As the COVID-19 pandemic continues and changes are made to the JobKeeper scheme, employers needing to make difficult decisions to manage the adverse economic conditions, should be careful when making changes to their workforce, particularly where those changes are significant.
The Federal Court of Australia (FCA) has confirmed, in Broadlex Services Pty Ltd v United Workers’ Union  FCA 867 (the decision), that a lack of consent to reduce an employee’s hours of work can give rise to an entitlement to redundancy pay, even where the employee continues to work for the employer.
The employer, Broadlex Services Pty Ltd (Broadlex), employed Ms Vrtovski in May 2014 as a full-time cleaner on 38 hours per week. On 15 August 2017, Broadlex informed Ms Vrtovski that her hours of work would be reduced due to operational requirements. The reduction, initiated by Broadlex, effectively changed Ms Vrtovski’s working hours from 38 hours per week to 20 hours a week, and reduced her salary by 40%. Broadlex invited Ms Vrtovski to sign a form to consent to this change, described as a “transfer from full-time to part-time” employment, inclusive of a change in hourly rates. Ms Vrtovski refused to sign the form, however, went on to work the reduced hours from the 12 September 2017 based on the perception she had no other choice.
Several years later the United Workers Union (UWU) filed a claim that alleged Ms Vrtovski’s reduction in hours and salary triggered her entitlement to redundancy pay. Broadlex denied the claim on the grounds the employee continued to be employed and was not terminated.
In the FCA decision, Justice Katzman determined that a redundancy was triggered because the reduction in the fundamental terms and conditions of employment had the effect of terminating the employee’s employment.
Justice Katzman found that the unilateral reduction of Ms Vrtovski’s hours and rate of pay constituted a ‘repudiation’ of the contract of employment.
‘Repudiation’ can include conduct that shows an unwillingness or inability to perform substantial terms of the contract.
Ms Vrtovski accepted the repudiation when she refused to sign the consent form and commenced working in the part-time role, thereby bringing the employment contract to an end. Subsequentially, the conduct by Ms Vrtovski to work the reduce hours was found to have created a new contract of employment and was not a continuation of the existing relationship Ms Vrtovski originally had with Broadlex.
As a result of these findings, Justice Katzman determined that Ms Vrtovski full-time role had in fact been made redundant and her employment terminated in 2017, triggering an entitlement to redundancy pay under section 119 of the Fair Work Act 2009, despite remaining employed with Broadlex.
This decision stands as a reminder for employers to consult with employees where fundamental changes to their employment are required and ensure genuine consent is obtained before variations are made to the terms and conditions of employment. In cases where termination of employment is triggered, employers may be able to reduce the amount of redundancy pay on application to the Fair Work Commission where other acceptable employment is obtained.
Alternatively, employers who have carefully drafted contracts of employment may be able to make variations without consent where they are permitted under the contract of employment (or industrial instrument) and are reasonable in the circumstances.
Like to know more? Contact CCIWA’s Employee Relations Advice Centre on (08) 9365 7660 or email firstname.lastname@example.org
Written By Erin Verzandvoort – Senior Employee Relations Adviser
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