A recent decision of Judge Cameron of the Federal Circuit Court (the Court), in the matter of Fair Work Ombudsman v F.L. Press Pty Ltd & Anor[1] (FL Press), has highlighted a potential discrepancy between the approach of the Court and that of the Fair Work Commission (FWC) to redundancy pay entitlements under the National Employment Standards (NES) where an employee’s position becomes redundant and the employee consents to a transfer to a different position with the same employer.

Section 119 of the Fair Work Act 2009 (Cth) (the Act) states that an employee is entitled to redundancy pay calculated on the scale outlined in that section:

“… if the employee’s employment is terminated:

(a) at the employer’s initiative because the employer no longer requires the job done by the employee to be done by anyone…”.

Section 120 gives the FWC the power to reduce an amount payable under section 119 upon application by the employer where the employer has obtained acceptable alternative employment for the employee.

In a situation where an employee’s position becomes redundant and the employee consents to continue their employment in a different position with the same employer, many employers assume that no entitlement to redundancy pay arises under section 119 on the basis that the employee’s employment has not terminated. This is consistent with the historical view of redundancy payments as compensation for the loss of a job, the corresponding trauma of losing a reasonable expectation of continued employment, and the practical inconvenience caused in an employee’s personal life in seeking new employment.[2]

However, a number of members of the FWC have handed down decisions which take a different approach – namely, that the loss of an employee’s redundant position itself constitutes a termination of employment, giving rise to an entitlement to redundancy pay under section 119, even if the employee consents to a change of position and continues in employment with the same employer.

The recent decision by Commissioner Spencer in the matter of Trehen Camp Management Services P/L Trading as Trehen v Mr Colin Walden [2015] FWC 1217[3] reflects this approach. Mr Walden was promoted from Day Chef to Logistics/HSE Support Officer in December 2014. However, in January 2015 his employer informed him that his (new) position was redundant and offered to return him to his previous Day Chef role at a lesser salary than he had been paid in the Logistics/HSE Support Officer role. The employee agreed, and was paid for a one month notice period at his higher Logistics/HSE Support Officer rate following his return to the Day Chef position. The employer applied to the FWC under section 120 to have redundancy payments reduced on the basis that it had obtained other acceptable employment for the employee.

Commissioner Spencer found that the employee was entitled to redundancy pay under section 119 on the basis that his employment had been terminated because his position had been made redundant, even though the employee voluntarily remained employed with the same employer:

“The starting point is that employees are entitled to redundancy pursuant to the provisions of the Act, and s.119 relevantly provides that an employee is entitled to be paid redundancy pay by the employer if the employee’s employment is terminated at the employer’s initiative because the employer no longer requires the job done by the employee to be done by anyone, except where this is due to the ordinary and customary turnover of labour. I accept that the Respondent’s position of Logistics/HSE Support Officer was terminated at the employer’s initiative because they no longer required the job to be done by anyone. The position was made redundant and the Respondent has an entitlement to redundancy pay.” [4]

The Commissioner agreed to reduce the quantum of redundancy pay on the basis that the employer had found acceptable alternative employment, but did not reduce it to zero given the reduction in the employee’s pay in the new position

The approach taken by Commissioner Spencer contrasts with comments of Judge Cameron in his decision in FL Press. In that matter, the employer had been prosecuted by the Fair Work Ombudsman for, amongst other matters, non-payment of redundancy pay under section 119, in circumstances where the employee’s full-time position had been made redundant and he had been transferred to a less favourable part-time position with the same employer without his consent. The Court found that the employee’s employment had been terminated, as required under section 119, because the employer had repudiated the employee’s contract of employment by transferring him to a new position without his consent. Consequently, the employee was entitled to redundancy pay.

However, in his decision, Judge Cameron contrasted that situation with one in which an employee genuinely consents to being placed in a new role as a variation of their existing contract of employment, following the redundancy of their position:

“More generally, and including the present case, a person’s employment cannot be divorced from the contract of employment which governs it. …. Because the terms of a person’s employment are determined by the related contract of employment, to identify whether the employment of a person such as Mr Jovic has been terminated and replaced with another employment or continued according to amended terms depends on the contractual terms applicable to that employment.” [5]

This suggests, contrary to the view taken by Commissioner Spencer and other members of the FWC, that an employer may be able to avoid any redundancy pay entitlement arising under section 119 where both employer and employee genuinely consent to a variation of the employee’s existing contract, providing for continued employment under the terms of that contract, albeit in a different position and (arguably) on less favourable terms.

If employers seek to rely upon this view when transferring employees internally as result of redundancy of their existing position, it would be prudent to ensure that:

  1. existing contracts of employment clearly provide that the contract will continue despite a variation to the employee’s position or duties; and
  2. the employee’s genuine consent to a variation of their existing contract providing for continued employment under the terms of that contract in a different role, and an acknowledgement that their employment has not terminated as a result of the transfer, are obtained and appropriately documented.

[1] Fair Work Ombudsman v F.L. Press Pty Ltd & Anor [2015] FCCA 1578

[2] Termination Change and Redundancy Case (1984) 8 IR 24 at 50

[3] Trehen Camp Management Services P/L Trading as Trehen v Mr Colin Walden [2015] FWC 1217. See also FWC decisions in Mandurah Safety and Training Services Pty Ltd v Edward Dalecki (C2011/6648), Baptistcare Incorporated (C2015/2370), Vanderfield Pty Ltd T/A Vanderfield (C2015/1449), and Sibelco Australia Limited (C2015/4024)

[4] Ibid at paragraph 18

[5] Fair Work Ombudsman v F.L. Press Pty Ltd & Anor [2015] FCCA 1578 (18 June 2015) at paragraphs 232 and 233

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