A recent decision of the Fair Work Commission may be of some assistance to your business when considering redundancies and offers of alternative employment.
On 27 February 2015, the Fair Work Commission awarded full redundancy pay to a general manager who lost his position after his company acquired another, with a ruling that an offer of a different senior role at the same salary level was not acceptable alternative employment.
Senior Deputy President Richards held that the employer’s offer (Datamars (Australia) Pty Ltd) of a Business Development Manager (or BDM) position in the expanded post-merger organisation did not meet the requirements of section 120 of the Fair Work Act.
SDP Richards found that he had no scope to vary the amount owed to the general manager on redundancy, despite the employer wanting to reduce the payout to zero.
It was observed by SDP Richards that the employer’s offer had a number of characteristics that would ordinarily appear to be an acceptable alternative position. The former general manager’s pay, job security, and hours would have remained the same, and the offer preserved his continuity of employment. Furthermore, the BDM position was “within a much larger organisation which presumably afforded a wide range of opportunities compared to the narrower base in the pre-acquisition period”, with no concern that the prospect of “underperformance or incapacity” would have undermined his employment security.
However, SDP Richards found that beyond those listed points “doubts emerge” in relation to the offer. Importantly, he said that while it was not necessary for the employer’s offer to “replicate the various functions of the original position” in order to be acceptable, “it is a salient consideration as to whether or not the alternative position manifests the same degree of seniority and executive status within the employer’s business“.
Furthermore, he said the BDM position “does not provide compensatory executive level functions sufficient to retain the same degree of seniority within the employer’s business as did the role of General Manager“.
Importantly, SDP Richards said it was necessary to give “considerable weight” to issues of seniority and status. The former employee, “after all, was the General Manager for the business in Australia and reported only to the Chief Operating Officer in Switzerland prior to the acquisition“.
He said the alternative position suggested that the former general manager would have a role in securing corporate business in Australia and through that, “in growing the business… but the offer of employment stated that he would be working with the national sales manager in that respect (or independently as appropriate) and would be required to achieve revenue and margin levels in line with budget expectations… This appears to be more of an operational level sales oriented function than the largely executive level function undertaken previously by [the general manager].”
SDP Richards also noted that the employer “was not able to identify over whom [the general manager] would exercise. . . managerial control” and it “does not appear to me that there was any clarity around the precise role envisaged“.
SDP Richards said the proposal had “all the appearance of a ‘work in progress’” and that while “quite a number of indicia” supported the employer’s case, “I consider that absence of any definable and substantial executive/strategic function and a very different measure of seniority and status in the new position inhibits a determination that the alternative position was acceptable“.
Datamars had argued as a fallback position from its application to seek to pay zero to the general manager, there “should at least be an appropriate reduction for the role that was offered to him“.
But SDP Richards noted that the scope to vary the redundancy pay obligation where an employer found acceptable alternative employment “may be limited, or problematic, given the 2004 Redundancy Case Full Bench commentary at least… Such exemptions from the obligation to pay redundancy pay (which arise in instances in which an employer has not obtained acceptable alternative employment and must otherwise pay the full amount of redundancy pay) do not form part of the National Employment Standards and are not able to be relied upon any longer by employers.”
SDP Richards said that, given his finding on the offer, there was “no scope for me to vary the amount the Company must pay as redundancy pay as a consequence (notwithstanding that the alternative position maintained a number of key conditions of the original position)”.
Please refer to: Section 120 Application to vary Redundancy Pay, Datamars (Australia Pty Ltd T/A Datamars  FWC 1269 (27 February 2015).
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