Redundancy is never an easy situation for employers. But it is something that happens more frequently than not, particularly in small businesses that may have frequent organisational changes for their employees or that need to operate flexibly according to client projects. Even businesses that are merged or taken over by other businesses may need to address redundancy issues when restructuring their workers. This shouldn’t be a reason for a business to only hire casual employees (workers who are usually not entitled to redundancy payments). In fact, having a good understanding of what redundancy is and your obligations is important for every employer that has employees or is planning to hire in the future. We revisit below what is a genuine redundancy as well as explain what an employer’s redeployment obligations are. 

1. What is Redundancy?

Redundancy occurs if an employee’s role within an organisation is no longer considered necessary for the ongoing operation of the business and the employer may terminate the employee’s employment. The employer must no longer require the employee’s position because of restructuring or operational changes that have arisen within the business. If redundancy occurs, the employer, usually by way of an employment agreement, an award, enterprise agreement or the National Employment Standards, is obliged to make a redundancy payment to the employee. 

2. But Was it Genuine?

Sounds simple, right? But, an employer needs to remember that the redundancy must be genuine, meaning you simply can’t use redundancy as a reason to remove an employee. Section 389(2) of the Fair Work Act 2009 (Cth) (‘Act’) states that a redundancy is not genuine if “it would have been reasonable in all the circumstances for the person to be redeployed within the employer’s enterprise or the enterprise of an associated entity of the employer”.

Although your business may be undertaking restructuring or organisational changes, you will need to consider other possibilities within the organisation or an associate of the organisation before officially making the employee redundant. 

3. What is the Standard in Seeking Redeployment?

The Act prescribes that an employer must comply with any employment agreements (or award or enterprise agreement) when it comes to consulting an employee about redundancy. Every employer should first consult with their employee and discuss the issue of redeployment.

In Henry John Howarth & Ors v The Ulan Coal Miners Limited [2010] FWA 4817 (Ulan coal Case No. 2), the Fair Work Commission (‘Commission’) was strict in their interpretation of the Act. Here the employers were a mining company who believed that they held little influence in the operations and management of their associated entities and thus did not attempt to redeploy their redundant employees to these entities. The Commission disagreed and stated that a more “activist” process for redeployment was required. The Commission went on to find that there was potential for a few of the employees to be redeployed.

4. What are the Consequences of a Non-Genuine Redundancy?

If a redundancy is not genuine or if an employee is under the impression that the redundancy is not genuine, they have the opportunity to make an unfair dismissal claim. Consequently, all employers should seek to make genuine redundancies by redeploying an employee within the organisation or an associated entity of the organisation if it is reasonable.

There are many steps an employer can take to minimise the risks of an employee making a successful unfair dismissal claim. This means taking the obligation to redeploy seriously and consulting with the employee about their prospects of gaining employment within the organisation or an associate of the organisation.

***

If you have any questions about redeploying your employees or your obligations as an employer regarding genuine redundancies, get in touch with our employment lawyers on 1300 544 755.

Kristine Biason

Ask Kristine a Question

If you would like further information on any of the topics mentioned in this article, please get in touch using the form on this page.