Reducing redundancy obligations on employers

Under the Fair Work Act the Fair Work Commission may reduce or eliminate the obligation of an employer to pay statutory redundancy pay in certain circumstances. Here is an example.

“Variation of redundancy pay – alternative work offered – other employment found to be

acceptable – redundancy varied.

[1] Oznorth Services Pty Ltd (the Applicant) has applied pursuant to s.120(2) of the Fair

Work Act 2009 (the Act) to have the Fair Work Commission (the Commission) reduce to nil

the redundancy entitlement of Mr Stephan Bruun, Mr Rowan Johnston, Mr Richard Mustart,

Mr James Walkerden, Mr Gary Brooks, Mr Clive Travers, Mr Clive Lavrick, Mr Timothy

Manning, Mr Bernard Jansen, Mr Anthony Herbert, Mr Andrew Olm, Mr Adrian Vassie, and

Mr Brendan Tennick (the Respondent/Respondents) who were employees of the Applicant

and were offered alternative employment following the end of a contractual agreement with

Viva Energy Australia to provide refuelling duties.

[2] Oznorth Services Pty Ltd provide aircraft refuelling and associated services by way of

a contract (Services Contract) with Viva Energy Australia.

[3] On 14 November 2022, the Applicant advised Viva Energy Australia they were

terminating the Services Contract. The Applicant contacted the new agency and obtained work

for each of the staff on substantially the same rates of pay and conditions.

[4] On 13 February 2023, the Services Contract came to an end. Accordingly, each of the

Respondents’ contracts with the Applicant came to an end. The Respondents were paid all

statutory entitlements owed and signed new contracts and commenced in substantially similar

roles as they held previously with the new contractor.

The applications

[5] On 20 February 2023, the Applicant filed thirteen applications to vary the redundancy

pay of the Respondents. These applications were on the basis that Oznorth Services Pty Ltd had

obtained acceptable alternative employment for the Respondents.

[6] On 21 February 2023, the applications were allocated to me. The Applicant was directed

to provide an aide memoire by 5:00 p.m. on 22 February 2023. A hearing was listed for 11:00

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DECISION

[2023] FWC 483

2

a.m. on 24 February 2023 by Microsoft Teams. The parties were advised that the matters were

going to be joined and if there were any objections, they could contact my chambers by email

by 5:00 p.m. on 23 February 2023. If no response was received, the hearing would proceed as

listed. No response was received from any of the Respondents. The Applicant was represented

by Mr Steven Munns, Director of the Applicant. None of the Respondents appeared and an

extra twenty minutes was provided to allow the Respondents a chance to contact my chambers

if there were any issues. However, no correspondence was received.

[7] The matter for determination is whether the Applicant obtained other acceptable work

and if so, should the Commission exercise discretion to vary the redundancy. If a variation was

granted, the natural corollary is that I must determine to what extent the redundancy should be

varied.

Relevant legislation

[8] Section 119 and 120 of the Act provide:

119 Redundancy pay

Entitlement to redundancy pay

(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.

Amount of redundancy pay

(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:

Redundancy pay period

Employee’s period of

continuous service with the

employer on termination

Redundancy

pay period

1 At least 1 year but less than 2

years

4 weeks

2 At least 2 years but less than 3

years

6 weeks

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Redundancy pay period

Employee’s period of

continuous service with the

employer on termination

Redundancy

pay period

3 At least 3 years but less than 4

years

7 weeks

4 At least 4 years but less than 5

years

8 weeks

5 At least 5 years but less than 6

years

10 weeks

6 At least 6 years but less than 7

years

11 weeks

7 At least 7 years but less than 8

years

13 weeks

8 At least 8 years but less than 9

years

14 weeks

9 At least 9 years but less than

10 years

16 weeks

10 At least 10 years 12 weeks

120 Variation of redundancy pay for other employment or incapacity to pay

(1) This section applies if:

(a) an employee is entitled to be paid an amount of redundancy pay by the

employer because of section 119; and

(b) the employer:

(i) obtains other acceptable employment for the employee; or

(ii) cannot pay the amount.

(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] Section 121 of the Act provides:

121 Exclusions from obligation to pay redundancy pay

(1) Section 119 does not apply to the termination of an employee’s employment if,

immediately before the time of the termination, or at the time when the person was

given notice of the termination as described in subsection 117(1) (whichever

happened first):

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(a) the employee’s period of continuous service with the employer is less than

12 months; or

(b) the employer is a small business employer.

(2) A modern award may include a term specifying other situations in which section 119

does not apply to the termination of an employee’s employment.

(3) If a modern award that is in operation includes such a term (the award term), an

enterprise agreement may:

(a) incorporate the award term by reference (and as in force from time to time)

into the enterprise agreement; and

(b) provide that the incorporated term covers some or all of the employees who

are also covered by the award term.

[10] Section 120 confers on the Commission a discretion to reduce the amount of redundancy

pay to which an employee would otherwise have been entitled under s.119 of the Act.

[11] Section 120(1) states that the section applies if an employee is entitled to be paid an

amount of redundancy pay under s.119, and the employer ‘obtains other acceptable

employment’ for the employee. These are the jurisdictional facts that must be established before

the Commission may exercise its discretion. Section 120(2) then states that the Commission

‘may determine that the amount of redundancy pay is reduced to a specified amount (which

may be nil) that the FWC considers appropriate’. If the Commission makes an order under

s.120(2), the amount of redundancy pay to which the employee is entitled is the reduced amount

specified in the determination (see s.120(3)).

Submissions

The Applicant’s Submissions

[12] The Applicant provided an aide memoire prior to the hearing. It was identified that there

were two groups of employees. The first were refuellers, the second were supervisors.

[13] The Respondents who were employed as refuellers were: Mr Bruun, Mr Mustart, Mr

Brooks, Mr Travers, Mr Lavrick, Mr Manning, Mr Olm, Mr Vassie, and Mr Tennick. Their role

was essentially the same across all nine positions. They were responsible for:

(a) checking serviceability of refuelling vehicles at the commencement of their shift;

(b) checking fuel quality;

(c) decanting fuel from mobile fuel carriers into the aircraft’s fuel tanks;

(d) checking flight schedules;

(e) monitoring incoming phone calls and emails for fuel orders;

(f) managing time effectively to ensure on time performance;

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(g) assisting generally with compliance and completing tasks otherwise as directed by Viva;

and

(h) advising of any defects regarding aircraft or vehicles and assisting with any minor

repairs required or other general tasks as directed.

[14] The Applicant negotiated and secured employment for the nine refuellers with the

incoming service providers. The Respondents were offered a position with identical duties, rates

of pay, hours, conditions of employment, and work location. All nine now work for the

incoming service provider. On this basis, the Applicant submits that they found and secured

employment for the refuellers, and this was “other acceptable employment” within the meaning

of s.120(1)(b)(i) of the Act.

[15] The Respondents who were employed as supervisors were Mr Anthony Herbert, Mr

James Walkerden, Mr Rowan Johnson, and Mr Bernard Jansen. Their role required

management and supervision of the staff providing aircraft refuelling services, and a degree of

interface between the Applicant and Viva Energy Australia.

[16] The Applicant also negotiated and secured employment for the four supervisors. Mr

Johnson and Mr Walkerden maintained their duties, wages, hours, conditions, and locations.

Mr Jansen was employed as supervisor and agent for the Mackay and Mount Isa sites, resulting

in an increase of income of $100,000 per annum. Finally, Mr Herbert has been employed as a

refueller resulting in a reduction in seniority and a reduction of income of $8,000 per annum.

[17] For the supervisors Mr Johnson, Mr Walkerden, and Mr Jansen, the Applicant submits

that that they found and secured employment and that this was “other acceptable employment”

within the meaning of s.120(1)(b)(i) of the Act.

[18] For Mr Herbert, the Applicant refers to Feltex Australia Pty Ltd v Textile, Clothing and

Footwear Union of Australia.

1 To qualify as an (objectively assessed) “other acceptable

employment”, the new employment need not be identical to the previous. The new employment

may even involve some detrimental alteration to the terms and conditions of employment.

[19] The submission is that the Applicant found Mr Herbert other acceptable employment

within the meaning of that phrase as it appears in s.120(1)(b)(i) of the Act. Whilst there has

been a reduction in pay and seniority, it is not such that would warrant a finding, on an objective

basis, that the Applicant failed to find Mr Herbert other acceptable employment. The work is

of a like nature, the employment is secure, and the location has not changed. Pay, whilst

reduced, has only slightly reduced. The change in seniority is also minor.

The Respondents’ Submissions

[20] The Respondents were invited to provide oral submissions however none of the

Respondents attended the hearing.

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Authorities – “other acceptable employment”

[21] In Spotless Services Australia Limited t/as Alliance Catering [2016] FWC 4505

(‘Spotless’), Deputy President Sams usefully identified the authorities relevant to “other

acceptable employment” and the task to be performed by the Commission:

[60] The question of what constitutes ‘other acceptable employment’ in the context of a

redundancy situation, has been considered by the Commission and its predecessors in

many and varied circumstances and industries over a number of years. In Derole

Nominees, a Full Bench of the Australian Industrial Relations Commission (AIRC) said

at pp 128-129:

‘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.

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.

This approach to the test demonstrates that any alternative employment

available to the eighteen former employees of the company cannot be regarded

as “acceptable” merely because a number of other former employees took up

employment at the new location. The relevant aspects of the job must be

examined objectively to determine whether the employment is “acceptable”.

The exemption provision imports the notion that an effort of a sufficient kind by

an outgoing employer may cause his obligation for redundancy pay to be

reduced; a decision by an employee not to co-operate with the employer may

well disentitle the employee to all or some of the payment.’ (my emphasis)

[61] In Oscar Oscar Group Services Pty Ltd v Lees [2012] FWC 3901 (‘Oscar Oscar’),

Commissioner Asbury (as Her Honour then was), said at paras [18]-[19]:

‘[18] The question of whether alternative employment is acceptable, must be

assessed on an objective basis. It is relevant to the assessment that redundancy

payments are not made solely for the purpose of assisting employees to find

alternative employment. Redundancy payments are intended to tide an employee

over during the search for alternative employment, and to compensate the

employee for loss of credits for sick leave, long service leave and other

entitlements based on length of service. The question of whether previous service

[2023] FWC 483

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with the previous employer is recognised as service with the new employer, will

also be relevant.

[19] Other considerations will be whether the alternative employment is of a like

nature; a reasonable distance from the previous employment; whether pay and

conditions are comparable; hours of work and job security in relation to the new

position. The fact that an alternative position does not meet the personal

preferences of an employee, may place the right to receive full redundancy pay

at risk, where the employee refuses a position that is found to be acceptable on

an objective basis.’ (my emphasis)

[62] Senior Deputy President Watson in Feltex said at a para [33] and [89]:

‘[33] The parties accept, as do I, that matters to be considered in assessing

whether alternative acceptable employment has been obtained include matters

such as pay levels, hours of work, seniority, fringe benefits, workload and speed,

job security, the location of work, continuity of service and accruals and the

application of probationary periods. The relevant authorities also demonstrate

that this listing of matters is not exhaustive and the question of whether an

employment is acceptable alternative employment will be decided on the

peculiar facts of a matter. Further, the authorities suggest that acceptable

employment is not synonymous with identical employment, although the basis of

the 2004 variation of the TCR test case provision suggests that, whilst not

identical, terms and conditions should be substantially similar and no less

favourable, overall, than the terms and conditions applicable to the employee at

the time of the redundancy.

[89] I accept the proposition advanced by Feltex Australia that acceptable

alternative employment is not necessarily identical employment and that the

AIRC has previously found alternative employment to be acceptable

notwithstanding inconvenience to employees and some detrimental alteration

to the terms and conditions of employment.’

[63] In Vicstaff Pty Ltd (t/as Stratco) v May (2010) 204 IR 233 (‘Vicstaff’), Bissett C

said at paras [29]-[30]:

‘[29] The determination of whether or not alternative employment is acceptable

must be determined objectively and not subjectively from the perspective of the

employer or employees. That the alternative employment may be rejected does

not objectively make it unacceptable nor does the fact that the employment was

offered make it, by virtue of the offer, acceptable. Further, that one of the persons

out of a group may have accepted the employment does not make the employment

acceptable for the others in the group. The reasons for the acceptance of

alternative employment are many and varied and general conclusions should

not be drawn from a particular circumstance.

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[30] It is therefore incumbent upon the employer (Vicstaff) in this matter to

demonstrate that the alternative employment is acceptable taking into account

all matters relevant in such a consideration. Had the alternative work been

considered acceptable to the individuals one imagines they would have accepted

the work offered.’

[64] In DRW Investments t/as Wettenhalls v Timothy Richards & Others [2016] FWC

461, I said at para [183]:

‘[183] Notwithstanding the above general principles, whether the alternative

employment is acceptable, will likely include consideration of the following

matters:

  • rate of pay;
  • hours of work;
  • work location;
  • seniority;
  • fringe benefits;
  • workload;
  • job security;
  • continuity of service;
  • accrual of benefits;
  • probationary periods;
  • carer’s responsibilities; and
  • family circumstances.

This list is not exhaustive. There may be other relevant factors.’

[65] The above decisions have some common features, including:

  • The test of what constitutes ‘acceptable employment’ is an objective one. It does

not mean it must be acceptable to the employee.

  • ‘Acceptable employment’ is not identical employment, as no two jobs could be

exactly the same.

  • An employee must meaningfully cooperate with the employer in exploring or

considering options for alternative positions.

  • An employee’s prima facie entitlement to redundancy pay may be at risk if the

employee refuses a role or position, which is found to be objectively

‘acceptable’.

  • The acceptance of alternative employment by one or more persons in a group of

redundant employees, does not necessarily make the alternative employment

‘acceptable’ for all of them. Each employee’s individual circumstances must be

taken into account.

  • There are a range of factors of varying weight, according to an employee’s

particular circumstances, which may be taken into account to assess the

acceptability of alternative employment.

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Meaning of ‘acceptable employment’

[22] The question remains whether the offer by the Applicant was on terms and conditions

no less favourable than the terms and conditions that the Respondents experienced prior to the

restructure.

[23] The proposed roles do not have to be identical and in considering this the Commission

must determine the matter objectively weighing up aspects of the role that include duties,

conditions, pay level and location to mention some of them.

[24] Relevant to this point in Derole Nominees2

, the Full Bench of the Australian Industrial

Relations Commission (AIRC) found:

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.

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.

[25] A further explanation on this point was put forward in Von Bibra Robina Autovillage

Pty Ltd [2007] AIRC 397 by Richards SDP, who adopted the principles in Derole Nominees

and said at [26]:

“[26] In contrast, 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.”

Was the substance of the role the same?

[26] Having regard to the above authorities, I consider the employment provided to the

refuellers does constitute acceptable alternative work within the meaning of s.120(1)(b)(i) of

the Act. The refuellers were employed in a role with identical duties, rates of pay, hours,

conditions of employment, and work location. As all nine now work for the incoming service

provider and in the absence of submissions and evidence from the Respondents, I will reduce

the redundancy to zero.

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[27] Regarding the employment provided to Mr Johnson and Mr Walkerden, I find they were

also provided with acceptable alternative work within the meaning of s.120(1)(b)(i) of the Act.

As they were employed in a role that was substantively in form and function the same role, I

will reduce the redundancy to zero.

[28] For Mr Jansen, he maintained his role and was also employed as agent for the Mackay

and Mount Isa sites. According to the submissions provided by the Applicant, Mr Jansen is

being compensated for the extended duties. As such, I find he was also provided with acceptable

alternative work within the ambit of s.120(1)(b)(i) of the Act. As such, I will reduce his

redundancy to zero.

[29] Regarding Mr Herbert, the Applicant secured a role where there was a reduction in pay

and seniority. I accept the Applicant’s submission that the employment need not be identical

and may involve detrimental alterations to the terms and conditions of their employment. On

assessment of Mr Herbert’s new role, the work is of a like nature, the employment is secure,

and the location has not changed. In the absence of any submissions or evidence from Mr

Herbert, I find that Mr Herbert was provided with acceptable alternative work. I will reduce his

redundancy to zero.

Conclusion

[30] Taking into account all of the circumstances, I consider that I will exercise my discretion

to reduce the Respondents’ redundancy pay to zero. I Order accordingly.”

 

Application to vary redundancy pay for other employment or incapacity to pay – Oznorth Services Pty Ltd  [2023] FWC 483 delivered 27 February 2023 per- Lake DP