As the Christmas and New Year period brings the year to a close, it is a typical time for making some tough decisions about your business. If you are planning on making employees redundant over this period, there are several legal issues you need to consider, including compliance with:
- the Fair Work Act (FWA) and other relevant laws;
- the Small Business Fair Dismissal Code;
- your worker’s award or enterprise agreement; and
- your contractual obligations as an employer.
This article will outline some practical steps you should take to remain legally compliant when making someone genuinely redundant.
What is a Genuine Redundancy?
Under the FWA, a redundancy must be for genuine reasons. A genuine redundancy is where:
- you no longer require anyone to perform your employee’s job due to operational changes within your business;
- you have complied with any obligations set out in the worker’s award or enterprise agreement; and
- you cannot reasonably redeploy your worker somewhere else within your business.
If your employee’s redundancy is not genuine, they may be able to make an unfair dismissal claim.
What is Redeployment?
As an employer, you have the obligation to transfer employees who you plan to make redundant to another position within your business. This is known as redeployment. Redeployment is possible where:
- a suitable alternative position is available within your business or an associated entity; and
- the employee can take over that role with, at most, a moderate amount of training.
Roles that require significant re-training or new qualifications may not be suitable for redeploying your employees.
How Do I Choose One Employee Over Another?
You should aim to choose the employee whose skills make them the most suitable to be redeployed into alternative roles. You should consider:
- what roles will exist after you reorganise your business; and
- which of your potentially redundant employees are most suitable for continuing employment.
Remember that an employee’s termination will not be genuine if you could have reasonably redeployed them. To avoid any unfair dismissal claims, you should consider and have reasons ready for why you cannot redeploy them.
You should ensure you are not discriminatory and make the decision based on gender, age, race or family responsibilities. It is also advisable that you keep a record of the decision-making process concerning all your employees. This should include:
- why you are making them redundant;
- the investigations have you made regarding finding them a new role; and
- why they are suitable or unsuitable for alternative roles.
What Are Some Issues With Offering Redeployment?
Demotions
Just because you have another role available for the employee does not mean that it will be a legal redeployment. Where a new role is a demotion, the termination will be legally a redundancy and not a redeployment. Demotions include where the employee:
- takes a pay cut;
- moves to part-time; or
- has reduced responsibilities.
Accepting the New Role
When offering redeployment, you should clarify to the employee that you are offering them the role and not just providing them with the opportunity to apply. Employees should also know that they have the option of accepting or rejecting the role.
However, if an employee rejects the role you offered, this will affect their ability to bring any legal claims against you for unfair dismissal. In this case, the court will consider whether:
- the employee took up the offer; and
- you offered them a suitable role.
Where an employee accepts redeployment, you still have to provide the required termination notice period. However, you will not be required to pay out the employee’s entitlements at the end of the notice period, as it will continue to accrue.
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What Happens if My Employee Is on Annual Leave When I Want to Make Them Redundant?
If you are making your employees redundant over the Christmas/New Year period, you cannot give notice when they are on leave. The notice period also cannot run at the same time as their leave. This is so that your employee can take advantage of their accrued leave.
Therefore, in the situation where your notice requirement clashes with their leave, you can either:
- wait until they return from their leave and then give them formal notice of their redundancy; or
- pay out their notice in lieu.
If you decide to go with the second option, you must pay the employee the full amount they would have earned should they have worked until the end of the notice period.
Key Takeaways
The process of making employees redundant can be a stressful and difficult time, especially before the Christmas holidays. However, you must ensure that you are following all of your legal obligations to avoid any unfair dismissal claims. These include:
- ensuring your employee’s redundancy is genuine;
- taking steps to redeploy your employee before considering redundancy; and
- providing the correct notice period when it does not correspond with your employee’s leave or payment in lieu.
If you have any questions about the process of making your employees redundant, our experienced employment lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
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