Employer’s application for reduction of redundancy entitlement

In a deviation from the usual case, this treats of an application by an employer to reduce the amount of redundancy pay of nine employees it had made redundant to nil. The employer argued that as an employer, it had obtained other acceptable employment for the 9 employees and should not be made to pay redundancy entitlement for them.

Employer failed to win a bid for a work contract and considered making employees redundant

The employer was an environmental services and vegetation management company. In April 2021, it had bid on a project in New South Wales but it was unsuccessful and did not get the contract. The vegetation management company then determined that it would not be viable for its business to continue the employment of the nine employees and decided to make them redundant.

Successful bidder asked to be allowed to recruit from among employees to be made redundant

However, a few days after, the successful bidder, another vegetation management company, spoke with the employer to inform them that it was in need of employees and would be happy to transition whoever among the employees he would make redundant were comfortable to move to their company. After discussion, the two vegetation management companies agreed to work together to “transition” the redundant employees.

The successful bidder asked the employer to advise its redundant employees to respond to an online employment advertisement on the website SEEK. The employer then provided the successful bidder the training records for the redundant employees.

Successful bidder spoke about opening of positions

At the end of April, the employer allowed the successful bidder to come to the work place to meet with the employees about to be made redundant to provide them information about transitioning to the employ of the successful bidder.

Employees applied for work using the successful bidder’s job placement ad

Nine respondents made online applications on the SEEK website for the position advertised by the successful bidder. They were interviewed and later, the new company offered them employment. The successful bidder then sent the employer a list of the employees that had applied and were offered positions in their company.

Employer made employees redundant

The employer then sent each of the nine employees a formal notification of termination of employment due to redundancy effective from close of business on 2 July 2021. In the termination letter, the employer provided extensive information about its efforts to find employment for its current staff members in the rival vegetation management company that had successfully bid and obtained the job contract.

Employer notified employees of its plan to seek a reduction of their redundancy entitlements

The employer claimed that a number of the staff had already undergone interviews because of the employer’s efforts. The employer also lodged an application with the Fair Work Commission seeking that redundancy severance pay not be paid to the transitioning employees.

The employer stated that the transitioned employees did the same work and at similar rates of pay for the rival company without any break in their employment such that their severance payments will be reduced or not paid.

Employer sought the FWC to exercise its discretion and reduce the redundancy pay

At the FWC, the employer stated that under the employment contract and enterprise agreement and the Electrical Power Industry Award, the employees were entitled to be paid redundancy pay. However, because the employer complied with s.120 of the Fair Work Act and obtained the redundant employees acceptable employment, it ought not to be made to pay redundancy entitlements.

Even before the FWC could consider the application, 8 of the 9 employees who had transitioned individually withdrew their application stating that they had already reached a settlement with the employer. Only 1 redundant employee continued and the decision of the FWC concerned only this remaining employee.

The employee’s opposition to the employer’s application

The employee asserted it was not the employer that had obtained the alternative employment. He had applied to the rival vegetation services company himself. Second, the employment with the rival vegetation management services company was not “acceptable” alternative employment. The employee was paid $5.17 less per hour in his new employment than he was in his previous employment. At his new employment, he had been engaged on a six-month probation period and his work location and rostering arrangements were changed significantly to be detrimental to him. And lastly, the FWC in its exercise of discretion should not reduce his redundancy pay.

The union’s opposition to the employer’s application

The union representing the redundant employee asserted that the employee’s right to be paid his redundancy entitlement did not come from s.119 of the Fair Work Act but of s.58 of the enterprise award. It also asserted that even when the enterprise award had already passed the expiry date, it had not been terminated and it did not cease to operate until a new enterprise agreement had come to operation. For that reason, the FWC ought not to exercise its discretion to reduce the redundancy entitlement of the employee under s.120 of the Fair Work Act.

The question before the FWC was whether the employer had obtained acceptable alternative employment for its employees and can thus ask for a reduction in the redundancy entitlement it had to pay.

For FWC to reduce redundancy pay, the redundancy must be under s. 119 of the Act

The FWC found that s. 120 of the Fair Work Act lays the onus on the employer to prove it had obtained other acceptable employment for its employee. There is a requirement for the application to related to the redundancy pay that the employee is entitled to under 2. 119 of the Fair Work Act.

Enterprise agreement still operative

Under ss. 53, 54 and 58 of the Fair Work Act, an enterprise agreement that is past its expiry date continues to operate until a new enterprise agreement is entered. It covers and applies to the employer and the employee.

Enterprise agreement provides mechanism to reduce redundancy pay

However, the enterprise agreement itself provides a mechanism for the FWC to amend the amount of redundancy benefit payable to the employee if the employer obtains acceptable alternative employment for the employee.

Employer did not secure acceptable alternative employment for the employees

There is no evidence that the actions of the employer operated as the primary means by which the employee secured his new employment. It was the new employer who had initiated contact with the employer. The employer may have negotiated with the new employer for a path for which the new employer may recruit from the employees who were to be made redundant but at best, it had only facilitated and assisted the new employer to provide potential employment for the employees it was going to make redundant.

New employment was not “acceptable” as it was not similar in its terms and conditions

The FWC objectively examined whether the new employment situation of the employee was comparable with its former employment situation and found that it was not. The employee lost non-transferable employment credits derived from his length of service with his previous employer because he was a new employee at his new employment situation.

The employer’s application was dismissed.

Source:

Savco Vegetation Services Pty Ltd [2021] FWC 6239 (4 November 2021) http://www.austlii.edu.au/cgi-bin/viewdoc/au/cases/cth/FWC//2021/6239.html