In limited circumstances, an employer may be able to avoid its obligation under the Fair Work Act 2009 (Cth) to provide redundancy pay to an employee, including if it offers the employee reasonable alternative employment.  However, as highlighted by a recent case, what is ‘reasonable’ depends on all of the circumstances.

In a recent case before the Fair Work Commission (FWC), an employer was unsuccessful in its efforts to avoid triggering its statutory obligation to pay redundancy pay to employees covered by an enterprise agreement. 

What happened?

The employer offered employees new contracts of employment.  The employees had previously performed work exclusively at a site in Kogarah, New South Wales, but the new contract contained a clause requiring employees to move to Ingleburn, New South Wales, at the employer’s direction, if it decided to close down the Kogarah site.  The FWC accepted that it would take the affected employees between 38 minutes and over one hour and 15 minutes each way to travel between Kogarah and Ingleburn.

The FWC found:

  • the new contract contained inferior terms and conditions of employment compared to the employees’ current contract;   
  • the employees’ positions were made redundant by the closure of the Kogarah site;    
  • the employer failed to properly consult with employees about the redundancy, as required by the enterprise agreement;    
  • the offer of alternative employment at Ingleburn was not reasonable in light of the individuals’ circumstances, including caring responsibilities and the significant burden of additional travel time; and  
  • the employer’s offer to provide transport between Kogarah and Ingleburn did not transform the offer of employment at Ingleburn into a reasonable offer. 

As a result, the employees were entitled to redundancy pay pursuant to the enterprise agreement.

Lessons for employers

As highlighted in this case, the circumstances in which an employer can avoid paying redundancy pay are limited and will turn on the particular circumstances of the case.  Unless an employer is able to successfully demonstrate that it has obtained acceptable alternative employment for an employee, and that the employment is reasonable in light of the employee’s individual circumstances, it will need to comply with its obligations to provide redundancy pay to the employee.