A recent decision of the Full Federal Court (the Court) has provided important clarification on when a change to a part-time employee’s hours can constitute a genuine redundancy. In Commissioner of Taxation v Baya Casal, the Court confirmed that a substantial reduction in hours and remuneration can fundamentally change a position, meaning the original role no longer exists.
Although the case arose in a tax law context, its reasoning has significant implications for employment law, restructures, redeployment, and redundancy decisions across Australia.
Background
The employee worked as a part-time assistant in an early learning centre at Ivanhoe Grammar School, working approximately 34.5 hours per week.
Following a restructure, the employer advised that her role would change and offered alternative positions involving significantly reduced hours, including roles of 28.5 hours and 21.5 hours per week. The employee declined the roles and her employment was terminated.
The dispute arose when the Australian Taxation Office (ATO) treated the termination payment as an ordinary employment termination payment rather than a genuine redundancy payment, which would attract more favourable tax treatment.
Decision
The Court held that the employee had been genuinely made redundant.
Importantly, the Court rejected the argument that redundancy could not exist because the same duties still needed to be performed.
Instead, the Court held that a “position” includes more than just tasks or duties. It also includes attributes such as (a) working hours; (b) remuneration; (c) scope and scale of the role; and (d) working arrangements.
A significant reduction in hours and pay may fundamentally alter a role so that the original position no longer exists, even if similar work continues.
Key takeaway
The decision confirms that major reductions in hours can amount to redundancy, particularly for part-time roles where working hours are a defining feature of the position.
For employers, the case is a reminder that offering an employee alternative roles with substantially reduced hours or pay may not prevent a redundancy from arising.
As restructures become more common, this decision highlights the importance of carefully assessing whether changes to a role effectively eliminate the original position.
At FC Lawyers, our experienced business and corporate team can assist with advising on, employment law, drafting contracts, termination and other related matters. Contact our team today to discusss your employment law needs.
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