The Case

Australian Commercial Catering Pty Ltd (ACC) operated a canteen at a Robert Bosch (Australia) Pty Ltd (Bosch) plant in the Melbourne suburb of Clayton. In 2013, ACC lost the Bosch contract and subsequently terminated the employment of two long-serving employees – Ms Powell and Ms Togia both worked at the Clayton plant as canteen assistants – on the basis that their services were redundant.

On 18 March 2014, ACC applied to the Fair Work Commission (FWC) to be relieved of its obligation to pay both the employees redundancy pay, claiming that it had offered the employees acceptable alternative employment for the same hours, at the same rate of pay, and under the same conditions as their previous employment.

The alternative employment was, however, at a different location some 15 minutes’ away from the Clayton plant. The offers were made on 23 October 2013, 5 days before the employees would have been required to start work at the new ACC site. Both employees refused the job offer.

In the first instance, the FWC reduced Ms Powell’s redundancy payment to 33% and left Ms Togia’s redundancy payment untouched. ACC appealed to the Full Bench of the FWC, which upheld the decision. ACC then appealed to the Federal Court.

The Verdict

The Federal Court quashed the decision of the Full Bench of the FWC and directed the FWC to hear and determine the employee’s applications according to the correct interpretation of the Fair Work Act 2009 (Cth) (FW Act).

This followed the Court’s finding that the Full Bench of the FWC had incorrectly interpreted the meaning of ‘acceptable employment’ under section 120(1)(b)(i) of the FW Act. The Court held that in determining what is ‘acceptable’, regard must be given to employees’ particular circumstances, noting: “What might be acceptable employment for one employee will not necessarily be acceptable employment for another”.

The Court held that both employees were entitled to their full redundancy pay. While Ms Togia had accepted a job offer with the new catering company at the Clayton site, which ACC had helped her to obtain, the employment involved substantially fewer hours of work, lower income and less security. As such, it did not constitute reasonable acceptable employment.

For the same reasons, the Court held that it was acceptable for Ms Powell to decline employment with the new catering company.

It also found that it was acceptable for Ms Powell to decline the alternative offer of employment at ACC’s other plant, given it would unreasonably add to her travel time by an additional 35 minutes because she had to drop her husband off at work.

In addition, the Court held that: “An increase in travel times will often result in a reduction in net wages in that it will usually involve higher fuel costs or increased fares. It may also have higher personal costs in that it will reduce the amount of leisure and family time available to an employee”.

The Lesson

In determining what constitutes acceptable alternative employment, it is important to consider the individual circumstances of the employees involved, and make the assessment on a case-by-case basis.

Remember, as the Court noted, “What might be acceptable [alternative] employment for one employee will not necessarily be acceptable [alternative] employment for another.”

Please note: Case law is reported as correct and current at time of publishing. Be aware that cases in lower courts may be appealed and decisions subsequently overturned.