Redundancies: Proceed with caution!

Redundancies
Proceed with caution!

Rosa Raco, Principal & Katherine Taylor, Law Student

WHAT IS A GENUINE REDUNDANCY?

For a redundancy to be genuine, it needs to meet the requirements set out under section 389 of the Fair Work Act 2009 (FW Act). This is replicated below for your convenience. If a redundancy is

s 389 firstly outlines the meaning of genuine redundancy

  (1)  A person’s dismissal was a case of genuine redundancy if:

  1. the employer no longer required the job to be performed by anyone because of changes in the operational requirements of the employer’s enterprise;

This includes splitting a job up and sharing it amongst other workers.

  • the employer has complied with any obligation in a modern award or enterprise agreement to consult about the redundancy.

Most awards have a ‘major change’ section outlining consultation requirements. The importance of consultation is evidenced in the below case – one of the first cases decided in the COVID19 era:

A recent case, Australian Municipal, Administrative, Clerical & Services Union v Auscript Australasia Pty Ltd [2020] FWC 1821, highlights the importance of adhering to consultation obligations under the relevant modern award.

Here, an employer sought to make 58 employees redundant, however is was held that Auscript had failed to consult properly over their decision to downsize. The Commission stated that the consultation was hollow because the business had already made their decision.

Employees had presented other options such as their willingness to stand down, use leave (including leave without pay) and even some employees taking break in their careers, all rather than redundancies. Auscript’s failure to consider these business options properly, made its ‘consultation’ more like ‘notification’; that is, merely notifying the employees of its decision.

The FWC also stated that Auscript had failed to treat its workers with dignity and respect during this time of crisis.

The second limb of section 389 of the FW Act concerns redeployment:

389 (2) A  person’s dismissal was not a case of genuine redundancy if it would have been reasonable in all the circumstances for the person to be redeployed within:

  1. the employer’s enterprise; or
  2. the enterprise of an associated entity of the employer.

An employer must consider all redeployment options, even to lower level positions, and must include all its associated entities when considering redeployment options.  

If a redundancy is found not to be a genuine redundancy, it could be found to be an unfair dismissal.

HOW DO YOU SELECT WHICH EMPLOYEES TO MAKE REDUNDANT?

An employer must have fair, valid and transparent reasons to make one employee redundant over another if they occupy the same or similar positions.

This is not to avoid the Unfair Dismissal provisions of FW Act, but to avoid the adverse action provisions – these provisions outline protections for employees against an action that is unlawful; if the action is taken for particular reasons such as discriminating between employees. Processes employers use can include a ‘spill and fill’ where they vacate the affected positions and ask employees to apply for their positions, or a comparison of resumes, or possibly a skills matrix where employees are compared to each other. The important point to remember is to ensure the process selected is valid and able to be scrutinised.

InCFMEU v Melbourne Precast Concrete Nominees Pty Ltd [2020] FCA 931, the Federal court ruled that the employer used a “contrived” selection process to make a “stellar” senior employee redundant because of his role as a Occupational Health & Safety (OH&S) rep and his complaints to the workplace safety regulator.

The Court also found that the employer failed to disprove that it had sacked the employee because he was exercising his workplace rights as an OHS rep. A skills matrix was used, but Justice O’Callahan found that it was a document “contrived by the director to conceal the real reason for the dismissal”, and the director was subsequently found personally liable for the adverse action.

Overall, the company failed to prove that the reasons given by the company for the dismissal were in fact for substantive and operative reasons.

If you are looking at making staff redundant, WR Law can assist you to identify and manage your obligations and minimise the risks. Get the right advice and get it early!

This article has been prepared by WR Law for information purposes only and is not legal advice. Please contact WR Law directly for legal advice regarding your specific circumstances

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