By Lachlan Commins, Patterson Houen & Commins, Lawyers, Sydney
Do you operate a business which employs 15 or more staff? Are you thinking of relocating to new premises? Will you be requiring your current staff to relocate to the new premises as a condition of their continued employment? If yes, then you need to be aware of your potential liability to pay redundancy pay to those employees who refuse to relocate.
Relocation can amount to Repudation
Recent case law suggests that if an employer gives a direction to its employees that they will be required to relocate to new premises as a condition of their continued employment, the employer may be taken to have repudiated the employment agreement if there is no express or implied term in the employment agreement regarding relocation; this may apply even if the employment at the new location would be on the same terms and conditions. If an employee accepts this repudiation by refusing the employer’s direction to relocate, the employer will be deemed to have terminated the employee’s employment by making that employee’s position redundant. If an employee has been made redundant, they may be entitled to redundancy pay in addition to their other entitlements upon termination.
Employee Entitlement to Redundancy Pay
An employee’s entitlement to redundancy pay is provided for by the National Employment Standards and the Fair Work Act 2009 (“the Act”). If an employee has been made redundant, the level of redundancy pay they may become entitled to upon termination of their employment is set out in a table in s 119 of the Act. Needless to say, the amount an employer may become liable to pay its redundant employees can amount to a substantial sum when considered that employees may also be entitled to receive their accrued annual leave, long service leave and payment in lieu of notice (if applicable). Accordingly, the amount an employer may be required to pay if they are relocating premises should be taken into consideration as an expense.
Exceptions to Entitlement to Redundancy
Not all employees are entitled to redundancy pay and s 123 of the Act lists some of these exceptions. Notably the Act provides that the following employees are not entitled to redundancy pay whether or not it could be said that they have been made redundant:
- Those employed by a “small business employer” (that is, an employer that employs less than 15 employees not including casual employees other than those employed on a regular and systematic basis);
- Employees who have been employed with the employer for less than one year;
- Employees who have been retrenched as a result of the employer’s ordinary and customary turnover of labour (applicable in industries where work done by an employee is dependent on the employer retaining a contract for services with a third party, and that employer fails to retain the contract); and
- Casual employees.
What is Redundancy
The definition of redundancy given in the Act is where an employee’s employment is terminated “at the employer’s initiative because the employer no longer requires the job done by the employer to be done by anyone”; this may be due to “changes in the operational requirements of the employer’s enterprise”.
Accordingly, an employer may be forced into making redundancies as the consequence of structural change to the employer’s business. The Fair Work Ombudsman website lists the following circumstances as examples where a business may be forced to implement a redundancy:
- The introduction of new technology (eg. the employee’s job can be done by a machine);
- A slow down due to lower sales or production;
- Closure of business;
- Relocation of the business interstate or overseas;
- Restructure or reorganisation due to a merger or takeover.
The “Unfair Dismissal” Benchbook published by the Fair Work Commission also lists several examples from case law of what has and has not been considered a genuine redundancy for the purposes of the Act (see pages 86 to 89).
Essentially, a redundancy is with respect to an employee’s position within the enterprise and not with respect to the employee per se.
The Purpose of Redundancy
A redundancy allows an employer to regulate its staff levels in the face of structural change without falling foul of unfair dismissal laws contained in the Act (in the case of Award employees). If the option of redundancy were not available, the employer may be forced to rely on the employee’s conduct or capacity to do the job, which may not always be available as valid reasons. Further this process can be lengthy as it requires strict compliance with a consultation process that includes notice to the employee and providing him or her with adequate opportunities to address any shortcomings in their conduct or capacity (although summary dismissal may be available in circumstances of serious misconduct).
Repudiation of Employment Agreement by Employer
In the usual course of things, a redundancy will be brought about by the direct initiative of the employer. However, an employer may be found to have repudiated an employment agreement if its action constitutes or would constitute a breach of an essential term of the employment agreement. If such conduct arises from the employer “no longer requir[ing] the job done by the employer to be done by anyone”, the repudiation, if accepted by the employee, will amount to a redundancy.
Location may form an Essential Element Term
If an employer no longer requires an employee to do their job at a particular location, could it be said that the employer no longer requires that job to be done by anyone? If the location of that employee’s job forms an essential element of that job, whether implied or otherwise, then the answer may be “yes”. That is, if the location of a person’s job forms an integral part of that person’s job, then if the location is changed, it could be said that the person’s job no longer exists.
The following citation from the decision of DL Employment Pty Ltd v “Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union” known as the Australian Manufacturing Workers’ Union (AMWU)  FWCFB 7946 (01 December 2014) sumS up the position perfectly:
Once a “job” for the purpose of the analysis is identified as having a particular location, it is difficult to understand why (apart from any de minimis change of location) the abolition of employment at that location would not compel the conclusion that the employee’s job is no longer required to be performed by anyone.
In other cases, the following required changes of location were also deemed to have formed a repudiation of the employment agreement by the employer which amounted to a redundancy in the case of certain employees:
- Annandale to St Marys (Sydney, NSW) – 40km change
- Richmond to Laverton (Melbourne, Victoria)
- Kogarah to Ingleburn (Sydney, NSW) – 34km change
Redundancy determined on a case-by-case basis
It is essential to note that the decision regarding repudiation and redundancy will be made on a case-by-case basis with regards to the particular facts and circumstances of the employee. For example, the direction to relocate analysed in the cases above did not result in repudiation or redundancy for all employees. Indeed, some employees did not accept the employer’s repudiation and opted to make the relocation to the new premises.
Factors that will be considered by a tribunal have included:
- Whether the employment agreement contains an express term or implied term that the employee shall be required to relocate premises if directed by the employer;
- The impact the relocation would have on the employee in terms of increased travel time and costs and the disruption to his or her family and caring responsibilities;
- The nature and substance of any benefits offered by the employer to reduce the impact of the relocation on affected employees such as travel allowances, alteration of rostered hours or provision of private transport arrangements (although the tribunal has been reluctant to accept that such concessions could be said to stave off a finding of repudiation); and
- The duration of the employee’s employment at the current location, their skill-set, and their ability to adapt to a change as significant as relocation.
Factors that would refute a finding of repudiation by an employer include:
- If the employment agreement contains an express provision relating to the requirement by the employee to relocate if reasonably directed by the employer;
- If because of the nature of the industry and/or the employee’s position a standard term can be implied in the employment relationship that the employee would agree to a reasonable direction by the employer to relocate.
Apart from an express term in the employment agreement regarding the employee’s agreement to relocate if directed by the employer, a term to similar effect could be implied if it was common, or at least not unusual, practice in the particular industry or with respect to the employee’s position that he or she would agree to a reasonable direction by their employer to relocate. For instance, a managerial employee with a high level of control or responsibility in an employer’s national or international enterprise may be expected to agree to any future reasonable direction by their employer to relocate (although in such a case it may be rare that the employment agreement did not contain an express provision dealing with this issue).
Take-Away for Employers
Returning now to the series of questions at the top of this article; if you answered “yes” to all of them, you need to consider the following:
- Insert a clause into your future employment agreements that all new employees shall be required to comply with any reasonable direction by the employer to relocate to a new premises. The more detail and scope you include as to the potential whereabouts of the future location the less likelihood there is for any future disagreement to arise over what constitutes “reasonable”.
If a definite decision has already been made to relocate, you must, as soon as practicable, undertake to consult with all affected employees regarding the relocation. The consultation process needs to be carried out in strict accordance with the terms of the relevant Award or the Enterprise Agreement that covers the affected employees (the Fair Work Commission website contains a list of all modern Awards and Enterprise Agreements).
The purpose of this consultation is to:
- Discharge your obligations as an employer under the Fair Work Act 2009 and the relevant Award or Enterprise Agreement;
- Avoid the prospect of an unfair dismissal claim being brought against you;
- Negotiate with affected employees and to ascertain which are willing to relocate and which are not; and
- Determine which employees based on their circumstances would be entitled to redundancy pay.
Redundancy pay can form a significant cost to you as an employer when terminating employment. This cost must be borne in mind when thinking of relocating premises.
 Re Rubber, Plastic & Cable Making Industry (Consolidated) Award 1983  AIRC 528
 DL Employment Pty Ltd v “Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union” known as the Australian Manufacturing Workers’ Union (AMWU)  FWCFB 7946 (01 December 2014)