Pay cut for snubbing reasonable alternative employment
When faced with redundancy, many workers may not realise that rejecting an offer of reasonable alternative employment could see their redundancy pay reduced. In this article, we detail the rights and obligations of workers when it comes to accepting or declining reasonable alternative employment.
What is reasonable alternative employment?
For a redundancy to be considered genuine under the Fair Work Act 2009, an employer must make a reasonable attempt to redeploy them in another role. Redeployment can be within the employer’s business or an entity associated with the business. For example, a subsidiary or client’s business.
While they are often used interchangeably, redeployment is different from reasonablealternative employment. The latter does not need to be a role in the employer’s business or an associated entity. It also requires an employer to consider a range of factors related to an alternative role. This includes the seniority of the position, the hours worked, the rate of pay, the job location, job security and continuity of services, amongst other factors.
Can you reject reasonable alternative employment?
An employee has the right to reject an alternative role if they believe it is not appropriate. For instance, if the pay is lower or requires more hours, amongst other reasons. If the employee rejects the alternative role, the employer has the right to reduce or eliminate their redundancy pay.
It can do this by making an application with the Fair Work Commission, under section 120 of the Fair Work Act 2009. The Fair Work Commission will then need to determine if the alternative role was suitable for the employee or not. And therefore, whether they should have their redundancy pay reduced or receive it in full.
Let’s look at two recent cases where the Fair Work Commission had to decide if an alternative role met the definition of reasonable alternative employment.
Workers have pay cut for rejecting reasonable alternative employment
In the Fair Work Commission unfair dismissal case Bartercard Digital Australia Pty Ltd [2024], the company applied to have the redundancy pay of a group of employees reduced. The workers were employed as business development managers with primary work locations across various Bartercard offices throughout Australia. Their responsibilities included managing customer accounts and promoting Bartercard’s services. They were also tasked with facilitating networking among Bartercard members and growing the company. Their role required the workers to meet members in person, for which they received a $5,000 annual vehicle allowance.
Workers told to accept new role or face redundancy
In September 2023, Bartercard underwent a restructuring that would result in the closing of its physical offices. On 19 October 2023, the workers were informed of potential redundancies. At the same time, they were offered new positions as trading specialists and told that refusal of this new role would result in redundancy.
The new role would be entirely remote due to the closure of physical offices. While the workers would lose their $5,000 annual vehicle allowance, Bartercard would provide a work from home allowance. For some of the workers, the new position would see them earn up to $10,500 more than the previous role. It also offered improved incentives to provide up to $1,000 extra per month.
Workers reject “call centre” role and opt for redundancy
Consultation meetings were held between 23 and 27 October 2023, during which Bartercard explained the reasons for the redundancy and discussed the new roles. Between 26 October and 1 November 2023, the workers were notified in writing of their dismissal. And they were informed of their entitlements including redundancy pay.
According to Fair Work Commission records, many of the workers felt the new role was a “demotion.” This was because they would no longer be interacting with customers face to face. Rather, it would be more akin to a “call centre operator” role. Some of the workers also claimed that they did not have sufficient resources to work from home. They also argued that the boost in salary would not cover the costs of establishing a work from home office.
Within two days of their dismissal, each worker declined the trading specialist role and opted for redundancy pay. They continued working until their respective notice periods ended.
Employer did not provide warning of reduced redundancy pay
Bartercard soon realised that it had not informed the workers that their redundancy pay would be reduced if they refused the new role. So on 23 November 2023, the company sent a follow-up letter outlining this oversight. For some of the workers, they were given only one day to respond. All of the workers still rejected the new role offered. Bartercard subsequently made a claim with the Fair Work Commission to have their redundancy pay reduced.
New role constituted reasonable alternative employment
The workers’ case was heard by the Fair Work Commission in April 2024. The commission noted that it was “sympathetic” to the workers’ belief that their role had lost importance. Specifically, because they would no longer see clients in person. But at the same time, it was found that the new role offered to the workers constituted reasonable alternative employment.
The Fair Work Commission outlined that the new role would be more efficient, as the workers could call prospects instead of travelling to meet them in person. It was accepted that a business “should not be inhibited from innovation and improved efficiencies through the ability to restructure its organisation.”
In addition, the commission said that while job satisfaction may factor into an employee’s decision, it “should not be a sole reason to seek a redundancy when the employer has offered reasonable alternative employment.” The Fair Work Commission noted workers should “seek to adapt” to organisational changes as opposed to refusing reasonable alternative employment.”
Worker loses one weeks’ pay for refusing reasonable alternative employment
The Fair Work Commission acknowledged the limitations some workers faced in having to work from home full time was a “drawback” of the new role. But that these limitations had to be assessed on a “case-by-case basis.”
One worker faced such limitations as he lived in a two-bedroom flat where his wife already used a bedroom as her office. The other room was used by their son for his university studies. As a solution, the Fair Work Commission said that the son could study at the university or another study space.
This particular worker had been employed with Bartercard for three years. He therefore would have been entitled to seven weeks’ redundancy pay. However, as he had rejected reasonable alternative employment, the Fair Work Commission decided to deduct one week’s pay from his redundancy pay.
Worker loses four weeks’ pay
Another worker argued that she faced difficulties working from home as she lived in a “busy environment with no separate space for her to set up a desk away from distractions without renovation.” She claimed the new role would exacerbate her cost of living situation and mental health, while also “deskilling” her.
However, the Fair Work Commission said that Bartercard not offering to fund a home office setup “does not necessarily mean that the offered employment is not suitable.” It was acknowledged that the worker “had not given enough consideration” to the alternative employment.” And that the worker had accepted the redundancy as “there had been prior performance concerns.” It was noted that she had been working one day per week from home already and had never voiced her concerns.
This worker would have been entitled to 13 weeks’ redundancy pay. However, this was cut down to just 9 weeks’ pay.
Worker loses two weeks’ pay
Another worker employed with Bartercard for over 12 years had a ligther reduction to her redundancy pay. This was because the Fair Work Commission found that she had “meaningfully engaged in considering alternative options.”
The worker had complained that she lives in a granny flat “with extremely limited space for an office set up.” The commission considered her long service to Bartercard and that the new role would require “some detrimental alteration” to set up a home office. As a result, this worker had only two weeks shaved off her redundancy pay.
Employer fails in bid to reduce retail worker’s redundancy pay
Another Fair Work Commission unfair dismissal case that dealt with reasonable alternative employment is Australian Footwear T/A Diana Ferrari [2018]. The case involved Dinna Tzortzis, who was employed by Australian Footwear part-time for almost 12 years. She worked as a retail assistant at the company’s Diana Ferrari store in Sydney. In August 2017, Australian Footwear’s CEO told all staff that Diana Ferrari would exit the apparel business. This meant that all Diana Ferrari stores would be phased out over the following 18 months.
In September 2018, Ms Tzortzis was informed that the Diana Ferrari store she worked at would cease trading the following month. In October 2018, she was offered an alternative position at a Williams store, which was owned by Australian Footwear. The store was located on the other side of Sydney. However, the new role mirrored the terms of her previous job in terms of part-time hours, pay rate and seniority.
Worker declines reasonable alternative employment
A few days later, an Australian Footwear HR representative emailed Ms Tzortzis informing her that if she rejected the new role it would make her role redundant. The representative also told her that the company would make a claim with the Fair Work Commission to have her redundancy payment reduced. Ms Tzortzis rejected the new role, and on the same day, Australian Footwear lodged its claim with the Fair Work Commission.
Was the new role reasonable alternative employment?
The core issue for the Fair Work Commission to determine was whether this alternative role constituted reasonable alternative employment. It was accepted that Ms Tzortzis’ alterative role offered the same hours, pay and seniority as her previous position. What came under close scrutiny, however, was the longer commute and parking costs Ms Tzortzis would have to bear if she accepted the alternative role.
It was found that the commute time had not increased significantly if she drove her own vehicle. However, public transport would have added considerable time to her journey. The availability and cost of parking emerged as a contentious point. At the Diana Ferrari store, free street parking was available. Conversely, parking at the Williams store required a fee of $10 per day, equating to $50 per week.
Australian Footwear argued that there were 5,000 paid parking spaces available at a discounted rate for staff at the new store. The company also claimed that there was untimed street parking located close by.
Fair Work Commission makes decision
The Fair Work Commission calculated that Ms Tzortzis’ weekly wages were approximately $615. The additional parking expense represented a significant proportion of her wages, which was deemed an unreasonable financial burden.
“The added expense of parking at Williams Macquarie as a proportion of these wages is not insignificant for a retail worker on Award rates of pay,” the Fair Work Commission said.
Based on these expenses, it was decided that the new position did not constitute reasonable alternative employment. The application by Australian Footwear to reduce Ms Tzortzis’ redundancy pay was therefore dismissed.
Conclusion to: Redundancy pay cut for rejecting redeployment
Our team has over 30 years’ experience helping Australian workers who have been unfairly dismissed. We can help you challenge your dismissal or redundancy at the Fair Work Commission, guiding you throughout the entire process. We can represent you and perhaps negotiate a larger payput or save your job. Make the call to us, it’s free.
Make sure to call us today as you have only 21 days from your redundancy / termination date to file a claim with the Fair Work Commission.
Dial 1800 333 666 for a free private discussion.
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