Employers beware – employee who had her hours unilaterally reduced deemed entitled to redundancy pay

Amid wide-spread changes to the workforce brought on by the COVID-19 pandemic, the Federal Court has handed down a decision providing that an employer who unilaterally changed a cleaner’s hours from 38 per week to 20 per week had repudiated the employment contract and terminated her employment, entitling her to redundancy pay.

Employers should be wary when making changes to an employee’s employment and ensure they are aware of the obligations attached to such actions.

What happened?

Broadlex Services Pty Ltd (Broadlex) supplied cleaning services to the electricity distributor Ausgrid. Upon entering into a new contract with Ausgrid, which had reduced cleaning hours, Broadlex informed full-time cleaner Brizitka Vrtovski that, due to operational requirements, she had been identified to reduce her status from full-time to part time, reducing her work hours from 38 hours a week to 20 hours a week with a proportionate reduction in salary. In response to such a request, Ms Vrtovski declined to sign a form consenting to the change but nevertheless began working the reduced hours as she considered she had no choice.

Why was this considered a redundancy?

Exploring the true meaning of the redundancy provisions found in the National Employment Standards (section 119 of the Fair Work Act 2009 (Cth)), Justice Katzmann provided 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.

Justice Katzmann explained that, by reducing Ms Vrtovski’s hours without consent, Broadlex had repudiated her employment contract, which was accepted by her when she refused to sign the consent form, bringing the employment relationship to an end. This had the effect that, when Ms Vrtovski started work on a part-time basis, she did so under a new contract of employment.

As the change was initiated by Broadlex, who did not require the job to be done by anyone (as the new Ausgrid contract had reduced cleaning hours), Justice Katzmann considered that, under the terms set out in section 119, Ms Vrtovski was entitled to redundancy pay.

Conclusion

The decision of the Federal Court sheds light on the potential consequences of unilateral action by an employer impacting an employee’s terms and conditions of employment.