An employer can look into making an employee redundant if the employer decides that they do not want an employee’s job to be done by the employee or anyone else. Furthermore, the employer must not be able to redeploy the employee elsewhere within the employer’s business.  For example, this may occur if new technology is introduced into a business, a business is restructured or an employer becomes insolvent or bankrupt.

Care should be taken by an employer when making an employee redundant as the employer should ensure that any redundancy is non-discriminatory, fair and justified.  If the termination of an employee’s employment by way of redundancy is not a genuine redundancy and/or the employer does not otherwise comply with the relevant legal requirements then the employer may risk the employee making a claim for unfair dismissal or unlawful termination. Make sure a Letter of Termination of Employment is given to the employee is they are still in their probation period.

Relevant Legislation

Care must be taken when making an employee redundant as federal workplace laws provide protections to employees in certain circumstances where their employment is terminated by their employer. The aforementioned federal workplace laws allow an employee to commence proceedings against their former employer following the termination of their employment. Making an employee redundant is not always the end of the process.

For example:

  • an employee may commence proceedings for unlawful termination if their employment is terminated for a discriminatory reason, or otherwise against the law;
  • if an employer does not take care in terminating or dismissing an employee then the dismissal may be considered by the Fair Work Commission to be harsh, unjust or unreasonable.  Generally, a dismissal will not be harsh, unjust or unreasonable where there is a valid reason for the dismissal relating to the employee’s conduct; the employee is notified of the reason for dismissal and the employer gives the employee an opportunity to respond; the employee receives one or more warnings about unsatisfactory performance before being dismissed and the employee’s dismissal relates to unsatisfactory performance.

Legal Process

If an employer is making an employee redundant due to poor performance or misconduct then the employer must have sufficient grounds for termination and, in the case of poor performance, must have previously warned the employee about their poor performance, provided training (where appropriate) and given the employee an opportunity to improve their performance.

An employer should also take into account the following matters, amongst other things, when making an employee redundant:

  • Notice – generally, an employee must be given notice of termination of their employment (or payment in lieu of notice), which notice period is generally determined by either the terms of an employee’s employment contract or their length of service as an employee.  For example, under the National Employment Standards (NES) most employees are entitled to between 1 and 4 weeks notice of termination.  An additional week’s notice must be given if an employee is over 45 years of age and has two years continuous service.  However, no notice of termination is required for casual employees and employees terminated due to serious misconduct.
  • Entitlements – an employee is entitled to payment of their outstanding employee entitlements on termination of their employment, including wages, payment in lieu of notice (if any), accrued annual leave and long service leave entitlements, severance pay entitlements (e.g. for redundancy).  The final payment should be made on the employee’s last day of work, wherever possible.

An employee whose employment is to be terminated by way of redundancy should also be given a letter setting out the date of redundancy, calculations of all monetary entitlements, other entitlements and procedural issues (e.g. confidentiality and return of company property).

Conclusion

Before making an employee redundant an employer should understand its obligations under the employee’s employment contract, award and at law. Care must be taken by an employer when making an employee redundant in order to minimise the risk of an employee commencing proceedings against their former employer following the termination of their employment.

An employer should consider seeking legal advice before terminating an employee’s employment, particularly if termination is by way of redundancy, in order to ensure that they comply with their legal obligations and minimise the risk of proceedings being commenced by an aggrieved employee.

Lachlan McKnight

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