Workplace relocation: acceptable alternative employment or redundancy?

The issue of relocating employees from one workplace to another is one which sometimes arises when businesses restructure or when workplaces close (and others open elsewhere). Whether an employee is entitled to redundancy pay, and whether an employer can insist that the employee relocate are questions which often arise.

Matters such as whether there are any relevant express or implied binding terms, the extent of the relocation and allowances which might be provided to employees to compensate them for additional travelling are all factors. Decisions such as Target Australia Pty Ltd v SDA re Target Retail Agreement 2001 (Target) ^[1] which considered a 44 km relocation and additional travelling costs reimbursed by the employer to be an acceptable relocation, are often considered when legal advice is sought.

A recent decision of the Fair Work Commission has again considered the issue of relocation, and demonstrates the difficulties employers face when attempting to relocate employees.^[2]

Fair Work Commission decision: DL Employment Pty Ltd v Australian Manufacturing Workers’ Union ^[3]

Darrell Lea owned factories in Kogarah and Ingleburn. Employees at these factories were covered by the Darrell Lea Enterprise Agreement (Darrell Lea Agreement). The Darrell Lea Agreement made no express reference to the location of employment.

DL Employment acquired both of the Darrell Lea factories and retained employees at Kogarah. DL Employment entered into contracts with Kogarah employees which permitted DL Employment to transfer Kogarah employees to Ingleburn (DL Employment Contracts).

When the Kogarah site closed, DL Employment attempted to relocate Kogarah employees to Ingleburn in accordance with the relocation clauses in the DL Employment Contracts.

Claim of employees

Six employees challenged DL Employment’s attempted relocation. They claimed that the relocation unfairly placed additional travel burdens on them. On behalf of these employees, the AMWU argued that the Kogarah closure constituted redundancy under the terms of the Darrell Lea Agreement.

Employer’s arguments

DL Employment argued in reply that the relocation was acceptable alternative employment, relying on the relocation clause in the DL Employment Contracts. DL Employment also pointed out that it had offered the employees a bus service from Kogarah to Ingleburn and a $70 per week allowance to meet the additional travel requirements.

Fair Work Commission original decision

At first instance, the Commission held that the employees’ positions were made redundant, that there was no acceptable alternative employment, and therefore, redundancy payments were required. DL Employment appealed to the Full Bench of the Fair Work Commission.^[4]

Full Bench of the Fair Work Commission

The Full Bench ruled that DL Employment must pay its employees their full entitlements. This liability cannot be reduced by alternative employment at Ingleburn.

Closure of the Kogarah site triggered redundancy

There was no dispute that the parties were bound by the Darrell Lea Agreement, which provided that the redundancy process is initiated by:

"a definite decision that the employer no longer wishes the job the employee has been doing to be done by anyone." ^[5]

A subsidiary issue was whether “the job” ^[6] “that each employee occupied was one located only at the Kogarah plant”, ^[7]  or whether the job, at the discretion of the employer, could be relocated to Ingleburn.

Applying Re Rubber Plastic & Cablemaking Industry Award 1972, ^[8] the Full Bench said that for location to be accepted as an element of the job, “location needs to have been a term of the particular employment” ^[9] instrument; that is, a term of the Darrell Lea Agreement.

The Full Bench found that the Darrell Lea Agreement contained no express provision that made location a term of “the job”. Despite this, the Full Bench imputed location into the Darrell Lea Agreement by relying on “textual and extrinsic implications” ^[10] that suggested that location was important to the employees.

Because the Darrell Lea Agreement contained a term stating that the agreement exhaustively recorded the parties’ rights and obligations, the DL Employment Contracts could not impact upon this imputed term of employment.

Relocation to Ingleburn was not acceptable alternative employment

The Full Bench then considered whether DL Employment’s redundancy liability could be reduced by alternative employment in Ingleburn. This required the relocation to be acceptable alternative employment.

The Full Bench did not believe that the travel allowances DL Employment offered had met the objective standards required and concluded that DL Employment failed to consider;

"the additional distance to the Ingleburn site (approximately 34 kilometres), the significant additional travelling time involved (even if one takes DL Employment’s lower-end estimate of this), and the extent of the consequential disruption to the long-established patterns of the Claimant Employee’s personal lives and circumstances."^[11]

This meant DL Employment had failed to meet the objective standards required for an employer to offer acceptable alternative employment.

As an obiter comment, the Full Bench decided that the relocation to Ingleburn as alternative employment was unacceptable.

Conclusion and implications of decision

The Re Rubber Plastic & Cablemaking Industry Award 1972 case provided that the location of employment will be considered an element of “the job” when determining redundancy, only if it is a term of the employment agreement.

The Full Bench conceded that location was not an express term of the Darrell Lea Agreement. A logical sequence would be to conclude that location was therefore not a term of the agreement, meaning it could not be considered when determining whether relocation triggers redundancy.

The Full Bench, however, relied on textual and extrinsic materials to conclude that for the Kogarah workers, location was an “essential term of their employment contracts”,^[12] and imputed location into being a term of the Darrell Lea Agreement.

This imputation demonstrates that employers must consider both the express and implied terms of bargaining agreements with regards to the location of employment. In this case, implied terms meant location was an element of “the job” with regards to redundancy, even though there was no express term dealing with location.

With regards to how relocation interacts with acceptable alternative employment, DL Employment’s relocation was a similar distance to the relocation in Target, and, like the employers in Target, offered reimbursement for travel costs.^[13] Despite these similarities, the Full Bench came to a different conclusion than the court in Target. Unlike Target, the Full Bench demanded that employers consider how relocation will impact on the personal lives of employees and their families. This demonstrates that the Full Bench elevated the standards an employer must meet for relocation to be acceptable alternative employment. This constrained the employer’s power to relocate employees. As a result, employment law practitioners must carefully consider whether a relocation constitutes acceptable alternative employment, and should warn their employer clients of the risk of redundancy being triggered by unacceptable relocations — a result that is more likely following the Full Bench’s decision in the DL case.

The authors thank Sadaat Cheema, Lawyer, Clayton Utz for his contribution to the article.

This article was first published in the Employment Law Bulletin, Vol 21 No 1, February 2015