For companies and employers considering restructuring prior to Christmas or early in the new year, there are many issues to consider.
The Fair Work Act 2009 (Cth) is prescriptive at some level, for example the amount of redundancy pay that is payable to employees.
A recent case, Troy Brown & Ors v Clermont Coal Pty Ltd  FWC 3862 (Brown Case) has given more scope for managerial prerogative where there is a mix of workers who are employees, labour hire staff and contractors. In particular, the Brown Case has given employers the ability and right to reasonably implement a restructure wherein positions held by employees may be terminated even though there are contractors and labour hire staff engaged in other areas of the business.
The Brown Case explored the mining industry in this context however, in our view the decision could be implemented for other industries which regularly engage labour hire and contractor workers in different parts of the business such as manufacturing, warehouse and construction.
To be clear, the Brown Case does not change the fact that for there to be a genuine redundancy (and therefore avoid amongst other things an unfair dismissal claim), it is the position which must be made redundant and therefore as a consequence the employee that held the position.
In the Brown Case, the employer undertook a restructure of 76 employees and 25 contractors/labour hire workers. Six of the employees made an unfair dismissal claim, claiming that the redundancies were not genuine – there contention was that they could have been redeployed in other positions which were held by contractors and/or labour hire workers.
It was established generally that the employees would have been able to perform the duties of the positions held by the contractors and/or labour hire workers.
The decision by Vice President Catanzariti found that the redundancies were genuine and it would not have been reasonable to expect that they be redeployed into roles (even with associated entities) which were already filled by contractors and/or labour hire workers.
In recognising both the right to restructure and the right to structure its business in whatever fashion it saw fit, Vice President Catanzariti held the following views:
- The Fair Work Commission should not be criticising the legitimate business model of an employer which may or may not engage a mixed work force inclusive of contractors and/or labour hire workers; and
- In cases where there is a legitimate operational strategy to engage a mixed workforce, the Fair Work Commission should not require a change to the strategy.
The Brown Case confirms that an employer still has managerial prerogative to make decisions about the way a business should be structured.
The Brown Case gives employers several ways forward in considering a mixed workforce business model and still enter into restructures legitimately. Caution should prevail however, with redundancies it is very easy to be perceived to be terminating an employee’s employment to engage contractors in their place. The Brown Case does not go this far and advice should be sought immediately if this is the plan.
Some tips to consider:
- Redundancies need to be genuine (and not for other nefarious purposes such as performance issues or other bias);
- Minimum redundancy pay is prescribed under the Fair Work Act 2009 (Cth) (some limited exceptions apply);
- A mixed workforce model should not deter an employer from making certain positions redundant if required;
- Be able to present your business case – of a mixed workforce or the use of a mixed workforce;
- Always consider redeployment;
- Most Modern Awards have consultation provisions for redundancies – it is important that a consultation step (or several) is taken.