10] Section 119 of the Act provides, relevantly:

(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.

• [11] An entitlement to redundancy pay under s.119 only arises where the employee's employment is terminated in the circumstances set out in s.119(1)(a) or (b). A termination of employment was held to have occurred in the matter of Broadlex Services Pty Ltd v. United Workers' Union[1] in circumstances where a full-time employee's hours (and remuneration) were significantly reduced, the position was converted to a part-time position and the employee did not accept the change. In that case, her Honour Katzmann J, rejected the argument that the entitlement to redundancy did not arise because the employment relationship continued even after a repudiation of the employment contract was accepted by the employee. At [91], her Honour concluded that the employer repudiation that had been accepted by the employee had brought the employment contract and the employment relationship to an end for the purposes of s.119.

• [12] A reduction in hours (and pay) for a part-time employee which is not agreed to by an employee has also been held to be a 'genuine redundancy,' at least for the purposes of the Income Tax Assessment Act 1997 (Cth).[2]

• [13] The circumstances in Broadlex are distinguishable from the present case. In Broadlex, the employee rejected the proposed change to her working arrangements. The purported unilateral change to those arrangements amounted to a repudiation of the contract of employment by the employer which was accepted by the employee and that acceptance brought the contract of employment, and the 'employment' for the purposes of s.119, to an end. The employment of the employee had thereafter been undertaken pursuant to a new contract of employment on substantially inferior terms.

• [14] Here, there was no evidence that Ms. Thornton disputed the proposed change or otherwise treat it as a repudiation of her contract of employment. Ms. Thornton expressly agreed to the proposed change - the offer to vary - in writing. Ms. Thornton was engaged in the process that led to the change and proposed the form of the new arrangements which were regarded by herself and the applicant as more 'achievable.' The change proceeded to be implemented as a variation to Ms. Thornton's contract of employment. The contract of employment permitted such a variation. Clause 28 of the contract provides, relevantly:

28.1 This contract will continue to apply to your employment notwithstanding any change to your position, duties, hours of work, remuneration or location, unless otherwise agreed in writing.

28.3 After execution, the terms of this contract may not be changed or modified in any way other than as contemplated by this contract, unless it is in writing signed by both you and the Employer.

• [15] A variation of a contract does not create a new contract but alters the obligations under the existing contract, although the parties may elect to rescind the original contract altogether and replace it with a new contract which includes the newly agreed term or terms.[3] Whether and how the parties, by a subsequent agreement, vary an earlier agreement is determined by reference to the intention of the parties.[4] The evidence here shows that the common intention of the parties was to vary the contract of employment on the terms proposed, that is the reduced hours, and with the additional amendment proposed by Ms. Thornton to perform her reduced working hours over 3, rather than 5, days. In the documentation provided, the parties referred to the terms of the existing contract as being amended and all other terms were to remain in accordance with the current contract.

• [16] On the basis of the material before me there has been no termination of the employee's employment that would be necessary to trigger an entitlement to redundancy pay under s.119. This is because there has not been a repudiation and acceptance of the repudiation by the employee such as to bring the contract of employment and the employment relationship to an end. What occurred was a variation to an existing contract of employment. There was no interruption to either the operation of the employment contract or the employment relationship.

• [17] Although I have concluded that no obligation to pay redundancy pay arises under the NES in the present circumstances, it does of course remain open to the applicant pay the amount equivalent to 50 hours pay to Ms. Thornton given this was the outcome sought by both of the parties to this application.

• [18] As no obligation to pay redundancy pay arises because of s.119 of the Act, the application under s.120 to vary a redundancy pay entitlement must be dismissed.

[1] Broadlex Services Pty Ltd v. United Workers' Union [2020] FCA 867. See also Fair Work Ombudsman v FL Press Pty Ltd [2015] FCCA 1578.

[2] Casal v. Deputy Commissioner of Taxation [2025] FCA 87.

[3] Commissioner of Taxation (Cth) v Sara Lee Household & Body Care [2000] HCA 35; (2000) 201 CLR 520 at [22]- [24].

[4] AEU v State of Victoria (2015) 239 FCR 461, [2015] FCA 1196 at [319].

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