Redundancy is a legitimate reason for terminating employment. However, managers need to ensure proper process is followed to avoid unfair dismissal and adverse action claims under the Fair Work Act 2009 (FW Act).

When it comes to Redundancies, even the best intentions can put your business at risk.

“Genuine redundancy’ vs. “Unfair Dismissal” – the pain of ripping off the redundancy band-aid

Redundancies are emotionally and financially tough on everyone involved. So it’s no surprise Employers often look for a fast resolution.

‘Ripping off the Band-Aid’ to quickly finalise a redundancy can seem like a good approach to minimise disruption and distress. However, a rushed process, no matter the intention, could open the door to an unfair dismissal claim.

How to avoid so?

If you are considering redundancies, you must understand your obligations as an Employer and not to risk a protracted Unfair Dismissal proceeding.

Tip 1 : Prove the redundancy is “genuine”

A genuine redundancy is a type of dismissal that typically occurs at a time of operational change. The Fair Work Act 2009 (Cth)(Fair Work Act) sets out the terms for employment and dismissals, including genuine redundancies. A redundancy will be genuine if:

  1. The employer has complied with consultation obligations; and
  2. The employer has explored reasonable re-deployment opportunities for the employee.

According to the Fair Work Act (Section 389(1)), a genuine redundancy is:

  • when the job no longer required,
  • because of changes in the operational requirements. 

The ongoing economic effects of the COVID pandemic has forced a growing number of businesses to consider redundancies over the last 12-months.

If a redundancy occurs, the process must comply with any relevant Modern Award or Enterprise Agreement obligations. An Employer’s obligations may include a consultation process and considering redeployment options. 

Consultation obligations of redundancy

An employer must comply with any award or agreement obligation about consultation.

Redundancies are not used as a dismissal vehicle for another purpose. The purpose could be racial or sexual discriminating. As an Employer, your selection method for redundancies should be

  • fair,
  • non-discriminatory and
  • easily justified to other parties.

Things To Consider

If an employer is unsure whether the all obligations are met, it is recommended to conduct following activities

  • seek expert advice from a qualified practitioner or work relations specialist;
  • undertake a formal consultation process;
  • process should be documented accordingly. 

to ensure a business not only satisfies its obligations, but avoids unnecessary disputes.

Tip 2 : Justify why the job is Redundant

If you are considering a redundancy, the first step is to ask if you no longer wish the job to be performed by anyone?

A position can become redundant due to changes in your business operations. Changes in operational requirements resulting in a redundancy include:

  • Automation of processes; where a program or machine is available to perform the job
  • A downturn in trade or completion of a project reducing the number of employees required
  • Business or site closure 
  • A restructure resulting in the position no longer existing as tasks become redistributed or outsourced

Know your obligations when dealing with redundancies.

Employers must understand their consultation obligations in the redundancy process. Most Modern Awards and Enterprise Agreements have consultation provisions for redundancies.

This is an opportunity for the Employee to be engaged before a permanent decision is made.

One of the benefits of undertaking a consultation is that the Employee may come up with alternative solutions.Importantly, if an Employer fails to comply with the consultation obligation correctly, this could result in an unfair dismissal claim. 

There are times where consultation is unlikely to negate the operational reasons for the redundancy or change the outcome; this does not void an Employers obligation to consult under the Fair Work Act.  The consultation process could include why a role redundant.

Tip 3 : Consider all alternatives to Redundancies.

Redundancy is a form of dismissal. If an employer fails to comply with the consultation process or adequately consider redeployment options, it is not a genuine redundancy under the Fair Work Act.

If the dismissal is not a genuine redundancy, the onus will be on the Employer to demonstrate that the dismissal is still “fair” in any proceedings. Saving time is not worth risking an Unfair Dismissal proceeding.

What should I do – When an employer decided some positions will be made redundant

Under the Fair Work Act, a Redundancy is a last resort, and Employers must consider alternatives such as redeployment. 

Redeployment vs. Redundancy

Under Section 398(2) of the Fair Work Act, redeployment could occur within the enterprise or the enterprise of an associated entity.

The suitability of redeployment may take into consideration: 

  • A similar position in another area of your enterprise or an associated company
  • Qualifications required for a different role, and feasibility of any re-training required
  • Transferable skills, experience or qualifications of the Employee
  • Location of a suitable position

Simply put, the Employer should be able to easily justify to other parties why it was not ‘reasonable’ to redeploy the Employee.

Voluntary Redundancy

Employers often consider voluntary redundancy as an alternative to the more lengthy genuine redundancy process. 

A voluntary redundancy occurs when an employee volunteers or agrees to be made redundant. The benefit of voluntary redundancy is that a Business may forego the protracted consultation processes required to effect a genuine redundancy.

Typically there will be some form of financial incentive and a formal agreement that ends the employment relationship. The agreement between Employee and Employer (such as a Deed of Release) generally prevents unfair dismissal proceedings. 

Tip 4 :Communicate clearly during Redundancy

Finally, a bonus tip.

Clear communication when effecting a genuine redundancy can assist Employers in mitigating their risks by clearly demonstrating their compliance with Fair Work obligations. 

Communication process may involve

  • interviewing all redundant employees,
  • answering any questions the Employee has, and
  • providing them with a letter clearly outlining their entitlements and redundancy date.

Having these hard conversations (and documenting them) can not only help to fulfill your obligations as an Employer, but can help to navigate transitional times in your business with professionalism and structure.

Undertaking redundancies can be an emotionally challenging process. Knowing your obligations as an Employer can make this transition less stressful for all involved. 

Everyone’s circumstances will be unique. Employers should seek professional assistance to ensure compliance and minimise any risk to your business. 

Considering making an employee redundant and avoiding legal risk?  NB Lawyers – lawyers for employers run specific and tailor-made training sessions for managers and supervisors give NB Lawyers – Lawyers for Employers a call and we can offer an obligation free consultation.  Reach out via service@nb-lawyers.com.au or +61 (07) 3876 5111 to book an appointment.

If you got value out of this article email service@nb-lawyers.com.au or click on this link to subscribe to our value added newsletter. 

Written By 

Jonathan Mamaril, Director

Jonathan Mamaril 

Director

NB Lawyers – Lawyers for Employers 

jonathanm@nb-lawyers.com.au 

+61 (07) 3876 5111 

Jonathan Mamaril leads a team of handpicked experts in the areas of employment law and commercial law who focus on educating clients to avoid headaches, provide advice on issues before they fester and when action needs to be taken and there is a problem mitigate risk and liability.  With a core value of helping first and providing practical advice, Jonathan is a sought after advisor to a number of Employers and as a speaker for forums and seminars where his expertise is invaluable as a leader in this area as a lawyer for employers. 

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