New FWC decision: companies learn tough lessons on redundancy

Reducing redundancy pay

The Fair Work Act 2009 (Cth) (‘the FW Act’) provides employees with an entitlement under s119 to redundancy pay in situations where their employer no longer requires their job to be done by anyone. The amount of redundancy pay is based on the length of an employee’s continuous service.

Employers can apply to the Fair Work Commission (‘the Commission’) under s 120(2) to have the redundancy pay reduced in certain circumstances. One such circumstance is found in s 120(1)(b)(i) where the employer “obtains other acceptable employment for the employee” after the redundancy, even where an employee doesn’t accept the position. This circumstance is two-pronged: first, the question is whether an employer has ‘obtained’ employment and then secondly whether the employment obtained is ‘acceptable’.

How is “obtained” defined?

The question of whether an employer has ‘obtained’ employment for its redundant employees was answered in the landmark case of FBIS International Protective Services (Aust) Pty Ltd v MUA and Fair Work Commission [2015] FCAFC 90 (‘the FBIS case’).

Security company FBIS International Protective Services (‘FBIS’) lost a tender for a long-standing contract to provide security services. FBIS’ failure to procure an extension to their contract meant that over 50 of their employees were made redundant, as FBIS lost the work and no longer required their roles to be performed by anyone.

The successful tenderer, ACG National Pty Ltd (‘ACG’), would be performing the exact work that FBIS had just lost. As part of their redundancy process, FBIS reached out to ACG to:

• provide them with a contact list of FBIS’ redundant employees;
• have discussions with representatives of ACG about their employees’ potential future engagement with ACG; and
• provide ACG with information about employee conditions under FBIS’ enterprise agreement.

FBIS then sought to have their employees’ redundancy pay reduced, arguing that because ACG had hired 49 of their employees, they had obtained employment for them in accordance with s.120(1) of the FW Act.

The Full Federal Court confirmed the decision that it’s not enough to facilitate the opportunity for future employment:

“To obtain employment for an individual means to procure another employer to make an offer of employment, which the individual may or may not accept as a matter of his or her choice.”

The Court concluded that FBIS had merely facilitated the opportunity for the employees to apply for employment with ACG. FBIS had no knowledge of which employees had been offered employment with ACG, or on what terms.

This question was tested in a recent decision from the Commission with further implications for businesses in the same situation, and labour-hire companies in particular. This case is Ready Workforce (A Division of Chandler Macleod) Pty Ltd t/a Chandler Macleod v Andrew Lowe, Bernard McIntyre, David Lindsay, Glenn Munro, James Eason, Johnathon Barbara, Mark Keller, Robert Snelgrove, Scott Ditchfield, Scott McFarlane, Timothy Farrow [2022] FWCFB 173 (30 September 2022) (‘the Ready Workforce case’).

Ready Workforce supplied 250 dump truck operators under a contract held from 2014 to 2021 before the contract was awarded to another labour-hire company, Programmed Skilled Workforce Ltd (‘Programmed’). Similarly to FBIS, Ready Workforce reached out to Programmed to discuss transferring these employees. In attempting to obtain acceptable employment for their redundant employees, Ready Workforce went further than FBIS, including:

• sending a list of employees to Programmed;
• sharing training records, medical records, employee information, and statements of service with Programmed;
• offering to write letters of recommendation to Programmed for the interview process;
• assisting employees to write resumes and prepare for interviews;
• sending invitations for discussion sessions about jobs at Programmed;
• paying workers overtime to attend those sessions; and
• providing paid time off to attend interviews with Programmed.

Despite this, the Full Bench of the Commission upheld the decision that this wasn’t enough to procure employment according to the test in FBIS. The Ready Workforce case confirms ‘procurement’ to mean that the employer must acquire the employment by its conscious, intended acts to the point where the employee can accept or reject it.

Programmed was said to have maintained their ‘unfettered option’ as to whether to engage or not engage any of the redundant employees throughout the process.

The action taken by Ready Workforce to produce a list of employee names, training records and medical information and support the interview process wasn’t enough to conclude that they had procured rather than facilitated the relationship.

Crucial learnings about what a company must do to obtain employment for redundant employees

It will not be enough for employers to simply engage with the future employer and put their employee’s name forward for prospective employment. Businesses should continue to keep in contact with the future employer beyond simply connecting them with redundant employees. The Ready Workforce case mentions that awareness of an offer being made and the terms and conditions of such an offer will be “necessary to establish that the employment had been relevantly procured”.

How is ‘acceptable employment’ defined?

In a recent decision of Hender Lee Electrical And Instrumentation T/A Hender Lee Electrical Contractors Pty Ltd [2023] FWC 446, the Commission confirmed what is meant by “acceptable employment.”

The decision concerned an employee who was made redundant and entitled to four weeks of redundancy pay under the FW Act. His employer offered the employee an alternative role as a FIFO worker, however, the employee declined this noting that his previous role as an electrician was largely based in the city region and the hours he worked were structured according to a standard Monday-to-Friday roster.

The employer sought to reduce the employee’s redundancy payment to two weeks (instead of four), on the basis that the employee refused other ‘acceptable employment’ within the business. The employee lodged an objection because the role offered wasn’t acceptable employment and was not substantially similar to his previous role.

The Commission found that whilst the employee’s contract of employment confirmed that the employee may be required to work on “multiple sites in WA”, there was nothing in the contract of employment that would suggest that the employee’s role could be subject to a FIFO roster. Furthermore, the Commission didn’t accept that the working arrangement of the redundant role lends to a finding that the employee’s previous role and the FIFO role, in relation to roster, location, hours, travel, are comparable.

The Commission said, “I have strongly considered the key differences between the position made redundant, which allowed Mr Passmore to work in the Perth metropolitan region and return to his home every evening, and that of the position offered, that would see Mr Passmore away from his family for two weeks out of every three, and I am not satisfied that the role offered was other acceptable employment.”

The Commission dismissed the employer’s application to reduce the employee’s redundancy pay.

Take away points

The above case highlights that for an alternative position to be considered ‘acceptable employment,’ it must be comparable to that of the redundant position.

About our author

Anthony El Salim is a Workplace Relations Advisor at Citation HR. He assists clients with a range of employment relations and compliance matters via the 24/7 HR Advice Line. He is currently studying for a Juris Doctor.