An employer has still been required to pay some redundancy pay to an employee, despite the Fair Work Commission (FWC) finding the employee was offered acceptable alternative employment, due to the “ham-fisted manner” in which the employer handled workplace issues.
In L.Arthur Proprietary Limited  FWC 1911 (L.Arthur), the employer made an application under s120 of the Fair Work Act 2009 (Cth) (FW Act) seeking to reduce the amount of redundancy pay payable to an employee after the employee rejected an offer of alternative employment.
The employee’s role as workshop receptionist was to be made redundant, but L.Arthur offered the employee the role of customer service operator.
Section 120 of the FW Act allows an employer to make an application to the FWC to vary the amount of redundancy pay payable to an employee if the employer “obtains other acceptable employment for the employee”. In such circumstances, the FWC may decide to reduce the amount of redundancy pay, including reducing it to nil.
In determining whether L.Arthur obtained “acceptable employment” for the employee, Deputy President Masson identified that:
an objective assessment of “acceptable employment” is required, meaning the alternative role does not need to be acceptable to the employee or identical to the redundant role;
the employee must meaningfully cooperate and the entitlement to redundancy pay may be at risk if the employee refuses a role, which is found to be objectively “acceptable”; and
the employee’s individual circumstances must be taken into account.
A range of factors may be taken into account to assess the suitability of alternative employment including pay rate, hours of work, location, seniority, fringe benefits, workload, job security, continuity of service, accrual of benefits, probationary periods, carer’s responsibilities, and family circumstances.
Other Workplace Issues
In the three months immediately before the first meeting with the employee about the redundancy, several workplace issues unrelated to the employee’s redundancy occurred, including:
the employee had lodged a formal bullying complaint about her new manager;
she was instructed not to attend the workplace and had her access to the employer’s IT systems removed;
the employee informally became aware of an investigation into irregularities involving supplier invoices which she was involved in from an administrative perspective (although no direct allegations of her misconduct were made and she was not interviewed); and
L.Arthur failed to take any steps to address the employee’s bullying complaint or involve her in the invoice investigation before commencing the redundancy process.
These issues were raised by the employee in response L.Arthur’s s120 application.
The Deputy President was comfortably satisfied that the alternative role of customer service offered to the employee constituted “other acceptable employment” for the purpose of s120.
However, L.Arthur’s less than satisfactory handling of the workplace issues immediately before making the decision to make the worker’s role redundant led the Deputy President to speculate that the L.Arthur’s conduct “might be viewed as a thinly veiled and poorly executed attempt to rid itself of an employee who had fallen out with the Workshop Manager and was proving troublesome”.
The employer was fortunate that the Deputy President decided the better view was their management of the workplace issues “was executed in an insensitive and ‘ham-fisted’ manner at the expense” of the employee and decided to exercise discretion in deciding to reduce the redundancy entitlement payable but only by 50%, even though other acceptable employment had been offered.
The decision highlights the need for employers to not only follow procedural requirements when terminating an employee for the reason of genuine redundancy, but also to handle other workplace matters which may be simultaneously occurring.
Although the termination of employment for the reason of genuine redundancy is often considered less complicated than termination for reasons of performance or conduct, it is important for employers to ensure they not only comply with obligations and requirements to avoid unintended consequences, but also ensure that other existing workplace issues that are not related to the redundancy are properly handled.