Redundancy might seem like a good alternative to keeping on a worker, but there are some serious pitfalls.

If a redundancy is deemed to be non-genuine by the Fair Work Commission the employer will be liable for unfairly dismissing the employee.

Redundancy is about a business no longer needing a specific job to be performed, it is not about the individual who does it.

So what exactly is a genuine redundancy?

To avoid an unfair dismissal claim the employer needs to show the termination was a “genuine redundancy”.

The Fair Work Act explains that a genuine redundancy is:

–       The employer no longer requires the employee’s job to be performed by anyone because of changes in the operation or requirements of the employer’s enterprise;

–       The employer has complied with any obligation in a modern award or enterprise agreement that applied to the employment to consult about redundancy; and

–       It would not have been reasonable in all the circumstances for the employee to be redeployed within the employer’s enterprise or the enterprise of an associated entity of the employer.

Hence a “genuine redundancy” includes circumstances where the employer is restructuring their business to improve efficiency, so the tasks done by a particular employee need to be distributed between several other employees or the job abolished all-together.

The tasks the person was performing within the company may still exist and may be now done by other employees, but the actual job previously performed by the employee cannot still exist for it to be considered a genuine redundancy.  Thus if a restructure results in another two or three existing employees taking on those  tasks, for instance, this could still be considered a genuine redundancy.

By contrast, it is not a genuine redundancy if the operational requirements of the business have not changed and the employer wants the employee’s job (in its entirety) to be done by someone else.

So here are some tips about deciding whether or not your termination would be considered a genuine redundancy:

(1)  You do not think the job needs to be done by anyone.

(2)  The decision has nothing to do with the competence of the employee.

(3)  The decision has nothing to do with any personal act or misconduct by the employee.

(4)  You can’t find any other job for the employee within the business for which they are qualified.  This includes vacant positions in different divisions of your business, as well as positions for which the employee might require reasonable re-skilling or training.

So what then are “changes in the operation or requirements of the employer’s enterprise”?

The explanatory memorandum to the Fair Work Act provides the following are possible examples of a change in the operational requirements of an enterprise:

  • the job or position is replaced due to the employer introducing new technology (for example, a machine is developed or available to do the job the employee performed);
  • business downturn due to poor sales and production;
  • the business relocates to a new geographical location;
  • a merger, sale or takeover happens;
  • the business restructures or reorganises.

BUT! You must explore whether you can place the person in another job within your business

The Fair Work Commission has made it clear an employer must make all efforts to place the employee in another job before making them redundant.

You should consider all available vacancies to see if there any suitable jobs for the employee.  You are entitled to consider the practicality and cost of doing this in making your decision.  It is okay to offer the person a position of lower-skill if you think this is appropriate.

Do I have to pay-out redundancy entitlements?

If you are a business with fewer than 15 employees you are officially exempt from paying any redundancy payments. There are other exemptions to the general rule, so you should check the rules before offering any redundancy.  Otherwise redundancy payments are calculated based on the amount of time the employee has worked with your business, starting with 4 weeks pay for service of at least one year but less than two years with smaller progressions for each year thereafter.

To speak with a business lawyer today, contact LegalVision on 1300 544 755. Our team of business lawyers are ready to help you with any legal concerns you might have.

Lachlan McKnight
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