The Fair Work Commission (FWC) has reduced an employee’s entitlement to redundancy pay to nil after an employer successfully argued that it obtained ‘other acceptable employment’ for the employee, which the employee had refused.

Under section 120 of the Fair Work Act 2009 (Cth) (FW Act), the FWC has the discretion to reduce an employee’s entitlement to redundancy pay in either of the following circumstances:

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

(ii)          the employer cannot pay the amount.

In Manheim Pty Ltd v Cordiner [2019] FWC 534, the employer had undergone a restructure of its business which had resulted in the removal of the employee’s position as head of truck and machinery. As a result, the employee was advised that his position had been made redundant but that he was being offered an alternate role as head of industrial operations.

The new role was largely similar to the employee’s previous role in respect of the level of seniority, remuneration, location and hours worked. However, the employee refused to accept the offer on the basis that he would be required to report to one of his former peers, who had been promoted following the restructure. The employee considered this to be a demotion.

The employer subsequently made an application to the FWC to have the employee’s entitlement to redundancy pay reduced to nil on the basis that it had obtained other acceptable employment for the employee.

In reaching its decision, FWC confirmed the established view that ‘other acceptable employment’ is to be assessed objectively and not by reference to what an employee considers to be ‘acceptable’. The FWC held that, whilst the employee considered the alternative role to be a demotion, this was not actually the case. His peer had been promoted, and the seniority and substance of the employee’s new role remained the same, that is, managerial and supervisory.

The FWC also noted that the terms of the employee’s employment contract expressly permitted the employer to change the employee’s reporting line from time to time, irrespective of whether or not a restructure had occurred.

On that basis, the FWC reduced the employee’s entitlement to redundancy pay to nil.

Lessons for employers

This case serves a good reminder to employers seeking to make applications to the FWC for variations to redundancy pay, that ‘other acceptable employment’ is assessed using objective criteria such as salary, skills and status, not how an employee feels about the other employment.

This case also highlights the importance of considering how changes in reporting lines during a restructure will affect an employee’s seniority or status.

It is also helpful to ensure that employment contracts are carefully drafted to allow employers some flexibility to vary an employee’s role and/or reporting line, as may be necessary for the business.

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