What Happens if Employees Are Made Redundant at Work?

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Table of Contents

• Employer makes employee redundant
• Why redundancy happens
• Redundancy or Termination?
• What is a “genuine redundancy”?
• Employer’s obligations to employee
• Key Takeaways

In recent years, there have been many industries in which businesses have made their employees redundant. If your business anticipates it may need to make employees redundant, do not forget that the Fair Work Act (FWA) has provisions that protect employees from being made redundant unless it can be shown that it is a ‘genuine redundancy’.

Employer makes employee redundant

According to the FWA, to lawfully make someone redundant, the employer would need to be able to prove that the business no longer needed anyone to perform the former employee’s role. In essence, the role serves no purpose to the business and is redundant itself. This means that by default, the employee is no longer of any use to the business and that there will be no replacement once he or she leaves.

Why redundancy happens

Redundancy in the workforce occurs for a variety of reasons. It can occur because there is no longer enough work for the role, or because technological advances have meant that the tasks previously performed by that role are now carried out by robots or other forms of technology, and are being performed more efficiently. Accordingly, the employer can allocate the various tasks that made up the soon-to-be-redundant employee’s role to other employees in the same workplace.

Redundancy or Termination?

In some cases, there may be some doubt surrounding whether the redundancy was genuine or whether it was actually a termination under the guise of redundancy. This can occur when an employer is displeased with the performance of an employee or their general behaviour. This can give rise to legal action if the employee can show that the redundancy was actually a termination.

What is a “genuine redundancy”?

When an employee initiates a claim for unfair dismissal, an employer may take advantage of the defence under section 389 of the FWA that the redundancy was ‘genuine’, but what does genuine actually mean?

The test in section 389 of the FWA for whether or not a redundancy is genuine is that the redundancy is genuine when:

• The employer no longer needed anyone, including the employee, to perform the tasks that made up the role due to operational changes in the business; and
• The employer has complied with all of its obligations under a relevant enterprise agreement or modern award.

Another consideration when deciding whether a redundancy is genuine is whether the employee could have been employed elsewhere in the company or an associated entity of the employer.

Employer’s obligations to employee

According to the National Employment Standards, which are part of the FWA, upon making an employee redundant, an employer must ensure that the following payment are made to the employee:

• Unused leave (annual);
• Notice payment, usually 1-5 weeks, which takes into account age and service of employee;
• Redundancy payment, up to 16 weeks, depending on service length.

It is worth noting that if an industrial instrument, agreement or award places an obligation on the employer to pay a rate that is higher than the National Employment Standards minimum, then this higher rate will apply, and the employer will have to conform to this requirement.

Key Takeaways

As an employer intending to make employees redundant, you should seek legal advice to ensure you comply with your legal obligations. If you need help with your employer obligations, 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.