When and how can an employer apply to vary the amount of redundancy pay to an employee?

Pursuant to section 120 of the Fair Work Act 2009 (Cth) (the FW Act), an employer can make an application to the Fair Work Commission (the FWC) to reduce the amount of redundancy pay payable to an employee if the employer obtains ‘other acceptable employment’ for the employee, or if it cannot pay the amount.

That provision was the subject of the decision of the FWC in Eagers Automotive v Trevor Varcoe [2021] FWC 6602. The FWC exercised its discretion to reduce the amount of redundancy pay payable to Mr Varcoe on the basis that the employer and Applicant in the proceeding, Eagers Automotive, obtained ‘other acceptable employment’ for him, despite such employment not being accepted by the employee.

Facts

Mr Varcoe was employed by Eagers Automotive from 7 February 2002 until 22 October 2021, when his employment was terminated on the grounds of redundancy. At the time of his dismissal, he was engaged as a Sales Consultant at Torque Ford, where he had transferred to from Torque Honda a few months prior as a result of stock shortages arising from COVID-19.

However, before the decision to terminate his employment was made, and during the consultation period in respect of the redundancy of his role, Eagers Automotive offered Mr Varcoe alternative employment in the form of:

• a Sales Consultant role at Zupps Aspley Mitsubishi, with the same tasks and duties as his current role. Eagers Automotive considered the additional travel time would be 10 minutes each way per day; and
• a role at Torque Honda (which was located next to Torque Ford), to cover an employee who was off work for 3 months. Permanent employment could not be guaranteed.

Mr Varcoe declined both offers of redeployment. On 22 October 2021, when Eagers Automotive formally terminated Mr Varcoe’s employment, it advised him that it intended to make an application to the FWC to vary his redundancy pay from 12 weeks to nil on the basis that he had been offered the two redeployment opportunities – being ‘other acceptable employment’ – which he had refused.

Decision

There was no debate that Mr Varcoe was entitled to be paid an amount of redundancy as a result of his position of Sales Consultant having been made redundant. The key issue for the FWC to consider was whether the two redeployment opportunities that were offered to Mr Varcoe by Eagers Automotive constituted ‘other acceptable employment’ for the purposes of section 120(1)(b)(i) of the FW Act, and whether discretion should be exercised to reduce the amount of redundancy pay ultimately payable to Mr Varcoe.

In determining what constitutes ‘other acceptable employment’ the FWC considered relevant authorities and concluded that several factors are likely to be considered when determining whether employment is acceptable. This includes remuneration, hours of work, location, and job security amongst others. Importantly, the ‘acceptable employment test is objective, it does not mean identical employment and “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.”

The FWC determined that the offer of employment at Zupps Ashley Mitsubishi was not ‘other acceptable employment’ because the additional travel time (which was an additional 20 minutes each way per day) was inconvenient given where Mr Varcoe resided. This conclusion was reached despite the fact that all other aspects of the role were identical to Mr Varcoe’s existing role.

However, the offer of employment at Torque Honda was found by the FWC to constitute ‘other acceptable employment’ because:

• the role was identical to Mr Varcoe’s existing role, but for the product being sold;
• the travel time was identical;
• while the role was of a fixed-term nature, if after the period of three months that position had been made redundant, and he was unable to be redeployed, he would be in the same position, and eligible to receive 12 weeks’ severance pay;
• he had 19 years of service and would continue to accrue long service leave.

Ultimately, the permanency concerns expressed by Mr Varcoe were a moot point.

In light of all the circumstances, the FWC decided to reduce the amount of redundancy pay payable by Eagers Automotive to Mr Varcoe from 12 weeks to 4 weeks.

Take Home Messages

Employers should understand that they may still be liable to pay out redundancy pay, even where ‘other acceptable employment’ is found, and where an employee turns this employment down. Even where employers are liable to pay out some redundancy pay, it is still prudent for them to explore the possibility of making an application to reduce the severance package.

Finally, employers should not overlook the possibility of making an application to vary an employee’s redundancy pay in circumstances where ‘other acceptable employment’ has been offered to an employee during the redundancy process. What is considered ‘acceptable’ will hinge on a number of factors and is to be assessed objectively.

Should you have any queries in relation to this article, please contact Sathish Dasan on +61 8 8210 1253 or sdasan@normans.com.au, Virginia Liu on +61 8 8210 1279 or vliu@normans.com.au or Anastasia Gravas on +61 8 8217 1331 or agravas@normans.com.au.