In brief: The Full Bench of the Fair Work Commission has found that a contractual relocation term can be displaced and inoperative due to inconsistency with the terms of an enterprise agreement. Senior Associate Emily Harvey reports.

HOW DOES IT AFFECT YOU?

  • Employers should ensure that enterprise agreements provide an express exemption from the obligation to pay redundancy pay if an employee is offered acceptable alternative employment

Background

When Darrell Lea went into voluntary administration, the Quinn family purchased the assets of the business and it was necessary for a number of employees to continue to work in the business. These employees were offered employment by DLE, a company owned by the Quinn family. The offer of employment was of the same position on the same terms as their employment with Darrell Lea and their service with Darrell Lea would be recognised. In addition, the offer letter included a term to the effect that the initial location was Kogarah but that the employee could be required to work at another location in the future. The relevant enterprise agreement did not contain any specific provision regarding relocating employees.

Some time later, DLE effectively directed employees to transfer from Kogarah to Ingleburn, some 34 kilometres away. DLE informed the employees who refused to relocate that their employment with DLE would end. The AMWU lodged a dispute and argued that positions of the employees at the Kogarah site were redundant and that the employees were entitled to redundancy pay, including because the offer of employment at Ingleburn was not acceptable alternative employment.

Interaction between the enterprise agreement and the contracts

The Full Bench of the Fair Work Commission found that the agreement did not permit DLE to transfer employees to a different location because:3

  • the enterprise agreement did not expressly permit DLE to direct an employee to transfer to a different location; and
  • various clauses in the agreement indicated that the parties did not contemplate the relocation of employees.

The enterprise agreement contained an unusual provision (the Employment Terms Clause), which provided that 'the employer and the unions agree that no employee, including apprentices and trainees, shall be employed other than under the terms of this agreement'. This term meant that DLE could not engage employees on terms that were inconsistent with the terms of the enterprise agreement.

The contractual location term purported to confer on DLE a right that was inconsistent with the terms of the enterprise agreement (that is, the right to transfer an employee to a different location). The Full Bench found that the contractual location term was displaced by the Employment Terms Clause, and rendered inoperative. As a result, DLE was prohibited from engaging employees on the basis that the contractual relocation term applied.

Entitlement to redundancy pay

The Full Bench found that the proposed change of location meant positions were redundant. The Full Bench did not determine whether the employees had been offered acceptable alternative employment because the agreement contained no such exemption from the obligation to pay redundancy pay. In fact, the enterprise agreement permitted employees who were offered alternative positions, within the same site, to elect to be retrenched instead. Not surprisingly, the Full Bench refused to imply into the enterprise agreement a term that would absolve DLE of the obligation to pay redundancy pay in circumstances where it obtained acceptable alternative employment.