Making an employee redundant can pose significant risk to employers. A good example of the kind of risk encountered in redundancy cases is demonstrated by a recent case where the employer proceeded to make certain employees redundant, despite those employees being covered by various awards. This led to the employees initiating claims of unfair dismissal against the employer.
A redundancy, for all intents and purposes, is another means of terminating employment. It happens when certain jobs cease to be necessary or practicable. This might be because of the advent of technology, i.e. robots and machines replacing human labour, but might also arise when the duties of an existing role are shared amongst other employees by way of restructure. It is worth noting that employers can make an employee redundant without worrying about claims of unfair dismissal (in most cases). This is because redundancy has nothing to do with the quality of the employee’s work and more so to do with the availability (or lack thereof) of that role.
Requirements to protect against ‘Unfair Dismissal’
There are several important prerequisites that are necessary for an employer to avoid facing claims of unfair dismissal, including:
- The redundancy has to be legitimate, i.e. the job is no longer available. Employers are liable for making employees redundant for alternative reasons under the guise of redundancy. In many cases, Employers try to mask a termination as a redundancy, and then subsequently change the nature or title of the role slightly. The Fair Work Commission is well aware of these occurrences, and will consider all the surrounding facts in determining if it was a ‘genuine redundancy’.
- Any employees that are protected under an award-based system need to be personally consulted as soon as the employer has made any decisions to impose redundancy, including:
o To explain the details of the decision with the particular employees, the consequences, and protocols in place to mitigate any damage that may result;
o To listen carefully to the questions, enquiries and requests of these employees; and
o To look into the currently available positions in the business to determine whether or not these employees can move into new roles (not necessarily more senior or higher paid).
- If the employer cannot find any other option for employment, they must provide notice to the employees and pay the highest of any of the following forms of redundancy payment:
o Under the Fair Work Act;
o Workplace policies;
o Enterprise/Award rate;
o Employment Agreement
Beyond this, employees may be entitled to additional leave to search for a new job, and may have time off work to do so.
Alternatives to redundancy
It is important to keep in mind that it is sometimes better business practice to pay more than the minimum requirements. Also, it may be worth looking into alternatives to redundancy, such as:
- Freezing wages;
- Reducing wages;
- Reducing or eliminating bonuses; or
- Reducing or eliminating annual leave.
These arrangements must be agreed to in writing with the effected employees, and must consider the requirements of the various award and enterprise agreements where applicable.
Make sure you understand the legalities of redundancy before you commence this process. Once you have made the necessary considerations, look into options for alternative arrangements and do not forget to have consultations with the soon-to-be-redundant employees. After all is said and done, double check that the amounts being paid out are sufficient.
For assistance in this process, contact LegalVision on 1300 544 755 and ask to speak with one of our employment lawyers today.