Redundancies can be a difficult issue for all involved.
Understanding how to conduct a redundancy properly, fairly and in compliance with the Fair Work Act, will help to avoid a sensitive situation becoming a painful problem further down the track. If you do not follow the correct procedures when making a redundancy, you may find yourself dealing with a claim of unfair dismissal.
This piece aims to outline, in plain language, what steps need to be taken when making a genuine redundancy. It covers:
- What is genuine redundancy?
- Employee consultation
- The role of a support person
- Redeployment and ‘alternative acceptable employment’
What is ‘genuine’ redundancy?
For a redundancy to be genuine under the Fair Work Act, you must be able to tick off all the points on the following checklist:
- A redundancy must relate to a role and not a person; in other words, the role itself must be no longer required.
- There must be no performance issues at play
- The business must show valid reasons for the role to be made redundant
- The employee must be consulted during the process. Some Awards place an obligation on employers to consult with employees where there is a major workplace change. Redundancy is a major change.
Redundancy without consultation is unfair dismissal
Most awards or enterprise agreements include a provision which obliges employers to consult with employees in relation to potential redundancies. What does this mean in practice?
- Offer a support person – An employee whose role is to be made redundant should be given sufficient notice of any meeting to discuss the proposed redundancy, and offered the opportunity to bring a support person to the meeting. A support person is not an advocate.
- Consider all redeployment options – The employer needs to consider whether the employee can be redeployed into ’alternative acceptable employment’ within the business or an associated enterprise. The redeployment options should be carefully canvassed and include consideration of positions which may involve less pay or a reduction in seniority. The options can then be discussed with the employee in the meeting. For more information see below.
- Have a genuine discussion – At the meeting ensure that there is a genuine and interactive discussion which explains the nature of the changes and includes asking the employee for their input. This discussion is not to justify the reasons for the redundancy but rather to explore all possible options together with the affected employee. For example, the employee may wish to cut down on working hours or welcome a reduction in responsibilities.
For more information on genuine redundancy, see our previous blog Redundancy or not redundancy? The importance of proper process
Acceptable alternative employment
There is an increasing number of cases where consideration has been given to the issue of what constitutes a suitable alternative role. As with many other considerations, the short answer is that it depends on the circumstances. The more detailed answer is that a number of factors come into play including the seniority, the pay, the location and the employee’s situation. Consultation with affected employees provides an important opportunity to better understand an employee’s situation and gauge their opinion on whether they would consider things such as an alternative location, reduced pay or reduced seniority.
One such case is Smith v Onesteel Limited & Anor  NSWDC 18 (15 March 2013). In this case, this issue was critical because of the provisions in the applicable Award. The concept of acceptable employment may also be considered in relation to redundancy pay. Under the Fair Work Act an employer can seek a determination by the Fair Work Commission to reduce the amount of redundancy pay that would otherwise be payable, if they have obtained other acceptable employment for the employee.
In determining what is acceptable there are a number of relevant factors. These include: pay levels; hours of work; seniority; type of role; skills; location; and loss of benefits.
In the case of a significant demotion, for example, or reduction in seniority as occurred in the case above, these factors may affect the determination about redundancy pay.
It is important that employers consider all redeployment options. If alternative roles are available, employees should be offered any other available roles. The facts of each situation and the details around the roles, may in turn impact on whether redundancy pay is still payable. As part of a redundancy process an employer must consider redeployment. All alternative roles should be considered in consultation with the employee. This should include more junior roles and any positions available in an associated entity. If there are options, these should be offered to the employee who may then reject or accept as they see fit. For more, see our previous blog about redeployment, including interstate or overseas.
Lessons for employers
- Employers must approach a potential redundancy in a considered and careful manner. Both the reasons for, and the process of , redundancy are critical.
- All redeployment options must be considered, and then discussed with the employee – who may accept or reject any offers.
- If an alternative role is accepted by an employee, the details of that alternative role may impact on redundancy pay.
- For some employees you may also have to consider whether there are relevant Award provisions covering redundancy.
If you are uncertain about any aspects of a proposed redundancy, make sure you get advice early in the process to help avoid problems down the track such as unfair dismissal claims.