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September 2020

A unilateral reduction in hours can result in redundancy

A unilateral reduction in hours can result in redundancy

Case

Broadlex Services Pty Ltd v United Workers’ Union (2020)

Broadlex Services Pty Ltd (Broadlex), a cleaning services company, negotiated a new contact at one of its cleaning sites, which involved a reduction in the numbers of hours of work. Given this, Broadlex unilaterally reduced a cleaner’s hours at that site from 38 to 20 hours.

The United Workers’ Union commenced proceedings, arguing that the cleaner’s position had been made redundant and the cleaner was therefore entitled to severance pay.

Verdict

Broadlex argued it had not terminated the cleaner’s employment and, therefore, the employee was not entitled to severance pay.

The Federal Court held that the unilateral reduction in the cleaner’s hours of work had fundamentally changed the employee’s position, entitling the employee to redundancy pay for the following reasons:

1. Broadlex had repudiated the cleaner’s contract. The cleaner had accepted the repudiation by refusing to work the changed hours, bringing the contract of employment to an end.

2. There was no longer a full-time cleaning position available to be performed by the employee.

3. The Fair Work Act 2009 (Cth) (FW Act), enables an employer to apply to have the amount of severance pay reduced when the employer obtains other acceptable employment for the employee. This also applies where the employee remains employed by the same employer.

4. The FW Act’s unfair dismissal provisions apply to circumstances where an employee’s employment is terminated and they are re-engaged in a significantly inferior position.

Lessons

Exercise care when seeking to reduce an employee’s hours of work. Reducing an employee’s hours may give rise to a claim for severance pay, as well as other causes of action (such as unfair dismissal, general protection, industrial disputes or breach of contract claims).

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