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Whether it is due to the unpleasant nature of redundancy itself, or perhaps an unwillingness on the part of employers to consider that they may experience a downturn in business, employers are often unaware of the legal requirements for effecting redundancies until it is too late. In some cases this can prove to be a costly mistake, as a failure to effect a genuine redundancy may have significant legal and financial implications.

This article aims to explain what it is that constitutes a “genuine redundancy” for the purposes of the Fair Work Act 2009 (“FW Act”) and the legal implications if a genuine redundancy is not effected.


WHAT IS A “GENUINE REDUNDANCY”?

Section 389(1) of the FW Act provides a two-limb test which defines the circumstances in which a redundancy will be considered to be a “genuine redundancy.” Both limbs must be satisfied. A person’s dismissal was a case of genuine redundancy if:-

(a)     the person's 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.

While not defined in the FW Act, the accepted definition of a “job” for the purposes of the FW Act is “a collection of functions, duties and responsibilities assigned, as part of the scheme of the employer’s organisation, to a particular employee.(1)

The question to ask is whether the former employee has, after the restructure, any duties left to discharge. If they do not, then their position is redundant.(2)   As was stated in Kekeris v A Hartrodt Australia Pty Ltd t/as a.hartrodt [2010] FWA 674 at [27]:-

The test is not however whether the duties survive. Paragraph 1548 of the explanatory memorandum makes clear that it can still be a ‘genuine redundancy’ where the duties of a previous job persist but are redistributed to other positions. The test is whether the job previously performed by the applicant still exists.

Paragraph 1548 of the Explanatory Memorandum to the Fair Work Bill 2008 states as follows:

1548.     The following are possible examples of a change in the operational requirements of an enterprise:

  • a machine is now available to do the job performed by the employee;
  • the employer's business is experiencing a downturn and therefore the employer only needs three people to do a particular task or duty instead of five; or
  • the employer is restructuring their business to improve efficiency and the tasks done by a particular employee are distributed between several other employees and therefore the person's job no longer exists.

The case of Ulan Coal Mines Limited v Henry Jon Howarth & Ors [2010] FWAFB 3488 (“Ulan No 1) contains a good illustration of this point. That case concerned the dismissal of a number of employees after the Appellant mining company reviewed its operations and decided to reduce its unskilled workforce, outsourcing certain functions and increasing the number of employees with trade qualifications. The company dismissed 38 mineworkers, yet at the same employed a further 11 trade-qualified workers.

Fair Work Australia (now known as the Fair Work Commission) decided that the dismissals of the mineworkers were genuine redundancies. In doing so, it distinguished between the jobs of the mineworkers – which had been made redundant – and the duties and functions that those mineworkers performed, which the employer still required to be performed and were now spread across other roles.

It is worth noting that in any proceedings before the Fair Work Commission (“FWC”), the onus is on the employer to show that there were operational requirements that necessitated making the employee redundant. The employer must produce evidence to the FWC to support such a proposition, including evidence of the changed operational requirements.(3)   It is then the Commission’s role to determine, on the balance of probabilities, whether the employer no longer required the job to be performed by anyone for operational reasons.(4)   It is not the Commission’s role to determine whether the employee has been sufficiently convinced of the necessity of the operational changes which led to the position being made redundant, nor is it the Commission’s role to tell the employer how to operate its business.(5)

(b)    the employer has complied with any obligation in a modern award or enterprise agreement that applied to the employment to consult about the redundancy.

To determine compliance with consultation obligations requires an analysis of the applicable award or agreement obligations. In this regard each case will largely turn on its own facts. It is nevertheless clear however that employers must comply with consultation requirements. Even if an employee was made redundant for genuine operational reasons, if the employer did not comply with the applicable consultation obligations, that dismissal was not a genuine redundancy.(6)

Pursuant to Section 205 of the FW Act, an enterprise agreement must include a term that requires the employer to which the agreement applies to consult the employees to whom the agreement applies about “a major workplace change that is likely to have a significant effect on the employees.” This includes dismissal and redundancy. If an enterprise agreement does not include such a consultation term, the model consultation term found in Schedule 2.3 of the Fair Work Regulations 2009 (copy annexed) is taken to be a term of the agreement.(7)   Modern awards contain a standardised consultation term that essentially mirrors the model consultation term.

The case of UES (Int'l) Pty Ltd v Leevan Harvey [2012] FWAFB 5241 provides a good example of where a failure to consult has meant a dismissal was not a genuine redundancy. There the employer employed a supervisor and three store people, including the claimant, in its warehouse. While the claimant was on annual leave, the employer consulted with the other employees in the warehouse about potential redundancies due to a significant decline in sales. The employer then decided to make the claimant’s position redundant because he was the least efficient employee. The employer did not consult with the claimant about the redundancy, in contravention of the award consultation clause. The Full Bench of Fair Work Australia found that while there were sound reasons for the dismissal, the dismissal was not a case of genuine redundancy due to the failure to consult.

Generally speaking, in order to comply with consultation requirements an employer should:-

1. Engage in an open and transparent consultation process, providing employees with as much information as possible as soon as redundancies are being considered (and before any definite decision has been made to make employees redundant;
2. Provide all information to employees in writing;
3. As early as practicable after a definite decision has been made to make employee(s) redundant:-
a) Notify the employees who may be affected by the redundancies;

b) Provide (in writing) to the employees concerned all relevant information about the redundancies, including the expected effects of the redundancies on employees and any other matters likely to affect employees (provided that this process does not require the employer to disclose confidential information the disclosure of which would be contrary to the employer’s interests).

c) Hold a meeting with the employees affected to discuss the proposed redundancies, along with steps that the employer may take to mitigate the adverse effects the redundancies are likely to have on employees (for example, offering voluntary redundancies). The meeting should give the employees an actual opportunity to provide their views on the proposed redundancy. Notify the employees in writing of the outcome of the meeting.

d) Give prompt (and actual) consideration to matters raised by the employees at the meeting in relation to the redundancies;

e) Hold a subsequent meeting with the employees advising that the matters raised by them have been taken into account and the effect (if any) that has had on the proposed redundancies. Notify the employees in writing of the outcome of the meeting.

At a base level, the consultation process needs to be genuine and not just a “token” or “sham” process.


LARGE REDUNDANCIES:
Section 531 of the FW Act provides that where an employer has decided to make 15 or more employees redundant, they must notify any relevant union/unions of the following:-(8)

(i)      the proposed dismissals and the reasons for them;
(ii)      the number and categories of employees likely to be affected;
(iii)     the time when, or the period over which, the employer intends to carry out the dismissals; and


Following notification, the employer must consult with the union/unions regarding:-(9)

(i)      measures to avert or minimise the proposed dismissals; and
(ii)      measures (such as finding alternative employment) to mitigate the adverse effects of the proposed dismissals.


The opportunity to consult must be given as soon as practicable after making the decision to make employees redundant, and before dismissing an employee in accordance with the decision.(10)


WHAT IS NOT A “GENUINE REDUNDANCY”?

Section 389(2) of the FW Act defines what is not a genuine redundancy. A person’s dismissal is not a case of genuine redundancy if it would have been reasonable in all the circumstances for the person to be redeployed within either:-

     (a) the employer's enterprise; or
     (b) the enterprise of an associated entity of the employer.


It is not necessary to identify a particular job or position in which the dismissed employee could have been redeployed. The FWC must only be satisfied, on the balance of probabilities, that there was a job / position / other work within the employer’s enterprise (or an associated entity) to which it would have been reasonable to redeploy the employee.(11)

The employee must however have the skills and competence required to perform the proposed job to the required standard either immediately or within a reasonable period of retraining.(12) It is not necessary to retrain a redundant employee to any alternative position for which they are not immediately qualified or experienced, unless if there is only a modest retraining requirement to re-orient or supplement the employee’s skill set.(13)

All possible redeployment options must be considered and discussed with the employee. In Jenny Craig Weight Loss Centres Pty Ltd v Margolina [2011] FWAFB 9137, an employee that was previously employed as a manager for a Jenny Craig weight loss was made redundant where there were other less senior roles available. The employer did not offer these positions to the employee as they felt that she would have been “insulted” if offered a lower paid role. In fact, the employee would have accepted such a role in order to better meet her family commitments. The Full Bench of Fair Work Australia (now the FWC) stated that “an employer should not presume to know how a redundant employee will react to an offer of redeployment to a lower paid position” and held that the employer had not effected a genuine redundancy due to the failure to properly consult.


WHAT HAPPENS IF A DISMISSAL IS NOT A “GENUINE REDUNDANCY”?


A dismissal that is not a genuine redundancy may give rise to a number of possible claims. Below are the most common:-

1.    Unfair Dismissal:
In the context of the FW Act, a finding that a dismissal was a case of genuine redundancy is a complete defence to a claim for unfair dismissal, pursuant to Section 385 of the FW Act. If a redundancy is not genuine, that defence falls away and exposes the employer to such a claim.

Section 385 of the FW Act provides that:-

A person has been unfairly dismissed if the FWC is satisfied that:
(a)  the person has been dismissed; and
(b)  the dismissal was harsh, unjust or unreasonable; and
(c)  the dismissal was not consistent with the Small Business Fair Dismissal Code; and
(d)  the dismissal was not a case of genuine redundancy.

In UES (Int'l) Pty Ltd v Leevan Harvey [2012] FWAFB 5241, a failure by the employer to consult an employee regarding a proposed redundancy was considered to have been unreasonable. The Full Bench of Fair Work Australia consequently found that not only was the redundancy not genuine, but that the failure to consult was “a matter telling for a conclusion that Mr Harvey’s dismissal was harsh, unjust or unreasonable.” The employee was successful in his claim for unfair dismissal.

2.    Workers Compensation:
Pursuant to Section 11A of the Workers Compensation Act 1987, no compensation is payable in respect of a psychological injury if that injury was wholly or predominantly caused by reasonable action taken or proposed to be taken by or on behalf of the employer with respect to retrenchment or dismissal.

The employer carries the onus of establishing that the actions were reasonable,14 and in the consideration of what is reasonable it is not only the end result that is important, but also the manner in which it is effected.15 Even if a redundancy is justified due to a downturn in business, if the process of making the worker redundant is not objectively reasonable a Section 11A defence will not succeed.16

3.    Adverse Action:
If a dismissal is not a “genuine redundancy” for the purposes of the FW Act, the dismissal may give rise to an adverse action claim from the worker (for example, the worker may allege that their dismissal was discriminatory pursuant to Section 351 of the FW Act).

4.    Civil Penalties:
Chapter 4 of the FW Act contains civil remedies for breaches of the Act. Pecuniary orders can be made in respect of unfair dismissal, breach of an award or enterprise agreement and also a breach of the general protections provisions (including adverse action). The maximum penalty for each breach is currently $51,000 to $54,000 for a corporation and $10,200 to $10,800 for an individual.



MODEL CONSULTATION TERM

(1)  This term applies if the employer:
(a)  has made a definite decision to introduce a major change to production, program, organisation, structure or technology in relation to its enterprise that is likely to have a significant effect on the employees; or
(b)  proposes to introduce a change to the regular roster or ordinary hours of work of employees.

Major change
(2)  For a major change referred to in paragraph (1)(a):
(a)  the employer must notify the relevant employees of the decision to introduce the major change; and
(b)  subclauses (3) to (9) apply.
(3)  The relevant employees may appoint a representative for the purposes of the procedures in this term.
(4)  If:
(a)  a relevant employee appoints, or relevant employees appoint, a representative for the purposes of consultation; and
(b)  the employee or employees advise the employer of the identity of the representative;
the employer must recognise the representative.

(5)  As soon as practicable after making its decision, the employer must:
(a)  discuss with the relevant employees:
(i)  the introduction of the change; and
(ii)  the effect the change is likely to have on the employees; and
(iii)  measures the employer is taking to avert or mitigate the adverse effect of the change on the employees; and
(b)  for the purposes of the discussion--provide, in writing, to the relevant employees:
(i)  all relevant information about the change including the nature of the change proposed; and
(ii)  information about the expected effects of the change on the employees; and
(iii)  any other matters likely to affect the employees.
(6)  However, the employer is not required to disclose confidential or commercially sensitive information to the relevant employees.

(7)  The employer must give prompt and genuine consideration to matters raised about the major change by the relevant employees.

(8)  If a term in this agreement provides for a major change to production, program, organisation, structure or technology in relation to the enterprise of the employer, the requirements set out in paragraph (2)(a) and subclauses (3) and (5) are taken not to apply.

(9)  In this term, a major change is likely to have a significant effect on employees if it results in:

(a)  the termination of the employment of employees; or
(b)  major change to the composition, operation or size of the employer's workforce or to the skills required of employees; or
(c)  the elimination or diminution of job opportunities (including opportunities for promotion or tenure); or
(d)  the alteration of hours of work; or
(e)  the need to retrain employees; or
(f)  the need to relocate employees to another workplace; or
(g)  the restructuring of jobs.

Change to regular roster or ordinary hours of work

(10)  For a change referred to in paragraph (1)(b):
(a)  the employer must notify the relevant employees of the proposed change; and
(b)  subclauses (11) to (15) apply.
(11)  The relevant employees may appoint a representative for the purposes of the procedures in this term.

(12)  If:

(a)  a relevant employee appoints, or relevant employees appoint, a representative for the purposes of consultation; and
(b)  the employee or employees advise the employer of the identity of the representative;
the employer must recognise the representative.
(13)  As soon as practicable after proposing to introduce the change, the employer must:

(a)  discuss with the relevant employees the introduction of the change; and
(b)  for the purposes of the discussion--provide to the relevant employees:
(i)  all relevant information about the change, including the nature of the change; and
(ii)  information about what the employer reasonably believes will be the effects of the change on the employees; and
(iii)  information about any other matters that the employer reasonably believes are likely to affect the employees; and
(c)  invite the relevant employees to give their views about the impact of the change (including any impact in relation to their family or caring responsibilities).
(14)  However, the employer is not required to disclose confidential or commercially sensitive information to the relevant employees.

(15)  The employer must give prompt and genuine consideration to matters raised about the change by the relevant employees.

(16)  In this term:

"relevant employees" means the employees who may be affected by a change referred to in subclause (1).




_____________________________________________________________________________________

(1) Jones v Department of Energy and Minerals (1995) 60 IR 304
(2) Jones v Department of Energy and Minerals (1995) 60 IR 304
(3) Roy Morgan Research Ltd [2013] FWCFB 8936
(4) Fisher v Association for the Blind W.A. [2014] FWC 5604
(5) Fisher v Association for the Blind W.A. [2014] FWC 5604 at [34] to [36].
(6) Ulan Coal Mines Ltd v Howarth [2010] FWAFB 3488 at [29] – [32]
(7) Section 205(2) of the FW Act.
(8) Section 531(1) of the FW Act
(9) Section 531(2) of the FW Act
(10) Section 531(3) of the FW Act
(11) Technical and Further Education Commission v Pykett [2014] FWCFB 714.
(12) Ulan Coal Mines Ltd v Honeysett [2010] FWAFB.
(13) Horn v Mastermyne Engineering Pty Ltd [2012] FWA 10846
(14) Pirie v Franklins Ltd [2001] NSWCC 167
(15) Ivanisevic v Laudet Pty Ltd (unreported, 24 November 1998)
(16) Albino Albores v Lend Lease Project Management & Construction (Australia) Pty Ltd [2015] NSWWCC 92 




 

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