FWC reveals lessons about redundancy vs dismissal rights
The Fair Work Commission (FWC) recently dealt with an unfair dismissal case involving three workers who were told their positions would become redundant when their employer lost a major contract.
The workers were offered alternative roles but refused them, leading to a dispute over whether they resigned or were dismissed.
The workers argued they had been forced into fundamentally different positions that would reduce their income and change their working conditions significantly.
They maintained they should not have to resign and that their employer should terminate their employment and pay redundancy entitlements.
The employer countered that they had offered comparable alternative roles and that no termination had occurred. They argued the workers had effectively resigned by refusing reasonable redeployment offers and failing to report to their new positions.
The three workers were employed as roadside technicians for a motor vehicle dealership.
In October 2024, the dealer principal called affected employees to inform them that their major service contract would not be renewed and would end on 9 December 2024. A new contractor was set to take over the contract.
On 8 November 2024, the human resources manager sent emails to workers asking them to attend meetings to discuss the redundancy.
The emails noted that under the modern award covering the workers' employment terms, the employer was required to meet with workers about the possible impact of this major change "and not just correspond in writing."
One worker responded expressing concerns about the lack of written communication following the phone call.
He said: "Until now it's all word of mouth and nothing solid in writing." The human resources manager confirmed that holiday entitlements would be paid if he resigned, requesting written resignation by 25 November 2024.
Between 20 and 22 November 2024, discussions were held with the workers who were provided with job descriptions for the redeployment roles.
The workers received legal advice and on 24 November, two workers sent a letter declining the redeployment offer.
The workers argued they had not received official written notification of changes to their employment.
Their letter stated: "Emails from [the employer] asking for my resignation after an admission via email that my job role has been made redundant... is unacceptable." They argued the repeated requests for resignation bordered on coercion.
The workers concluded: "After much consideration, I must advise that I will be declining the verbal offer of redeployment with [the employer]. This requires [the employer] to terminate my employment, and not for me to resign."
The third worker sent a separate email saying he was not resigning and expected the employer to pay his "full redundancy entitlements."
On 26 November 2024, the employer sent letters to all workers setting out their position. The letters stated: "To be clear, we are not terminating your employment as we are not causing it to end."
The employer explained that while roadside technician roles were redundant, this was "not the same as ending of employment by termination."
The employer argued there would be "no termination of employment at the initiative of the employer" and that they preferred to describe the situation as offering "a commensurate role so that you transfer with us." The letters explained that roles were available for those who wished to stay.
The employer maintained: "In our opinion, there is no automatic entitlement to redundancy pay just because your position has been made redundant because we have offered you a commensurate role."
On 6 December 2024, the employer sent formal letters directing workers to report on 10 December 2024, warning they would be considered to have resigned if they failed to attend.
The roadside technicians originally worked with autonomy, driving service vehicles and attending breakdowns rather than working under direct supervision in workshops.
Two workers earned $35 per hour whilst the third earned $33 per hour. All workers received commission payments varying between $150 and $1,500 monthly depending on meeting performance targets.
The proposed service technician role involved workshop-based vehicle repairs with performance standards requiring a "minimum of 95% productivity with an efficiency of 95%."
The trade assistant role required customer service duties, washing cars, and assisting qualified mechanics. Both new roles reduced weekly hours from 42 to 38 hours and eliminated commission payments.
One worker calculated the financial impact: "4hrs less X $33 = $132/week, fuel costs = $107.4/week, nightshift allowance = $90/week, battery bonus = $37.50/week... Total loss: $353.04."
For a single parent, additional travel requirements created further hardship, with the worker noting the new role would mean "working away in another town for a minimum of 46.5 hrs/week including travel time."
The FWC determined that directing workers to perform substantially different roles without consent constituted repudiation of their employment contracts.
The employment contracts specified workers were employed as roadside technicians, with a clause allowing the employer to require workers to "perform other tasks from time to time, as reasonably requested."
The FWC found this power was limited, stating: "Read in context, [the clause] cannot sensibly be construed to mean that the employer can direct the employee to perform any other tasks, for any duration of time. The clause is clearly directed to ad hoc duties."
The Commission found that requiring workers to perform different roles permanently was not reasonable.
The Commission noted that employment contracts required any changes to be made "by mutual agreement in writing between the parties," with no evidence of any written agreement to vary the contracts.
The Commission concluded that changes in responsibilities, supervision arrangements, and pay were significant enough to constitute contract repudiation.
The employer argued workers had resigned rather than been dismissed, but the FWC rejected this argument.
The Commission stated: "I am satisfied that the termination was therefore at the initiative of the employer. [The workers] are eligible to seek a remedy for unfair dismissal."
The Commission noted that the significant reduction in pay constituted demotion under the Fair Work Act 2009.
The decision explained: "While the [workers'] hourly pay would remain the same, their weekly hours, and consequently their weekly pay, would be reduced by 10%, they would no longer receive a commission bonus."
Regarding redundancy entitlements, the Commission stated: "As I have determined that the [workers] were terminated, redundancy entitlements are owing to the [workers]."
However, the FWC clarified: "The Commission cannot and should not order that redundancy entitlements be paid through an unfair dismissal application."
The matter was scheduled for hearing, with the Commission noting the matter may resolve if workers are paid their redundancy entitlements.
