With Christmas nearby and the New Year fast approaching, you may be making some tough decisions about your business, especially if you are planning on making employees redundant. Redundancy over the Christmas period brings with it many legal issues, including compliance with the Fair Work Act 2009 (Cth) (FWA), the Small Business Fair Dismissal Code, awards and enterprise agreements, and your contractual obligations as an employer. This article will outline some practical steps you should take so that you 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:
- An employer no longer requires anyone to perform the employee’s job due to operational changes within their business; and
- The employer has complied with any obligations set out in the relevant award or enterprise agreement; and
- It is unreasonable for the employer to redeploy the employee within their business or related business.
If the redundancy is not genuine, your employee may be able to make an unfair dismissal claim.
1. What is Redeployment and How Do I Choose One Employee Over Another?
As an employer, there may be an obligation to transfer employees who you plan to make redundant to another position within your organisation (redeployment). The obligation will exist where there is a suitable alternative position available within your business or any other “associated entity”. When looking for a new role, you should also consider positions that may require some training. Of course, roles that require significant re-training and new qualifications may not be suitable.
When assessing whether to make one employee redundant over the other, it is important to investigate their current skills and whether they would be suitable for redeployment. What roles will exist after the reorganisation of your business? Which of the employees are most suited to the role? Remember that an employee’s termination will not be genuine if it would have been reasonable for the employer to have redeployed them.
As an employer, you also need to consider the reasons as to why you can’t redeploy the employee in your business. For example, if you are a small business owner, you may have limited options to move someone into a new role, even with adequate training.
You should ensure you are not discriminatory in this process and making 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. For example:
- Why are they being made redundant?
- What investigations have you made regarding finding them a new role?
- Why are they suitable or unsuitable for the existing or new roles?
2. What Are Some Issues With Offering Redeployment?
Just because you have another role available for the employee does not mean that it will be a redeployment under the FWA. Where a new role is a demotion (i.e. the employee takes a pay cut, moves to part-time, or a reduction of responsibilities), the FWA will consider the termination a redundancy and not a redeployment.
Accepting the New Role
It is important for the employee to understand that they do not have to accept the offer of redeployment. However, any future proceedings may consider whether the employee took up the offer and whether the new role was “suitable.” When offering redeployment, it is also important to make it clear that you are offering the employee the role, and not just providing the opportunity for them to apply.
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.
3. What Happens If My Employee Is On Annual Leave When I Want to Make Them Redundant Over the Christmas Period?
If you are making your employees redundant over the Christmas/New Year period, you should be aware that you cannot give notice when your employees are on leave. The notice period also cannot run at the same time as the leave. If you did do this, the employee would not be able to take advantage of the leave accrued and due to them.
Therefore, in the situation where your notice requirement clashes with their leave, you will have two options:
- Wait until they return from their leave and then give 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.
The process of making several employees redundant can be a stressful and difficult time, especially before the Christmas holidays. If you have any questions about the process, you should speak with an employment lawyer. You can also reduce your risks of an unfair dismissal claim if you follow the appropriate procedure and comply with the relevant employment laws. Get in touch on 1300 544 755.