The Devil Is In The Detail - When Workplace Redundancy Alternatives Just Don't Cut It
An employer has been ordered to pay full redundancy entitlements to employees despite offering them other employment arrangements.
The recent decision of Lee Crane Hire Pty Ltd v Sneek and Ors [2020] FWC serves as an important example of when an employer will be required to pay redundancy entitlements to employees, despite offering them alternative means of employment.
What the Fair Work Act 2009 (Cth) Says:
Section 120 of the Fair Work Act provides a mechanism for employers to apply to vary the amount of redundancy pay owing to an employee (which may be reduced to nil) in circumstances where the employer obtains other acceptable employment for the employee (and they reject it) or the employer simply cannot pay the amounts owing.
What is ‘Other Acceptable Employment’?
If an employer is able to prove that it offered an employee other acceptable employment and the employee rejected such employment and sought payment of their redundancy entitlements instead, an employer could request the Fair Work Commission reduce the redundancy pay potentially to nil.
The onus of proving that the alternative employment is acceptable rests with the employer. There is a body of case law which has set the bar particularly high and involves consideration of a range of non-exhaustive factors including, pay levels, hours of work, seniority, fringe benefits, workload, job security, work location, continuity of service, accrual of benefits, probationary periods, as well as the employee’s skills, experience and physical capacity. The location of the other employment must also not be unreasonably distant from the employee’s original place of work.
So What Happened in Lee Crane v Sneek?
Lee Crane v Sneek is a prime example of how the Fair Work Commission assesses ‘other acceptable employment’ and is a cautionary tale for employers, particularly those who may wish to offer casual or far away employment to soon-to-be redundant employees. Here’s what happened:
- Lee Crane Hire operates a mobile crane hire business in Gladstone and operates another depot at Biloela (121kms inland from Gladstone). There had been a downturn in business of the Gladstone Depot such that the business could no longer guarantee full time work to the employees based at the Depot. The owner of the business decided to close the Gladstone Depot and operate all his business through the Biloela depot.
- Employees Sneek, Wiemers and Kennedy worked at the Gladstone depot and were offered two alternatives to a redundancy:
- continue in the same role, but be based out of Biloela and Gladstone with the only Depot being in Biloela. This option would include payment for time spent travelling to work and accommodation, the same hours of work, a company vehicle supplied, the same salary and leave entitlements. Additionally, as the role was the same mobile crane operations role, the travel to different sites would be largely unchanged; or
- to take on casual employment for Lee Crane Hire in Gladstone, this would involve the employees performing the same work, however there would be no guaranteed hours of work.
- Sneek, Wiemers and Kennedy declined the above options and were terminated on the 31st of March 2020.
- Lee Crane Hire filed an application in the Fair Work Commission seeking the redundancy pay of Sneek, Wiemers and Kennedy be reduced on the grounds that it offered them ‘other acceptable employment’.
- When assessing the alternatives offered to the employees, the Fair Work Commission viewed both alternatives in the negative, and stated:
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- [29] It is the devil’s alternative: move to a new location some 121kms away and incur a practical detriment on a continuous basis or, keep your job, but as a casual with no assurance of work in an evidently declining market. This should not be classified as acceptable alternative work that would release the employer from their obligation to pay out a redundancy entitlement. In short, the travel to Biloela makes the options, in line with the authority cited, unreasonably distant.
- [35] My considered view is that the two employment options offered by Lee Crane Pty Ltd are not ‘acceptable other employment’ for the purpose of s.120(1)(b)(i) of the Act.
Ouch.
- Lee Crane Hire were ordered to pay Sneek, Wiemers and Kennedy their full redundancy entitlements which equalled 16, 12 and 7 weeks respectively.
Triple ouch.
What’s the lesson?
Employers need to tread very carefully when navigating redundancies and further, they need to ensure that any offers for other employment are indeed ‘acceptable’ based on the Fair Work Commission’s assessment criteria.
It goes without saying that if you are wondering if your redundancy process is correct or you are wishing you had some expert assistance to ensure your redundancy alternatives are not labelled “the devil’s alternative”, do not hesitate to contact our Principal Workplace Relations Team: