Employers to Rethink Redundancy with the Requirement to Redeploy – January 2010

With effect from 1 January 2010, the redundancy provisions in the Fair Work Act, 2009 (Cth) came into operation the result of employers and employees in the national workplace system being covered by the National Employment Standards (NES). The new redundancy provisions bestow a positive obligation on employers to fully explore opportunities within an employer’s wider corporate structure to redeploy. For employers, proactively pursuing and proposing alternate employment opportunities before redundancy termination, will minimise the risk of unfair dismissal or adverse action litigation being brought by employees.

Genuine Redundancy

An unfair dismissal claim is not available in circumstances of genuine redundancy. Employers must however be mindful of the requirement to redeploy where it is considered reasonable in all circumstances.

Genuine redundancy arises if:

  • an employer no longer requires an employee’s job to be performed by anyone because of changes in the operational requirements of the employer’s enterprise; and
  • an employer has complied with any obligation in a modern award or enterprise agreement that applied to the employment to consult about the redundancy.

The circumstances of genuine redundancy are qualified by the requirement to redeploy if it would have been reasonable in all the circumstances to redeploy within the employer’s enterprise or the enterprise of an associated entity of the employer.

Fair Work Australia’s (FWA) recent decision in the Ulan Coal Mines1 case demonstrates that the concept of ‘genuine redundancy’ will be rigorously tested with FWA determining that the redundancy of 10 coalminers did not constitute ‘genuine redundancy’.

In Ulan Coal Mines, following a review of employee numbers, the Company made a decision to reduce the employee head count, outsource certain ancillary functions, increase the proportion of employees with trade qualifications in underground crews and redistribute labour.

To reduce the number of mineworkers, the Company dismissed its fixed-term employees and called for expressions of interest for redundancy from non-trades-qualified mineworkers. Ultimately 14 permanent mineworkers were terminated in reverse order of seniority.
Prior to any terminations, the Company held discussions and/or meetings with the Union representatives and with its mineworker employees. Despite this, ten of the 14 employees subsequently lodged unfair dismissal claims with FWA contesting that their positions were genuinely redundant. 

Commissioner Raffaelli found that the efforts made by the Company to provide information as to alternative jobs (which involved posting information on Company noticeboards) was largely inadequate. He found that there was no evidence that directly affected employees were provided with any specific attention so as to have “at least put such employment opportunities squarely before them”.
The change in proportion of trades/non-trades positions, the Commissioner said, didn’t mean the jobs no longer needed to be done. A distinction was made between the concept of the job being performed by anyone in the context of genuine redundancy rather than an employer wanting the job performed by a different group or class of employees.

FWA ultimately determined that the dismissals were not cases of genuine redundancy as defined under the Act.
The Ulan Coal Mines case serves to highlight the interaction between the consultation and redeployment obligations under the Act. The consultation deficiencies meant that  Ulan had failed to comply with the redeployment requirements and in turn failed to meet the definition of ‘genuine redundancy’ under the Act.
Redeployment Opportunities

The obligation to redeploy before resorting to redundancy is far-reaching, extending outside an employer’s immediate enterprise to associated entities and tested by what is ‘reasonable’ in all the circumstances.

When considering redundancy termination employers will need to canvas and present any redeployment opportunities within associated entities which includes any related body or entity over which control or influence may be exercised.

Employer’s should also be mindful that what is seen as a ‘reasonable’ redeployment option will vary for each individual employee and ought to consider adopting policies or procedures that comply with this requirement.

An employee’s qualifications and experience should be considered in relation to other roles available and even in circumstances where redeployment would for example, require relocation or a decrease in pay, these opportunities ought to be presented rather than making assumptions whether this would or would not be acceptable to an individual employee.

In situations involving a large number of employees2 with similar skills and a limited number of redeployment options, each employee ought to be given the opportunity to respond to selection criteria. To minimise the risk of unfair dismissal claims, employers should ensure that each of their affected employees are given the opportunity to present their skills as well as to defend allegations of unsatisfactory performance where performance forms part of the selection criteria.

Consultation Obligations
As well as following legislative consultation requirements, employers should take care to adhere to any consultative process prescribed in a modern award or enterprise agreement.

Throughout the process, employers should keep written documentation of their redeployment considerations and consultations, which could be of use if terminated employees make unfair dismissal or adverse action claims. The Ulan Coal Mines case is a warning that group postings and discussions will not adequately serve any consultation process and individual employee attention to circumstances and opportunities will be vital.

When redundancy is unavoidable, open and honest communication is essential, and thorough, consultative and transparent termination procedures will help to minimise and defend any subsequent litigation.

1 Henry Jon Howarth; Anthony Honeysett; Aaron Oldfield; Christopher Michaelides; Graham Atkinson; Ray Murray; Craig Butler; Rodney Butler; Mark Butler; Daniel Dixon v Ulan Coal Mines Limited [2010] FWA 167 (27 January 2010).

2 There are also additional notification and consultation provisions under the Fair Work Act with respect to Centrelink and unions for employers seeking to make 15 or more employees redundant.

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