THE issue of whether employees are entitled to a redundancy payment when employers seek to retain them on standby payment can be somewhat difficult. AREEA principal employee relations consultant Bill Fitzgerald reviews a recent decision from the Fair Work Commission providing insight on this important issue.

In this case, mining contractor Barminco lost a contract at a Tasmanian site, but won another during the intervening period. As a result, Barminco sought to hold its existing employees on a standby payment at a reduced rate for a limited period, with intention to reassign those employees to the new site once the contract period began commenced.

The standby arrangement included remuneration at 75% of the employees’ average earnings for a period of approximately two months during which employees would not be required to work.

However, the Australian Workers Union, which represented the employees receiving the standby payment, argued the arrangement was unsuitable.

The union submitted that the reduction in remuneration during the standby period was so significant that the terms and conditions of employment were not substantially similar, as required under the Fair Work Act 2009.

Further, it said the greater travel burdens of up to one hour each way for employees travelling to the new site made the arrangement unsuitable in the same vein, therefore warranting redundancy payouts.

Commissioner Lee of the Fair Work Commission considered these two issues and other ancillary jurisdictional and threshold issues, but ruled against the entitlement to redundancy payments in both cases.

Commissioner Lee said that the location issue should be determined in the context of the nature of the resources sector.

“It is an agreed fact in this matter that the nature of the industry in which the employer operates is such that contracts are won and lost from time to time,” Cmn Less said.

“When a contract at a site is lost, the Respondent may be required to look at redeployment options at alternative mine sites and engage in consultation with the affected employees and their union representatives.

“It is a reality that mine sites are in rural areas and generally speaking some considerable distance from each other. This should be taken into consideration. They are different circumstances to those that would be considered when considering and acceptable alternate role, in a metropolitan setting.”

In regard to the standby issue, Commissioner Lee again found that the extent of the reduction by the employer paying a reduced rate of pay for a limited duration did not mean that the alternative employment was not on substantially the same terms and conditions.

“In my view, the reduced amount of payment, while a disadvantage for employees, has to be seen in context, it is the only disadvantage for the employees in this category. Moreover, it is a ‘one off’ and in context, a relatively minor disadvantage,” he said.

“The factors must be looked at as a whole. In this case, there is no dispute that the position offered was acceptable in all respects when the criteria is applied, with the stand-by period and its quantum of payment being the only criteria in dispute.

“When considered against the totality of the criteria, it is not of such significance in the circumstances of this matter to support a finding that the employment is not acceptable.”

With the exception of one employee in the case, Cmn Lee refused the application for redundancy payouts.

Read the full decision here.

Implications for Employers

This case is of special significance to the resource industry as it provides clarification on what constitutes suitable arrangements for the reassignment of employees, including standby payment rates.

It is also of importance that the Fair Work Commission took into account the nature of resource industry contracting trends.

The Fair Work Act, however, continues to pose some complications around standby payments to employees while new contracts are established. AREEA members are encouraged to contact their local AREEA office to speak to one of our employee relations experts for further advice, guidance and information.