Reduction in Employee’s Hours = Redundancy Pay?
The recent decision in Broadlex Services Pty Ltd v United Workers’ Union  FCA 867 highlights the risks employers will face if they reduce the hours of their employees without consent.
Broadlex, a cleaning company, experienced a downturn in business which triggered it to advise full-time employee, Ms Vrtovski, that her employment status would be reduced from full-time to part-time, reducing her hours from 38 hours per week to 20 hours per week (with a proportionate reduction in salary).
Ms Vrtovski declined to sign a form consenting to the change but nevertheless worked the reduced hours as she felt she had no choice. She later filed a dispute and upon examination, Justice Katzmann of the Federal Court of Australia held that Ms Vrtovski was entitled to redundancy pay on the grounds that:
1. Section 119 of the Fair Work Act 2009 (Cth) confirms that a redundancy requires:
- the employee’s employment to be terminated
- the termination to be done at the employer’s initiative because it no longer requires the job to be done by anyone.
2. by reducing Ms Vrtovski’s hours without consent, Broadlex had repudiated her contract of employment, which was accepted by her when she refused to sign the consent form. This, in turn, had the effect of terminating Ms Vrtovski’s full-time employment and when she commenced working on a part-time basis, she did so under a new contract of employment;
3. as the termination of Ms Vrtovski’s employment was initiated by Broadlex (when they changed her employment to part-time), who did not require her full-time role to be done by anyone, Ms Vrtovski’s circumstances met the requirements of section 119 and she was therefore entitled to redundancy pay.
Lesson for Employers
The decision in Broadlex serves as an important reminder that employers need to be very careful when making changes to an employee’s employment.
If you find yourself in a situation where you are considering making similar changes within your business, we encourage you to contact EL's Principal Legal Advisor – Workplace Relations, Amie Mish-Wills for advice & support: