Offering alternative employment in lieu of redundancy

by Miriam Bell21 Sep 2012

These days it is standard practice for employers to seek out alternative options – in particular arranging alternative employment – to redundancy pay when making an employee redundant.

A good employer should try to offer every available alternative to an employee before making them redundant, but liability for redundancy pay can become contentious in such situations. If an employee turns down an employer’s alternative employment offer, they could trigger an entitlement to redundancy pay, which would then need to be determined by Fair Work Australia (FWA).

If an employer wants to avoid, or reduce the amount of, redundancy pay for an employee, they have to prove that acceptable alternate employment was offered, Alice DeBoos from law firm Middletons said. “For award-covered employees or employees under the statutory remuneration cap for unfair dismissal claims, this is mandatory and all employers should be offering every available reemployment opportunity to employees before terminating roles by reason of redundancy.”

There is no one accepted rule for what constitutes an “acceptable alternative employment” offer, she said. “It depends on the role, the industry and the conditions of employment. As a general rule, it is a  broad concept and will cover a role which is within the employee's skills and capabilities (or could be with some retraining), is in a similar or comparable location and is commensurate in terms of remuneration.”

The Derole Nominees Pty Ltd v The Australian Chamber of Manufactures case established that “acceptable” needed to be determined objectively and was not something to be judged by the employee, DeBoos continued. “An objective assessment of the acceptability of a role will depend on the consideration of factors such as location, remuneration, duties of a like nature and like award or agreement based considerations.”

Meanwhile, she said that an unacceptable alternative employment offer could involve the job offered:

  • Being an unreasonable distance from the original place of work;
  • Requiring a completely different skill set;
  • Being on a vastly different shift pattern or roster; or
  • Having lower remuneration.

But the role should still be offered – in case the employee would rather accept than lose a job entirely, DeBoos explained. “There are several cases where employers have not met the legal requirements of ‘genuine redundancy’ because they failed to offer a job they thought wouldn’t be acceptable. It is then in the hands of the employee whether to reject the offer.”

Should an [objectively assessed] offer of acceptable alternative employment be declined by an employee, they would not then be entitled to a redundancy payment, she said. Further, in a situation where the acceptability of the offer was disputed, if the employer could satisfy the FWA that it was acceptable, then no redundancy payment would need to be made.

However, an employee might still be entitled to some type of redundancy payment even if they have accepted an offer of alternative employment – depending on the outcome of their negotiations, DeBoos added.

If the FWA has to get involved in determining whether or not redundancy pay [of any amount] is owed in such situation, they will take an individual employee’s circumstances and consider:

  • Pay levels
  • Hours of work
  • Nature of employment
  • Employment status/seniority
  • Skills and qualifications
  • Location of offered position
  • Loss of fringe benefits
  • Job security

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