As our business environment changes, organisational restructures are on the cards, and which often comes with redundancies. Employers should be comforted in knowing that, if done correctly, a genuine redundancy is a solid defense to an unfair dismissal claim under section 389 Fair Work Act 2009 (Cth). However, if the redundancy process is not done correctly, then the organisation risks legal claims of unfair dismissal, general protections and discrimination.
Learn how to get it right by following the tips below.
Tip #1 - Ensure the proposed dismissals are a genuine redundancy- avoid the common traps
To meet the requirements of a genuine redundancy in Section 389 of the Fair Work Act, an employer must prove that:
The employer no longer required the person's job to be performed by anyone because of changes in the operational requirements of the employer's enterprise; AND
Compliance with obligations in any applicable modern award or enterprise agreement; AND
That redeployment within the employer's enterprise or an associated entity is not reasonable in the circumstances.
Case study: Consulting firm engaged to perform the employee's duties [1]
The General Manager of the Human Resources team's position was made redundant. The organisation engaged a consulting firm. The consulting firm's scope of work grew over time to include the previous employee's duties. It was found not to be a genuine redundancy because the duties were still required to be done. An important lesson for organisations is that outsourcing the role does not automatically make it a genuine redundancy and care must be taken to ensure that the role is not replaced without a change in the substantial business environment.
Tip #2 - Know your essential documents
Good record keeping can protect a business if an employee makes a legal claim. Be prepared and have the following information in writing before the final decision to make postions redundant:
Know your numbers- the financial analysis which supports the decision to restructure.
Organizational charts and responsibilities- show that the role is no longer required to be performed by anyone- internally or externally.
Changes to the business environment- automation, reduction in demand, changing trends, project completion, loss of key business contract.
Projected downturn and the employees have been selected based on a skills assessment.
The reasons why redeployment is not available.
Tip #3 - Consult with employees
Employees covered in modern awards and enterprise agreements have extra consultation requirements. These requirements need to be followed carefully to ensure that it meets the threshold of a"genuine redundancy". The consultation needs to start before the final decision has been made.
Some modern awards and enterprise agreements require employers to send letters at various stages and hold multiple meetings with affected employees. It is important to check the terms of the applicable modern award or enterprise agreement to ensure that the process is properly complied with.
Case study: Employer did not consult during a business downturn [2]
A business faced a downturn and the warehouse manager's position was selected for redundancy. The employer did not consult before deciding to make the position redundant. The Comission held that the employer successfully argued that the job did not need to be performed by anyone, but ultimately failed to prove that it was a genuine redundancy because the employer did not consult.
Case study: Employer met the consultation requirements [3]
The employee's role was made redundant because of a downturn in work. She was covered by the Architect's Award 2010 which required the employer to:
1- Notify the affected employees and their representatives;
2- Discuss the potential changes with the employees and actions to mitigate against adverse effects and to provide prompt consideration;
3- Provision of information to the employees concerned;
The employer followed the steps from the relevant award. The Commission decided that the consultation requirements were met.
Tip #4 - Avoid illegal terminations
It is important to be mindful of categories where the termination of the employee would be illegal. Common legal traps include:
Discrimination: Choosing for redundancy because the employee has a protected attribute such as their race, colour, sex, sexual preference, age, physical or mental disability, marital status, family responsibilities, pregnancy, religion, political opinion, national extraction, social origin.
Employee misconduct or poor performance: If the employee is selected for redundancy because of their misconduct, it does not satisfy the requirements of a genunie redundancy because it is not due to changes in the operational requirements in the employer's enterprise and the role still needs to be performed by someone. The reason for the termination needs to be recorded as employee misconduct and the employee should be carefully performance managed before termination.
Because the employee exercised a workplace right or proposes to exercise a workplace right:
Complaints: The employee made a complaint or inquiry in relation to their employment.
Parental leave: The employee took parental leave.
Sickness/injury: The employee has been absent for less than 3 months in a year.
Carers' leave: The employee has been on leave for less than 3 months in a year for carers' responsibilities.
Union involvement: The employee has become involved in the union or taken a formal role within the union. Likewise, the decision not to become involved in the union is protected too.
Compensation claim: The employee made a workers' compensation claim.
Case study: Termination to avoid union negotiations [4]
A major airline made workers redundant, six months before the applicable Enterprise Bargaining agreement was due to be negotiated. The Full Court of the Federal Court held that the employer engaged in adverse action to prevent the workers from engaging in a workplace right. This case may be subject to an appeal.
Tip #5 - Be kind, be polite
How people are treated in the redundancy process has a big impact. It impacts on your organisation's internal morale and reputation in the wide world.
Get in touch
For trusted legal advice on how to conduct a redundancy process, get in to touch. Contact Caroline Mense from Legal Enablers on (03) 8691 3128.
References:
[1] Miller v Central Gippsland Water Authority [1997] FCA 1081 (2 October 1997), [(1997) 76 IR 186].
[2] UES (Int'l) Pty Ltd v Harvey [2012] FWAFB 5241 (Acton SDP, Kaufman SDP, Bissett C, 14 August 2012), [(2012) 215 IR 263].
[3] Patti v Vincent Chrisp & Partners P/L t/a Vincent Chrisp Architects [2012] FWA 8677 (Hamilton DP, 11 October 2012).