Impact of Finding Other Acceptable Employment on Redundancy Pay

When considering redundancy costs, employers should be aware of Section 120 of the Fair Work Act 2009 (Cth), which allows them to apply to the Fair Work Commission (FWC) to reduce redundancy payments under certain conditions.

Employers can make this application in two situations:
1. If they find the employee “other acceptable employment,” or
2. If they cannot afford to pay the full redundancy amount.

A recent FWC decision has shed light on the factors it considers when deciding if the new employment qualifies as “acceptable” under Section 120.

In Job Site Recyclers Pty Ltd [2024] FWC 2192, the employer, Job Site Recyclers, a construction cleaning and recycling company, sought to reduce redundancy payments to two employees. The company had transferred work to another business, EcoTrans Pty Ltd, and arranged for several employees to take new roles there.

One employee, who worked in administration, was entitled to seven weeks’ redundancy pay. However, the employer secured a similar role for her with EcoTrans, reporting to the General Manager alongside other admin staff. The second employee, who worked in scheduling, was entitled to eight weeks’ redundancy pay but was also placed in a new coordination and quality assurance role at EcoTrans.

Both employees objected, claiming the new roles did not constitute “other acceptable employment.” While the second employee remained in the position, the first employee resigned after two shifts.

The employees’ primary concern was the significant difference between the working environments. They had previously worked at a relatively clean and modern site in Carrum Downs, after being relocated from a dustier site in Dandenong South. In contrast, EcoTrans operated in a loud and dusty industrial warehouse. Both employees described the worksite as disruptive, with trucks frequently entering to unload large amounts of contaminated material, creating a stressful and unhealthy environment.

The FWC acknowledged that while the employees had previously worked in somewhat dusty conditions, the EcoTrans environment was notably worse. It also emphasized that, although Section 120 does not require the new job to be identical to the old one, the difference in work environment was significant and had to be weighed against other factors like similar pay and job responsibilities.

Ultimately, the FWC agreed to reduce the employees’ redundancy pay, but not to nil as requested by the employer. Instead, the amount was reduced by 70%.

Key Takeaways for Employers

To successfully apply for a reduction in redundancy pay under Section 120, the new role does not need to be exactly the same as the employee’s previous position. However, factors like the work environment and the overall differences in conditions will be taken into account by the FWC.

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