If the shoe (doesn't) fit—FWC decisions on redundancy pay and acceptable alternative employment

A recent Fair Work Commission (FWC) decision highlights the importance of considering all aspects of an alternative job offer when applying to have an employee’s redundancy pay reduced or varied. 

Section 120 of the Fair Work Act 2009 (Cth) (FW Act) enables an employer to apply to the FWC for an order to vary the amount of redundancy pay owing to an employee in circumstances where the employer obtains “other acceptable employment” for the employee.

If the FWC is satisfied the employer has obtained other acceptable employment, the amount of redundancy pay may be reduced to an amount the FWC considers appropriate, including a reduction to zero.

When determining whether an employee will be left disadvantaged, the FWC will consider a number of factors, not just wages. These factors can include the employee’s skills, experience and physical capacity, the rates of pay, hours of work, duties and conditions of employment relevant to the proposed job, whether the employee is provided with continuity of employment and the extent of any additional travel distances from home to the new workplace.

The recent case of Australian Footwear T/A Diana Ferrari [2018] FWC 7864 involved a retail sales assistant who was employed on a part-time basis for 12 years. In October 2018, the employee was advised the brand she worked for would no longer exist and as a result her position would be made redundant. However, she was offered an alternative position at one of the employer’s other stores in a different shopping centre. The terms and conditions of her employment would remain the same, the only difference being where she would work. The employee declined the offer.

The employer applied to have the employee’s redundancy pay reduced to nil, claiming it had obtained other acceptable employment for the employee. The FWC declined the application on the basis that the extra $50 per week that the employee had to pay for parking at the new location was a significant proportion of her usual $615 weekly wage (it constituted 8% of her weekly income). The FWC deemed this would leave the employee “not insignificantly” disadvantaged and led to a finding that the employer had not offered her “other acceptable employment” for the purposes of the FW Act.

This is consistent with an earlier FWC decision, White Cloud Trading Pty Ltd T/A Tree of Life v Monique Mihaljevich [2015] FWC 4798, in which it held that a 16% reduction in take home pay did not constitute an offer of other acceptable employment and, therefore, there was no basis for redundancy pay to be waived or varied.

What does this mean for employers?

This case highlights that when seeking to reduce a redundancy payment, employers need to be mindful of the following:

• When determining whether alternative employment is “acceptable” under s 120 of the FW Act, the FWC will apply an objective test: the personal preferences of an employer or employee will not determine whether an alternative role was acceptable.
• The employee must not suffer a significant disadvantage by accepting alternative employment—the FWC will be reluctant to reduce the quantum of an employee’s redundancy payment unless it is satisfied an employee will not be significantly disadvantaged in the new role.
• An employer must carefully consider all aspects of the alternative position—in determining what may be considered “other acceptable employment”, the FWC will objectively assess the alternative job offer against the redundant role. An alternative position does not have to be identical to the employee’s previous position; however, the FWC’s decision may turn on factors the employer might consider trivial, such as parking expenses in a new job location, distance, and the duties and conditions of employment offered.