Court Considers Years of Service in Assessing “Alternative Acceptable Employment”

By MST Lawyers

The New South Wales District Court has awarded an employee more than $150,000 in redundancy entitlements, finding that the transfer of an employee to a position with identical pay and hours did not satisfy the “acceptable alternative employment” test.

Mr Smith had accrued 32 years’ service with Commonwealth Steel Company Pty Ltd, holding the position of furnace operator for the last 20 years. In October 2010, due to a lack of work in the forge, Mr Smith was transferred to a “finishing line” and told his position would be reassessed in January 2011. Whilst the employee received the same wage and worked identical hours following the transfer, Mr Smith’s primary duties changed from furnace operations to painting railway wheels.

Mr Smith described the transfer as humiliating and found the painting work physically challenging as he suffered osteoarthritis in his knee. In November 2010, Mr Smith tended his resignation and sought payment of his redundancy entitlements (contained in a pre-modern Award).  Commonwealth Steel Company Pty Ltd argued that Mr Smith was not entitled to such payment as he had rejected the alternative acceptable employment.

In assessing whether the transfer amounted to “acceptable alternative employment”, Justice Elkaim referred to the well-established test in Clothing and Allied Trades Union of Australia v Hot Tuna Pty Ltd (1988) 27 IR 226, recently applied in UXC Connect v Moore [2012] FWC 4296:

• the test is objective;
• all relevant aspects of the job must be considered, such as pay levels, hours of work, seniority, fringe benefits, work load and speed, job security and travelling time;
• the test can only be determined through an evaluation of the facts before the Court.

In his judgement, Justice Elkaim concluded that the considerable length of service in his position afforded Mr Smith a certain level of seniority. His Honour expressed that through the transfer Mr Smith was effectively “starting afresh” requiring immediate training, and he was therefore “changing from a position based on seniority (even if only derived from length of service) to one in which, notwithstanding the similar pay scale, he became a trainee.”  Despite the maintenance of his hours and wage level, Justice Elkaim accepted Mr Smith’s view that the transfer was tantamount to a demotion.

Justice Elkaim also relied upon the AIRC decision in Von Bibra Robina Autovillage Pty Ltd to find that the finishing line position was not acceptable as it had no real connection with the employee’s demonstrated skill set and experience.

Whilst the Court was precluded from taking Mr Smith’s physical condition into account in deciding whether the finishing line job was acceptable, it found that the employer’s efforts to secure an alternative position were not bona fide given its direction to Mr Smith to work in the finishing line without any consultation in regards his physical capacity.

The case serves as a warning to employers who seek to transfer employees to different positions in order to avoid redundancy payments. Employers are encouraged to seek legal advice in relation redundancy obligations and entitlements, especially where redeployment offers are rejected.

If you require assistance regarding employment, industrial, OHS and HR advisory related matters, please call the Mason Sier Turnbull’s Workplace Relations team on (03) 8540 0200.

Smith v Onesteel Limited and Commonwealth Steel Company Pty Ltd [2013] NSWDC 18 (15 March 2013)