P&R Electrical Wholesalers Pty Ltd

[2016] FWC 1730

[2016] FWC 1730

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.120 - Application to vary redundancy pay for other employment or incapacity to pay

P&R Electrical Wholesalers Pty Ltd
(C2016/2743)

COMMISSIONER HAMPTON ADELAIDE, 24 MARCH 2016

Variation of redundancy pay – position redundant – whether employer obtained acceptable alternative position – alternative position offered within the company – same role and salary – same or similar working conditions – different location – substantial travel but capacity to relocate on reasonable basis part of employment terms – alternative position objectively acceptable – significant reduction in redundancy pay warranted – order made.

1. Background and case outline

[1] P&R Electrical Wholesalers Pty Ltd (P&R) has made an application to the Commission seeking a reduction in the redundancy pay otherwise due to Mr Don Cole, an Assistant Store Manager presently located at its Elizabeth store in South Australia.

[2] P&R is a South Australian based electrical wholesaler with branches across the Adelaide metropolitan and regional areas.

[3] The application concerns redundancy payments provided by s.119 of the Fair Work Act 2009 (the FW Act) as follows:

“119 Redundancy pay

Entitlement to redundancy pay

(1) An employee is entitled to be paid redundancy pay by the employer if the employee’s employment is terminated:

(a) 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

(b) because of the insolvency or bankruptcy of the employer.

Note: Sections 121, 122 and 123 describe situations in which the employee does not have this entitlement.”

Amount of redundancy pay

(2) The amount of the redundancy pay equals the total amount payable to the employee for the redundancy pay period worked out using the following table at the employee’s base rate of pay for his or her ordinary hours of work:

Redundancy pay period
Employee’s period of continuous service with the employer on termination	Redundancy pay period
1	At least 1 year but less than 2 years	4 weeks
2	At least 2 years but less than 3 years	6 weeks
3	At least 3 years but less than 4 years	7 weeks
4	At least 4 years but less than 5 years	8 weeks
5	At least 5 years but less than 6 years	10 weeks
6	At least 6 years but less than 7 years	11 weeks
7	At least 7 years but less than 8 years	13 weeks
8	At least 8 years but less than 9 years	14 weeks
9	At least 9 years but less than 10 years	16 weeks
10	At least 10 years	12 weeks

[4] The application has been made under s.120 of the FW Act which provides as follows:

“120 Variation of redundancy pay for other employment or incapacity to pay

(1) This section applies if:

(a) an employee is entitled to be paid an amount of redundancy pay by the employer because of section 119; and

(b) the employer:

(i) obtains other acceptable employment for the employee; or
(ii) cannot pay the amount.

(2) On application by the employer, the FWC may determine that the amount of redundancy pay is reduced to a specified amount (which may be nil) that the FWC considers appropriate.

(3) The amount of redundancy pay to which the employee is entitled under section 119 is the reduced amount specified in the determination.”

[5] P&R relies upon s.120(1)(b)(i) of the FW Act on the basis that it contends that it has obtained acceptable alternative employment for Mr Cole at another branch of its operations; namely, an Assistant Store Manager’s role at the Edwardstown branch. It contends that the redundancy pay should be reduced to zero.

[6] Mr Cole disputes that the position at the Edwardstown store is an acceptable alternative position on a number of grounds, including its distance from his home and present work location.

[7] It appears to be common ground that Mr Cole’s current position at the Elizabeth store will become redundant when that store closes. I understand that this will take place on 28 March 2016 and Mr Cole has been given notice of his redundancy. It is also common ground that the redundancy provisions of s.119 of the FW Act establish the entitlements, and that in the case of Mr Cole, this means that 13 weeks redundancy pay is otherwise due given his length of service with P&R.

[8] At the time of making this application, P&R had discussed with Mr Cole his potential redeployment to a store in Gilles Plains, South Australia. However, this did not proceed. Further, the proposed alternative position at the Edwardstown store being considered at that time would have involved the retention of Mr Cole’s salary but not in an Assistant Manager’s role. This aspect of that proposal was particularly concerning to Mr Cole.

[9] Following a conference before the Commission, P&R offered Mr Cole the position of Assistant Store Manager at the Edwardstown Store, and it is this position that it contends is the acceptable alternative position.

[10] Given the nature of the application and the absence of significant factual disputes, this application has been determined on the basis of written submissions and evidence.

2. The position of P&R Electrical Wholesalers Pty Ltd

[11] P&R advised Mr Cole and the Commission that as a result of a resignation at another store in the southern suburbs of Adelaide, an Assistant Store Manager’s role became available, which was for all relevant purposes, identical to the position Mr Cole held at the Elizabeth Store. This position has now been formally offered to Mr Cole.

[12] P&R contends that the proposed Assistant Store Manager position at Edwardstown removed the potential issue that may have caused Mr Cole concern, being a reduction in duties and status arising from the original offer.

[13] P&R also contends that Mr Cole was, in effect, offered a transfer and noted that there would be no change to his role, duties, salary, entitlements and conditions, or to his expected hours of work. Further it was noted that the new work location was not substantially further away from his home than another branch where he originally worked for P&R (for a lesser role and remuneration).

[14] P&R indicated that whilst it had received legal advice that it was open to them to simply transfer Mr Cole pursuant to clause 7.1 of his employment contract, it had taken the view that when the move in work location was to be permanent, the employee concerned should get some say in the transfer. In that light, it sought that the circumstances be treated as a redundancy but with Mr Cole’s redundancy payments being reduced to zero given the acceptable alternative position that was offered and declined.

[15] P&R noted that although Mr Cole had raised concerns as to his current and proposed working hours, and his salary package in that light, this was not relevant to this application. It also asserted that in any event, based upon advice, Mr Cole was receiving more than his correct award entitlements.

3. The position of Mr Cole

[16] Mr Cole has advised P&R and the Commission that he would not be able to accept a “transfer” to the Edwardstown store for the following reasons:

● He had sought clarification from P&R regarding his contracted hours, and was not satisfied with the response received;

● Mr Cole proposed that he not work Saturdays to compensate him for the extra work undertaken during the week and to reduce his hours from 80 per fortnight to 76. This was rejected by P&R; and

● His travel time to and from work would be significantly increased from two hours per week to around 12-15 hours per week and would impact upon his work/life balance, and make the transfer not financially viable for him to accept.

[17] Mr Cole also raised concerns as to whether his salary package was appropriate given the provisions of the Storage Services and Wholesale Sellers Award 2010 (the modern award).

[18] I understand Mr Cole’s position to be that given the above factors, the proposed Edwardstown position should not be considered to be acceptable alternative employment for present purposes.

[19] As a result, Mr Cole seeks the full 13 weeks redundancy entitlement and, in effect, that this application be dismissed.

4. Did P&R obtain acceptable alternative employment for Mr Cole by offering the position at the Edwardstown Store?

[20] In order to determine this question, it is necessary to consider both the appropriate approach to be taken by the Commission to s.120 of the FW Act and the nature of the alternative position in the context of the parties.

[21] The historical context for the nature of the provisions that are now found in s.120 of the FW Act is summarised by the Full Bench of the Australian Industrial Relations Commission in Australian Chamber of Manufacturers and Derole Nominees Pty Ltd - Clothing Trades Award 1982 1 (Derole) in the following terms:

“
“Obtains”
This term originates from the first decision in the Termination, Change and Redundancy Case where the Full Bench said:

“Two particular instances, which the employers argued might warrant an application for relief from the obligation to pay the general prescription, which were brought to our attention in the proceedings were when an employer obtains acceptable alternative employment for the employee, and where employees receive the benefit of superannuation schemes on retrenchment.

We do not wish to prevent an employer making an application to be exempted from the general prescription pursuant to this decision in cases where an employer obtains acceptable alternative employment for an employee but we would point out that, in our decision, severance payments are not made for the purpose of assisting employees to find alternative employment. Where such an application was made it would be important to consider whether previous service with the previous employer was recognized as service with the new employer.”

The word “obtains” does not appear in its context to mean actually obtain in the fullest sense possible. In circumstances like those occurring at the company one employer is incapable in law of effecting a contract of employment between his employee and another employer whether by assignment or otherwise; the creation of the legal relationship of master and servant depends on a mutuality being arrived at between the individual and the incoming employer. Therefore, the pursuit of alternative employment by the outgoing employer cannot be expected, by reason of itself alone, to produce new employment; there will usually and perhaps always remain the opportunity for the incoming employer, and the employee, to disagree as to matters such as terms of employment, suitability of the job to the employee and vice versa so that alternative employment may not eventuate.

It follows that “obtain” must be given some lesser meaning. The Shorter Oxford Dictionary (third edition, revised) provides as its relevant meaning, the definition of “obtain” as “to procure or gain, as the result of purpose and effort”. It seems to us that meaning is of assistance here; that is, the employer by purpose and effort may establish an opportunity which suits the employee and which crystallises as alternative employment of an acceptable kind.

This approach is supported if the passages quoted above from the Termination, Change and Redundancy Case are read in conjunction with what was said under the heading “assistance in seeking alternative employment”. There the Commission records the ACTU objective of achieving award provisions “designed to ensure that the employer assists the employee to find alternative employment”.

Reliance was placed by the ACTU on a decision of the South Australian Industrial Commission in the Milk Processing and Cheese Etc Manufacturing Case:

“where it was decided that there should be included in any detailed prescription on redundancy an obligation on the employer actively to offer, or to make reasonable endeavours to procure, suitable alternative employment for redundant employees.”

Dealing with the circumstances in which the general prescription the Full Bench was awarding might be departed from, the decision in the Termination, Change and Redundancy Case indicates that particular regard was paid to, inter alia, the S.A. Milk Processing and Cheese Etc. Manufacturing decision. Viewed in this way it will be seen that the intention is not to impose an absolute test on the employer’s ability to “obtain” alternative employment but rather it refers to action which causes acceptable alternative employment to become available to the redundant employee. The employer must be a strong, moving force towards the creation of the available opportunity.”  2

[22] I note that one element of the approach taken in Derole must however now be considered subject to the later decision of the Full Federal Court in FBIS International Protective Services (Aust) Pty Ltd v The Maritime Union of Australia. 3 In particular, the Court has qualified that the appropriate reference point to assess the efforts of the applicant employer in obtaining alternative employment does not involve consideration of whether the employer was the strong, moving force towards the creation of the available opportunity.4

[23] In any event, there is no doubt in this case that P&R obtained the alternative employment for Mr Cole. It organised the position within its own business and has made a definitive written offer setting out the terms and conditions in such a manner that Mr Cole could accept the same.

[24] The more critical issue is whether the alternative position was acceptable.

[25] It is well established in this jurisdiction that the concept of acceptable alternative employment is to be determined objectively. As noted by the Full Bench in Derole:

“What constitutes "acceptable alternative employment" is a matter to be determined, as we have said, on an objective basis. Alternative employment accepted by the employee (and its corollary, alternative employment acceptable to the employee) cannot be an appropriate application of the words because that meaning would give an employee an unreasonable and uncontrollable opportunity to reject the new employment in order to receive redundancy pay; the exemption provision would be without practical effect.

Yet, the use of the qualification "acceptable" is a clear indication that it is not any employment which complies but that which meets the relevant standard. In our opinion there are obvious elements of such a standard including the work being of like nature; the location being not unreasonably distant; the pay arrangements complying with award requirements. There will probably be others.” ⁵

[26] The onus of establishing that the alternative employment in question is acceptable rests with the applicant employer.⁶ In order to establish whether the alternative employment obtained by the employer is acceptable, it is necessary to have regard to such matters as pay levels, hours of work, seniority, fringe benefits, workload and speed, job security and other matters including the location of the employment and travelling time.⁷

[27] It is also clear that acceptable employment does not mean identical employment and that employees should not unreasonably refuse offers of alternative employment merely because they wish to access the benefits of redundancy pay.⁸

[28] If the Commission is satisfied that acceptable alternative employment has been obtained, a discretion arises to reduce all or some of the redundancy pay having regard to all of the relevant circumstances. 9

[29] The position at Edwardstown relies almost completely upon the existing contract of employment and position description presently applying to Mr Cole’s Assistant Store Manager’s position at Elizabeth. That is, the only significant change to the contractual terms would be to record Edwardstown as the location of the employment.

[30] The present contract, which was last endorsed in 2014, provides as follows:

“7. PLACE OF EMPLOYMENT

7.1 Your principal place of employment will be at the location described in Item 5 of the Schedule, or as otherwise reasonable requested by the Employer.

7.2 You may also be required to travel as reasonably necessary for the performance of your duties.”

[31] Item 5 of the present Schedule nominates the Elizabeth store.

[32] The Hours of work are set out in clause 8 and Item 6 of the Schedule to the contract in the following terms:

“8. HOURS OF WORK

8.1 Normal hours of operation are outlined in Item 6 of the Schedule.

8.2 You will be required to work an average of 38 hours per week plus any additional hours which are reasonably necessary to fulfil the requirements of your duties, or as reasonably required by the Employer.

… …

SCHEDULE

Item 6 Normal hours of operation 7.30am to 5pm (1/2 an hour lunch) & 7.30am to 12.00pm Saturday on a rotational basis.”

[33] It is a reasonable inference that the normal hours of operation, other than for the Saturday work, refer to Monday to Friday inclusive.

[34] Mr Cole’s salary of $50,000 plus a $2,000 car allowance and superannuation would be maintained in the new position.

[35] For reasons outlined earlier in this decision, the primary question arising under this application is whether the Edwardstown position was acceptable in objective terms.

[36] Given that the position at Edwardstown involves an almost identical position with the same salary and benefits and continuity of service, it is appropriate to consider whether the elements relied upon by Mr Cole should mean that it was not acceptable. Those elements being the hours of work, including the degree of Saturday work and the associated package, and the additional travel time involved.

[37] In terms of the Saturday work, it appears that as a result of local arrangements at the Elizabeth store, Mr Cole was working one in three Saturdays. It is also tolerably clear that his contract of employment already allows for Saturday to be worked on a rotational basis and this is what is proposed at Edwardstown. This may mean that Mr Cole could be expected to work every second Saturday at the Edwardstown store whereas at Elizabeth, because of the local arrangements, less Saturday work was required in practice.

[38] To the extent that Mr Cole now contends that he was not being paid sufficiently to cover for the full quota of Saturday work, this is a somewhat different question but does not substantially differentiate between the two positions given that Mr Cole could already be required to work more Saturdays at Elizabeth. I note in that regard, the salary would appear to be sufficient to cover the working hours involved; however, it is not appropriate for the Commission, as part of this application, to attempt to determine whether Mr Cole’s salary and arrangements complied with the modern award. As with the obligation to undertake Saturday work itself, the sufficiency of the package is not, in general terms, a factor that differentiates between the present position and the proposed Edwardstown role.

[39] In terms of the increased travel to attend work, the Edwardstown store is in the order of 33 kms by road from the Elizabeth store and some 40 kms from Mr Cole’s home. Depending upon the time of day and the extent of traffic, the trip from home to the Edwardstown store might involve something between 55 and 70 minutes. 10 Presently, Mr Cole lives no more than 10 minutes drive from the Elizabeth store.

[40] This additional travel is a relevant consideration in that this will involve both additional travel time and expense. However, this factor must be weighed along with the fact that Mr Cole’s existing contract contemplated him being relocated, where reasonably requested. In that regard, P&R’s constructive decision not to simply treat this as a transfer in my view recognises that a permanent shift in location of the nature proposed here is potentially a significant change better dealt with as a variation to the employment contract. I also note that earlier during his service with P&R, Mr Cole had worked at another store in close proximity to the Edwardstown store (Underdale – being approximately 35 kms from Mr Cole’s home). In that regard, I note also that the move to the Elizabeth store involved both a promotion and a work location that was much closer to his home. Further, under P&R’s proposal, Mr Cole would also continue to receive the $2,000 car allowance and this should also be taken into account.

[41] In the end, both the extent of actual Saturday work that would now be required and the additional travel to and from work are relevant considerations. However, in all of the relevant circumstances, including the contractual conditions presently applying to Mr Cole’s employment concerning those matters and the full maintenance of his position, role and employment conditions, I am satisfied on an objective basis that the Edwardstown position was acceptable alternative employment within the meaning of s.120 of the FW Act. I add that the considerations relied upon by Mr Cole remain relevant to the discretion to vary the redundancy pay entitlement.

[42] Given that the employer has obtained acceptable alternative employment for Mr Cole, the final issue is whether there should be a reduction (including potentially to zero) in the amount of the redundancy payments. As outlined earlier, this is a matter of discretion to be exercised having regard to all of the relevant circumstances of a particular matter.

[43] Given my findings, I consider that a very substantial reduction in the amount of redundancy benefits is warranted. However, the two elements relied upon by Mr Cole remain relevant considerations, and given the redundancy and the loss of his employment, some account should be taken of their impact upon him and the decision to decline the alternative position.

[44] On balance, I consider that the redundancy payments should be varied to a figure representing five weeks. I note that this does not include the notice, or pay in lieu of notice, that is required under s.117 of the FW Act and the employment contract.

5. Conclusions and orders

[45] I have found on balance that the Edwardstown position was acceptable alternative employment within the meaning of s.120 of the FW Act. I have also found that it is appropriate to exercise my discretion to significantly vary the extent of redundancy payments otherwise due to Mr Cole.

[46] In all of the circumstances, I have determined that the redundancy payments should be varied to a figure representing five weeks. An order 11 to that end is being issued in conjunction with this decision.

COMMISSIONER

Appearances:

R Godden, of P&R Electrical Wholesalers Pty Ltd, the applicant employer.

D Cole, the respondent employee, on his own behalf.

Conference details:

By telephone

2016

March 10.

Written submissions:

P&R Electrical: 16, 17, 18 March 2016

Mr Cole: 15, 17, 18 March 2016

 1   Australian Chamber of Manufacturers and Derole Nominees Pty Ltd - Clothing Trades Award 1982 (1), (1990) 140 IR 123 per Peterson J, Marsh DP and Oldmeadow C.

 2   Ibid at 127 and 128.

 3 [2015] FCAFC 90.

 4   Ibid at [19] and [20].

5 Derole at 128.

6 Re Target Retail Agreement 2001, PR916204, 4 April 2002, at para 6.

7 Re Clerks Salaried Staffs (Agriculture Award) 1999, Print S1216, 24 November 1999, drawing upon Derole.

8 See also Spotless Services Australia Limited [2013] FWC 4484 per Sams DP.

 9   Re Clerks Salaried Staffs (Agriculture Award) 1999, Print S1216, 24 November 1999, drawing upon Derole.

 10   Based upon Google maps.

 11   PR578329.

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