Employers are often faced with changing circumstances that can impact their ability to retain certain employee positions. Redundancies can occur when a business has or is forecasting lower sales or production, undergoes a restructure, or if the introduction of new technology can replace an employee’s tasks, among other scenarios.
However, employers must still make sure that the redundancy is genuine, in that they no longer require the position to be filled by anyone else. Having fewer employees complete the same tasks can still meet this requirement. Failure to establish a genuine redundancy may lead to an employee succeeding in an unfair dismissal claim at the Fair Work Commission.
1. When is a Redundancy not Genuine?
While a genuine redundancy can happen due to changes in the operational requirements of a business, or if the business closes or becomes insolvent, an employer must follow the consultation requirements under the applicable Modern Award or enterprise agreement. They also must assess the viability of redeploying affected employees elsewhere in the business, or within a related entity.
A redundancy will not be genuine if the employer:
- still requires the role to be filled, e.g., where they make a position redundant but then hires a new employee to complete similar duties and responsibilities
- could reasonably have given a suitably qualified employee a different job within the business
- fails to meet their consultation obligations under the relevant Modern Award or enterprise agreement (note that an employer may face civil remedy penalties under the Fair Work Act 2009 for breaching consultation requirements)
2. What are the Consultation Requirements and how does an Employer meet them?
The applicable Modern Award or enterprise agreement will typically set out consultation requirements when an employer decides to make a major change in their organisation or structure that will likely have significant effects on employees, such as redundancies.
To meet consultation obligations, employers will usually:
- give written notice of the proposed changes to all affected employees as soon as practically possible
- discuss the changes with affected employees and any likely effects on them, as well as considering measures to mitigate any adverse consequences
- analyse whether affected employees can be redeployed elsewhere in the business
It is important to notify affected employees as soon as possible to have genuine and meaningful discussions about these changes. If an employer notifies an employee about a major change the same day or just before actual notice of termination by redundancy is given, this consultation may be held invalid by the Fair Work Commission
3. What are the possible consequences of a Non-Genuine Redundancy?
Two types of applications are open to an employee:
- Unfair Dismissal: An employee may bring an application for unfair dismissal to dispute an alleged non-genuine redundancy at the Fair Work Commission. Unfair dismissal claims have a capped compensatory amount of 6 months of the employee’s salary or $79,250 for a dismissal occurring on or after 1 July 2021 (whichever is the lower amount); or
- General Protections (termination): An employee may allege that they were terminated under the guise of a genuine redundancy for having exercised a legitimate workplace right. If upheld, this termination may constitute an adverse action in a general protections application at the Fair Work Commission. The compensatory amount for general protections is uncapped.
Both applications above, if successful, can only lead to civil remedy penalties.
Constructive Workplace Solutions can help employers navigate the difficult area of genuine redundancies. While external circumstances may make redundancies appear reasonable and straightforward at the time, the failure to meet the above requirements could result in significant difficulties.
If you are considering making a major change at your workplace and are unsure of the next steps or possible consequences, please contact us at info@portal.businesssolutionshub.com.au or via our Contact Us page.
