When considering the financial impact of redundancies, employers should be mindful of the operation of s 120 of the Fair Work Act 2009 (Cth) (the FW Act), which allows an employer to apply to the Fair Work Commission (the FWC) to reduce the amount of redundancy pay it is obligated to pay redundant employees in certain circumstances.
In particular, employers are able to make such an application in two situations: (1) if they obtain “other acceptable employment” for the employee, or (2) if they cannot pay the amount.
A recent decision of the FWC has shown the factors that the FWC will take into account when determining whether the other employment is “acceptable” for the purposes of s 120 of the FW Act.
In the decision of Application by Job Site Recyclers Pty Ltd [2024] FWC2192, Job Site Recyclers Pty Ltd (the Employer), a construction cleaning and recycling business, applied to have the redundancy pay of two employees reduced to nil.
As part of the redundancy process, the Employer took steps to transfer existing client work over to another construction cleaning company, EcoTrans Pty Ltd. In doing so, the Employer arranged for a number of its existing employees to move to EcoTrans.
The first employee had been employed by the Employer in its administration team, performing administrative and reception work. Given her length of service, she would have been entitled to seven weeks’ redundancy pay.
However, the Employer obtained a new role for her with EcoTrans. The role was also part of the administration team, working alongside coordinators, schedulers and administrative personnel and reporting directly to the General Manager.
The second employee had been employed by the Employer in a scheduling role, mainly taking responsibility for scheduling out jobs. Given his length of service, he would have been entitled to eight weeks’ redundancy pay.
Again, the Employer obtained a new role for him with EcoTrans. The role was part of the coordination and quality assurance team and also required him to work alongside coordinators, schedulers and administration personal reporting directly to the General Manager.
The employees disagreed that the roles amounted to “other acceptable employment” for the purposes of s 120 of the FW Act. The first employee worked two shifts in the new role before resigning from the role, while the second employee remained employed.
In objecting to the application, one of the key arguments raised by both employees, was the difference in the working environment between the two worksites.
When they were employed by the Employer, the employees were initially employed at its worksite in Dandenong South. The worksite was described as a portable office in a dusty yard where they crushed and sorted building materials for recycling. The office was across the road from the recycling facility.
In their last two years of employment with the Employer, the worksite was moved to what was described as a nicer, cleaner office in Carrum Downs.
In contrast, the worksite at EcoTrans was a large industrial warehouse, which the employees described as very loud and disruptive.
The first employee submitted that there was a lot of dust and residue from the recycled timber and bricks/rocks that was contaminating the air, as well as heavy machinery being operated directly outside the building.
The second employee submitted that trucks were entering and unloading several tonnes of rubbish and other contaminated material multiple times throughout the day. As a result, the employee worked in constant stress and fear of inhaling fumes and dust particles on a daily basis. In addition to this, the employee reported constant truck horns and excessive noise from the facility hindered his ability to work.
In considering whether to reduce the employees’ entitlements to redundancy pay, the FWC accepted the employer’s submission that the nature of the industry in which they operated was a dusty and dirty one. The FWC also accepted that the employees had previously worked at a worksite (in Dandenong South) that was also in close proximity to the recycling facility which would have exposed them to some level of truck noise and dust (albeit to a lesser extent).
However, the FWC considered that this did not detract from the marked difference between the two workplaces. The FWC found that, in taking up the new employment, the employees moved from a white collar environment to a blue collar environment, which was a dusty, noisy and malodorous one with trucks constantly entering and leaving the worksite.
The FWC stated that, whilst s 120 of the FW Act did not require employers to obtain identical employment, the work environment was one less appealing factor (amongst other factors) that needed to be balanced against the other objectively acceptable factors, such as the fact that the employees were on similar pay, in similar locations and in largely similar roles to the roles that they had previously worked in with the Employer.
Ultimately, the FWC determined to reduce the employees’ entitlement to redundancy pay. However, it did not reduce the amount to nil, as requested by the Employer. Instead, the amounts were reduced by 70%.
In order to successfully rely on s 120 of the FW Act where the employer has obtained other acceptable employment, it is not necessary that the new role be identical to the role in which the employee was previously employed.
However, as this case has shown, the FWC will consider factors such as the work environment in which the employee is now employed in and specifically how different it is to the work environment that the employee previously enjoyed.
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