Reduced hours may be redundancy

The concept of a statutory redundancy entitlement in Australia is, at least from the perspective of the Fair Work Act, predicated several basic criteria, the first two of which are that (a) the employer decides that it no longer requires a particular job to be performed by anyone because of changes in the operational  requirements of the employer’s enterprise and (b) that the affected employee’s employment comes to an termination of employment.

In a reasonably startling decision of the Federal Court of Australia recently, the Court held in Broadlex Services Pty Ltd v United Workers’ Union [2020] FCA 867 that an employee who refused to agree to a substantial reduction in hours of work (around 40%) and a commensurate reduction in remuneration, but did without expressly agreeing to accept the demotion continue to work part time thereafter was entitled to be paid redundancy pay because of the redundancy of her first position. What is quite radical about the decision is that the Court concluded that because the employee had refused to accept the “demotion” but continued to work the reduced hours, she should be regarded by the law as having had her employment terminated on the basis that a demotion in employment which involves a significant reduction in remuneration or duties is a termination of employment within the meaning of the FW Act.

Here is an extract of the court’s reasoning.

“In the result, in a case such as the present, where, for reasons unrelated to the ordinary and customary turnover of labour, the employer repudiates the employee’s contract of employment because it no longer required the job the employee was doing to be done by anyone and the employee accepts the repudiation by agreeing to work significantly fewer hours with a consequential reduction in her remuneration, the employee is entitled to be paid redundancy pay. By repudiating the contract the employer terminates the employment relationship. By accepting the repudiation the employee brings the employment contract to an end. Reading s 119(1) in this way is entirely harmonious with the operation of the unfair dismissal provisions in Pt 3‑2 of the FW Act.

Conclusion

For all these reasons I am satisfied that Ms Vrtkovski’s employment was terminated when Broadlex repudiated her contract of employment as a full-time cleaner. Since it is common ground that the reason for the termination was that Broadlex no longer required that job to be done by anyone, she was entitled to redundancy pay in accordance with s 119(1). It follows that the appeal must be dismissed.”