Pendlebury
workplace law

Pendlebury Workplace Law is a specialist workplace relations and employment law legal practice based in Sydney.

Redundancy and Other Acceptable Alternative Employment – Is Redundancy Payable?

A recent case before the Fair Work Commission dealt with the issue of redundancy and suitable alternative employment.

In Szanto v ISS Facility Services Pty Ltd the Commission clarified the application of sections 119 and 120 of the Fair Work Act 2009 (the Act) in deciding whether a redundancy payment must be made.

The Act

Section 119 of the Act provides that an employee is entitled to be paid redundancy pay if the employee’s employment is terminated either:

• 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); or

• because of the insolvency or bankruptcy of the employer.

Any genuine redundancy, pursuant to the Act, must be paid in accordance with the employee’s contract, employer redundancy policy, the NES or applicable industrial award /agreement entitlement.

Under section 120 of the Act an employer is entitled to vary the sum of a redundancy payment if the employee has been made redundant and the employer has obtained other acceptable employment for the employee, or cannot pay the amount.

Section 120(2) allows the employer to apply to the Commission for a determination of a reduction in severance amount in circumstances where suitable alternative employment has been found for the employee.

Szanto v ISS Facility Services Pty Ltd

Mr Szanto worked for over 11 years as a Security Officer at ISS Facility Services (ISS) and more recently in the position as concierge of Telstra House.  Due to the loss of a contract, ISS had to reassign Mr Szanto’s to another role at a new site which involved a mix of security guard duties and shift work.

Mr Szanto refused the offer of alternative employment insisting that his role had been made redundant and that the new role was not suitable alternative employment due to his personal situation and the fact there was a change in his working hours. Mr Szanto demanded ISS make payment of his redundancy.

In contrast, ISS maintained that the new role was suitable alternative employment and refused to pay Mr Szanto’s redundancy.  ISS terminated Mr Szanto after he failed to attend his rostered shift at the new site and Mr Szanto applied to the Commission to redress the non-payment of redundancy.

At the Commission, Mr Szanto submitted that ISS owed him a redundancy payment as his position at Telstra House had been made redundant and that the offer of alternative employment was unsatisfactory.

ISS submitted that Mr Szanto was not made redundant as his role was not linked to a specific site or location.

Decision

In deciding whether Mr Szanto was entitled to a redundancy payment the Commission considered the following:

• was his role made redundant?; and
• was the offer of a new position suitable alternative employment?

The Commission concluded that as Mr Szanto was employed as a general security guard and had been placed as the Telstra House concierge, when ISS lost the contract for Telstra House and no longer required the role to be performed by anyone, Mr Szanto’s position was made redundant and he was entitled to redundancy pay.

However, when considering the question of whether ISS had offered him suitable alternative employment, Commissioner Cambridge stated that it is simply not a matter of choice for the employee to either accept or reject alternative employment, but an objective test of comparison between the terms and conditions that applied to the previous job that became redundant and those applicable to the new alternative employment.

In comparing Mr Szanto’s job at Telstra House with that of the alternative employment offered by ISS, the Commission found that although there were significant differences in hours of work and tasks to be performed the role clearly fell within the scope of the definition of security guards duties.  The updated and different terms of the new site were comprehended as being within the scope of the particular employment circumstances and the employer had offered suitable alternative employment to Mr Szanto.  Therefore, ISS was under no obligation to make payment of any redundancy payment because the new role fell within the scope of his duties as a security guard.

In Sum

Employers and employees should take note of the Szanto case as it supports the notion that just because an employer (or an employee for that matter) believes a similar role is available in another location to an employee who’s position has been made redundant, it will not guarantee that the Commission view it as suitable alternative employment.  However, so long as employers offer a substantially similar role, they may apply to the Commission to have the total sum of the severance payment they must pay assessed.

Clearly where the position offered is in no way suitable alternative employment then full redundancy will be required to be paid to the employee.

Brooke Pendlebury
Thursday, October 16, 2014
Dismissal, Entitlements