The Trustee for Gruzin Family Trust and the Trustee for SJW Investment Trust T/A Pointvale Pty Ltd & Performtech Pty Ltd v Ellen Thomson

[2015] FWC 6997

[2015] FWC 6997

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.120—Redundancy pay

The Trustee for Gruzin Family Trust and the Trustee for SJW Investment Trust T/A Pointvale Pty Ltd & Performtech Pty Ltd
v
Ellen Thomson
(C2015/4413)

DEPUTY PRESIDENT BULL SYDNEY, 19 OCTOBER 2015

Redundancy - application to vary NES entitlement, whether employer obtained other acceptable employment for employee. Redundancy entitlement reduced in part.

[1] The Trustee for Gruzin Family Trust and the Trustee for SJW Investment Trust Pointvale Pty Ltd (the applicant) operates women’s retail outlets known as Bloch, which specialises in women apparel and dance clothing. The applicant seeks relief from its statutory obligation under s.120 of the Fair Work Act 2009 (the Act) to vary the redundancy payment to its previous employee Ms Ellen Thomson (the respondent). The application was filed on 18 June 2015, but was not initially served on the respondent.

[2] The application names Pointvale Pty Ltd & Pointvale Pty Ltd T/A Bloch as the employer. Subsequently Mr Gruzin, the Director of the applicant company has advised that the correct name of the employer is The Trustee for Gruzin Family Trust and the Trustee for SJW Investment Trust T/A Pointvale Pty Ltd & Performtech Pty Ltd. The application is amended pursuant to s.586(a) of the Act to the extent that the true legal employer of the applicant is correctly identified.

[3] The applicant states the respondent is entitled to 10 weeks redundancy pay having been employed for more than 5 years but less than 6 years with the applicant and that her position was made redundant. The applicant seeks to reduce the statutory entitlement from 10 weeks redundancy pay to 4 weeks redundancy pay on the basis of having obtained ‘other acceptable employment’ for the respondent, as per s.120(1)(b)(i) of the Act.

[4] On 24 June 2015, the Fair Work Commission (the Commission) received a written response from the respondent objecting to the application.

Relevant Legislation

[5] Section 119 of Fair Work Act 2009 provides a statutory right to redundancy pay in amounts calculated based on an employee’s continuous service.

[6] Section 120(2) of the Act provides the Commission with a discretion to reduce or remove an entitlement to redundancy pay on application should the Commission consider it appropriate. Section 120(2) of the Act is couched in the following terms:

120(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.

[7] Section 120(2) of the Act applies where the terms of s.120(1) are met:

120(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.

(my underline)

Background

[8] The Commission was not advised of any enterprise agreement that applied to Ms Thomson’s employment. Consequently, as a Manager in a retail store, the redundancy provisions of the General Retail Industry Award 2010 (the Modern Award) would apply.

[9] Clause 15 - Redundancy of the Modern Award provides that the redundancy benefits provided under the National Employment Standards (NES) are applicable. Ms Thomson was employed by the applicant for a period of 5 years and 7 months which provides an entitlement of 10 weeks redundancy pay.

[10] The matter was listed for hearing on Thursday 13 August 2015, the applicant’s Director; Mr Michael Gruzin appeared for the applicant and there was no appearance by the respondent. The respondent did not answer her mobile phone and a voice message was left. The matter was adjourned to enable the reason for the respondent’s absence to be ascertained.

[11] Ms Thompson subsequently advised that she was not aware she was required to attend the hearing; hence the matter was relisted to facilitate her attendance. The matter was subsequently listed and heard on 9 October 2015.

[12] Section 119 of the Act sets out a minimum NES entitlement to redundancy pay for national system employees. The exclusions from redundancy pay provided for in s.121 of the Act were not raised in this application.

[13] It would appear that the statutory provision to enable a reduction in redundancy entitlements arises historically from a decision of a Full Bench of the Australian Conciliation and Arbitration Commission in the Termination, Change and Redundancy Case (TheRedundancy Case)  1. This case introduced a general severance pay entitlement under federal awards for employees whose employment was terminated on account of redundancy.

[14] In the Redundancy Case, employers submitted that it would not be appropriate where the employee concerned had secured alternative employment for the employee to then receive a redundancy benefit. The Full Bench stated:

“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. However, we would make it clear that we do not envisage severance payments being made in cases of succession, assignment or transmission of a business.” 2

[15] Later in that case, the Full Bench considered the terms of an amendment to the Metal Industry Award 1984 that should be made to reflect its decision 3. The Full Bench ruled that the following provision should be included in the amendment to that award4:

“An employer, in a particular redundancy case, may make application to the Commission to have the general severance pay prescription varied if he/she obtains acceptable alternative employment for an employee.”

[16] In the Full Court decision of the Federal Court in FBIS International Protective Services (Aust) Pty Ltd (CAN 083 774) v Maritime Union of Australia 5 and Fair Work Commission (the FBIS Case) the Court stated at paragraph 18:

“… to obtain employment for an individual means to procure another employer to make an offer of employment, which the individual may or may not accept as a matter of his or her choice. If the employment is not accepted, the question whether that employment was “acceptable” will then arise.”

Applicant’s submissions

[17] The applicant does not submit that it does not have the capacity to pay the amount of redundancy due, but argues that it obtained other acceptable employment for the respondent which was declined by Ms Thompson.

[18] Ms Thompson was previously employed as the store manager in the applicant’s Wollongong store assisting with the area management of three stores on an annual salary of $55,000. Ms Thompson’s last day of employment was Saturday 6 June 2015.

[19] Mr Gruzin provided a written statement, gave evidence, and made submissions. Mr Gruzin states that the applicant’s redundancy came about through the non-renewal of the Wollongong outlet lease in mid-June. He stated that he had undertaken on-going discussions with Ms Thomson regarding the closure of the shop and discussed possible redeployment opportunities, over a number of months before the Wollongong store closed.

Bloch store job offer

[20] Mr Gruzin stated that Ms Thomson was initially offered a position at the Bloch store in Miranda as a store manager, but without area manager responsibilities. Ms Thomson advised that she was not interested in the Miranda store position as it did not include fashion apparel and she was not particularly interested in ‘the core dance business’ and wished to pursue a career in fashion apparel. The position involved the same salary and entitlements.

[21] Mr Gruzin submitted that Ms Thomson would have had career opportunities at the Miranda store as Bloch is one of the major brands in the dance industry in Australia as well as globally. While the store manager role did not include area management, due to the size and scale of the Bloch business, there existed a good opportunity for career progression.

[22] Mr Gruzin submitted that Ms Thompson had told him that as she spent a number of nights each week with her partner in close proximity to Miranda, the location did not concern her.

Blockout store offer

[23] Accepting Ms Thomson’s position in respect of not wishing to be involved with dance apparel, he later offered her a position with an associated company ‘Blockout’ 6 which was also located in Miranda, this store was solely focussed on the sale of ladies fashion and active wear.

[24] Mr Gruzin stated that the trading entities; Bloch and Blockout have a common director and are considered associated companies. Mr Gruzin contacted Ms Thomson regarding the position of assistant manager at the Blockout store two months before the intended closure of the Bloch store.

[25] A meeting was held to discuss the alternate job offer at which Ms Thompson stated she felt a change was in order and would like to pursue a new career. She did however meet with the Managing Director of Blockout to discuss the opportunity of taking on the role which was more in line with her interests. The role was offered at the same pay and conditions. Mr Gruzin understood that as the Bloch store was not to close for another two months; a trial period was suggested to take place prior the closure of the Wollongong store to ascertain her suitability and whether she wished to take up the offer on a full time basis.

[26] The offer was not taken up and Ms Thomson advised Mr Gruzin that she felt that Blockout was too small and she was looking for a larger organisation. Mr Gruzin stated that Ms Thompson did not ask any questions regarding her entitlements in relation to the job offer with Blockout. In his evidence, Mr Gruzin was unable to state what actually had been offered to Ms Thompson by Blockout other than the fact that he arranged for the interview between the parties.

[27] Mr Gruzin later provided Ms Thomson with a verbal reference to her new employer Lovisa 7 for a role as store manager in their Miranda store, located in the same premises as the Block and Blockout stores.

Respondent’s submissions

[28] Ms Thomson stated that she wished to retain her full redundancy entitlement of 10 weeks.

[29] Ms Thompson’s evidence was that she was unclear that a permanent job offer with Bloch at its Miranda store was being offered. Ms Thompson acknowledged that the travel time to Miranda would be closer when staying with her partner who resides close to Miranda, but not when travelling from her residence in Wollongong.

[30] She stated that the second offer from the employer, with Blockout was not acceptable on the basis that she was unaware they were an affiliated company. After speaking with the owner of the Blockout store, only a trial period of employment was offered and no permanent offer was made. The trial was for both parties to ascertain the suitability of the position for each other. Ms Thomson was of the opinion that as the Blockout position did not contain area manager duties and was as an assistant manager, it was a demotion. In addition, Ms Thomson stated that the position involved additional travel and her career progression would be limited.

[31] It was clear that in giving her evidence Ms Thompson was never aware that her refusal to accept any alternate job offer would affect her redundancy entitlement. Nor was Ms Thomson aware that if she secured work with Blockout her accrued entitlements would transfer. Ms Thompson obtained work with another employer on her own merits in Miranda. Unfortunately that store has closed and she now is required to work in East Gardens which involves a travel time of one hour from her partner’s residence.

Conclusion

[32] Redundancy payments are intended to compensate for the loss of non-transferrable credits such as sick and long service leave as well as other entitlements based on length of service and the inconvenience and hardship imposed on employees, as discussed in the Redundancy Case. Both parties appear to accept that Ms Thomson’s position as manager at the Wollongong store had come to an end with the applicant’s lease having been terminated. The applicant states that the respondent’s position is redundant but that an alternate and acceptable position was offered to her.

[33] It is a serious step to make an order to limit or remove an employee’s statutory entitlements to redundancy pay. The employer must demonstrate that they have obtained other acceptable employment for the employee.

[34] It is well established that the onus lies with the employer who seeks an exemption from redundancy payment obligations (Clothing and Allied Trades Union v Hot Tuna). 8

[35] As discussed in the FBIS Case, if an offer of alternative employment has been made by the employer, and the employee does not accept it, then the question turns to whether the offer was an acceptable one. To establish the acceptability of alternative employment, the test is an objective one, involving a consideration of matters such as hours of work, pay levels, recognition of previous service, fringe benefits, distance of travel to job, workload, job security and other matters. 9

[36] In this application, there are a number of factors to consider concerning whether alternate employment was obtained by the applicant for the respondent and if so, whether the offer was an acceptable one.

[37] The first position offered to Ms Thompson with Bloch involved no loss of salary and entitlements. Whilst there was a slightly less “responsibility” (did not involve any area manager duties), the job still offered good career prospects, albeit with the potential of additional travel time. This offer was declined by Ms Thomson on the basis that the store did not include the category of fashion apparel.

[38] In considering the first job offer made by the applicant with Bloch, Ms Thompson’s evidence was that she didn’t understand she was being offered a permanent position with Bloch at its Miranda store. However the applicant’s correspondence to Ms Thompson of 15 July 2015, 10 confirmed this offer. As such, I find that the applicant was offered a position with Bloch and on the basis that it involved no loss of salary or entitlements, good career prospects (although slightly less responsibility) and some additional travel time, this offer was an offer of acceptable employment.

[39] The second position said to be offered to Ms Thompson with Blockout (a related company) which included fashion apparel could have been accepted on a trial basis prior to her termination with the applicant. The job provided the same salary and no loss of entitlements but was declined on the basis that Ms Thompson was looking for a larger organisation to join.

[40] In respect of this second “offer” with Blockout, there was no direct evidence of a job offer from Blockout, but rather an opportunity to trial a position to ascertain suitability by both parties. Whether this would have led to a job offer is unknown as it never took place because Ms Thompson declined to undertake the job trial.

[41] The conclusion that there was an acceptable job offer made by Bloch (the first job offer) by itself does not automatically rescind the respondent’s entitlement to a redundancy payment. The Commission has discretion to reduce the redundancy entitlement to an amount it considers appropriate.

[42] The applicant is not seeking to reduce Ms Thompson’s redundancy entitlement to nil but to an amount of 4 weeks. I am prepared to make an adjustment to the redundancy entitlement as requested by the applicant; however the reduction will be a period of 5 weeks.

[43] Taking into consideration the position offered at Bloch did not reflect the full responsibilities of the redundant position and there would have been the potential for additional travel time, this will require the applicant to pay the remaining redundancy entitlement of 5 weeks.

[44] The applicant has satisfied the Commission that the discretion available to reduce or eliminate its redundancy pay obligations to the respondent should be exercised by reducing the entitlement of ten weeks to a period of five weeks redundancy pay.

[45] An order [PR572804] reflecting this decision will issue.

DEPUTY PRESIDENT

Appearances:

Mr M Gruzin on behalf of the applicant.

Ms Ellen Thomson on her own behalf as the respondent

Hearing details:

2015

Sydney

9 October

 1 (1984) 8 IR 34

 2   Ibid at 75

 3 (1984) 9 IR 115

 4 (1984) 9 IR at 135

 5 [2015] FCAFC 90 at para18

 6   Whether this is a legal entity or trading name was not made clear

 7   A jewellery fashion store

 8 (1988) 27 IR 226

 9   Ibid at 230-231

 10   Exhibit A2

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