Most employers are unaware that when making a  position redundant, they can in fact reduce the amount of redundancy pay an employee is entitled to if they obtain "acceptable alternative employment” for them. This is easier said than done though, as an employer found out when a decision to vary their redundancy pay obligations was overturned by a Fair Work Commission (FWC) full bench.

After losing its contract to supply security services to a stevedoring company, an employer made 49 of its employees redundant. These employees were then employed by the security company that took over their former employer’s contract. However, their previous service with their former employer was not recognised for the purpose of accrued entitlements.

The former employer then filed an application to the FWC for an exemption from making redundancy payments. This was on the basis that they had ‘obtained’ acceptable alternative employment for these employees.

In an initial decision, the Commissioner found that this was the case and relieved the company of its redundancy pay obligations. However, on appeal, the FWC full bench ruled that merely facilitating an invitation for employees to apply for a position and undertake an interview with the security company was not ‘obtaining’ employment.  

The full bench said that the former employer “did no more than to secure the employees an opportunity to enter the recruitment process of [the security company], which may or may not have resulted in an offer of employment”.

Additionally, the bench found that the only other  actions the former employer took was to unsuccessfully attempt to negotiate an agreement with the security company covering the employee’s accrued entitlements and to provide it with its existing enterprise agreement.

This decision is a reminder to employers that they don’t have to automatically give a big redundancy pay-out to every employee that lines up for it. Although, when making an application to the FWC, employers should be aware that providing former employee’s contact details or facilitating an interview with a potential new  employer will not be enough to escape these  obligations.

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