Mechanic’s redundancy pay cut after FWC rules redeployment opportunity with additional travel time was acceptable

Employers have long known they are obliged to try to find new employment opportunities for employees who are faced with the redundancy of their current role. This might include redeployment within the business or its related companies, or finding employment with a third party.

Despite employers’ best efforts to preserve employment, from time to time, disputes arise when employees would rather have redundancy pay than a new role, or where the new role is not an adequate substitute for the old one.

In the recent case of ASG Maintenance Pty Ltd v Lord [2020] FWC 5894, the Fair Work Commission (FWC) was required to consider an application from an employer under s120 of the Fair Work Act to reduce an employee’s entitlement to redundancy pay on the basis that it had located ‘other acceptable employment’ for the employee even though the new job did require additional commute time.

The employer provides labour-hire and hydraulic services within rural New South Wales and Queensland on a project basis. The employer notified the employee that his services as a light vehicle mechanic were no longer required at the mine in which he was located, and offered him two alternative employment options.

The first was a service mechanic position in Tomingley, NSW, which was approximately 163 kilometres from the employee’s residence, and would have required a one hour 23 minutes commute each way. This role would have resulted in a loss of approximately $30,000 to the employee’s annual salary.

The second was a light vehicle mechanic position in Dubbo, NSW, which was 113 kilometres from the employee’s residence and resulted in a 52 minutes commute each way. This role was largely similar to the employee’s previous role and pay entitlements.

The employee rejected both offers, objecting to the additional travel time and the effect it would have on his commitments outside of work.

As a result of the employee’s refusal, the employer confirmed that the employee’s position was terminated as a result of genuine redundancy.

The employer subsequently made an application to the FWC to have the employee’s entitlement to redundancy pay reduced to nil on the basis that it had obtained ‘other acceptable employment’ for the employee.

Before the FWC, the employee argued that working in either location would require him to reside closer to Dubbo during the workweek due to the potential fatigue and safety risks associated with driving home after completing a 10-hour shift. The employee also submitted that in accepting either offer, he would suffer undesirable changes to his lifestyle and community activities.

In considering the application, the FWC confirmed the established view that ‘other acceptable employment’ is to be determined objectively and the mere rejection of alternative employment did not make it objectively unacceptable.

The FWC held that the first position offered in Tomingley was not ‘other acceptable employment’ due to the round-trip commute being excessive and given the significant loss of income the employee would incur.

However, the FWC accepted that the second position offered in Dubbo was ‘other acceptable employment’ due to the role being the same or substantially similar to the employee’s previous role in all aspects, other than location. The FWC did not consider that a two hours round-trip commute was unreasonable due to the nature of the employer’s business and its rural location.

The FWC ordered that the amount of redundancy pay should be reduced from seven weeks’ pay to five weeks’ pay, on the basis that the employer had obtained ‘other acceptable employment’ for the employee.

Lessons for employers

Applications can be made to reduce redundancy payments where the employer has put alternative employment options before an employee who refuses them.

The FWC will objectively assess what is acceptable employment, and will take into account factors such as salary, travel time and the nature of the employer’s business in conducting that assessment.