Reduction in hours triggers redundancy payment

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Reduction in hours triggers redundancy payment

An appeal in the Federal Court has upheld a decision to grant an employee redundancy pay, following a significant reduction in working hours. Both decisions affirmed the argument that the circumstances were consistent with the traditional meaning of termination extending to fundamental changes in employment conditions.

The case involved Broadlex Services Pty Ltd, a company contracted to supplying cleaning services to the electricity distributer, Ausgrid. The
employee commenced an employment contract on 1 May 2014 as a full-time employee. On 1 June 2017, Broadlex negotiated a new contract with Ausgrid in which the cleaning hours were reduced.

Soon after, on 15 August 2017, the employee was informed by Broadlex that “due to consideration of work flow an operational requirement to reduce (her) status from full-time to part-time”. Consequently, her working hours were reduced from 38 hours per week to 20 hours per week, and her salary effectively reduced by 40%.

The employee was invited to sign a consent form to affect the hours change. Not surprisingly, she refused but commenced working the new reduced hours on 12 September 2017 because she considered she had no choice. However, she also contacted her union, the United Workers Union, who commenced action on her behalf.

Section 119 (1) of the Fair Work Act (FWA) states in part   “An employee is entitled to be paid if the employee’s employment is terminated..

The union’s claim was that Broadlex had contravened s 44 of the FWA as the company had breached a provision of the National Employment Standards (by failing to pay the employee redundancy payments).

At the initial trial, Broadlex accepted that in reducing her employment status from full-time to part-time, it had repudiated her contract. The
Magistrate found that in accepting the repudiation by refusing to sign the consent form or agreeing to the proposed variation, her initial contact of employment was terminated, and when the employee started working on a part-time basis, she did so under a new contract.

Her Honour also found that the employment contract was terminated at the initiative of Broadlex because it no longer required the job to be done by anyone else (on a full-time basis) and that there was no evidence that the termination was due to the ordinary and customary turnover of labour, and hence, the employee was entitled to redundancy pay which she ordered.

In the appeal, Broadlex disputed the entitlement to redundancy, arguing that the employment relationship continued, and that termination of the initial contract was not sufficient to generate the entitlements under s119(1).

Importantly, in the initial ruling, the magistrate did not accept that there had been a variation of the full-time contract. Rather as explained above, she found that Broadlex had repudiated the contract, and that the employee had accepted the repudiation.

In the appeal, J Katzmann confirmed the views expressed by the Magistrate that the change in circumstances constituted a “termination of employment”, therefore triggering an entitlement to redundancy. As the Judge commented “..there was, in effect, a wrongful dismissal constituted by Broadlex’s repudiation of the employee’s contract, which the employment relationship to an end. The relationship in which (she) entered after she accepted the repudiation was a fundamentally different relationship from the relationship the parties previously enjoyed, She was no longer a full-time employee but a part-time employee, performing a fraction of the work she formerly undertook for a fraction of the
remuneration she formally received”.

Broadlex Services Pty Ltd vs United Workers Union  [2020] FWC 867 (22 June 2020)

For queries about redundancy or other employment questions, please contact Dean Cameron at Workforce
Advisory Lawyers – We Know Employment Law on 0417 622 178 or via email to dean.cameron@workforceadvisory.com.au

Disclaimer: This information is provided as general advice on workplace relations and employment law. It does not constitute legal advice and it is always advisable to seek further information regarding specific workplace issues. Liability limited by a scheme approved under professional standards legislation.

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