Could your employee’s redundancy be made legally redundant?

With change becoming the new constant in business, owners and managers can face the difficult decision of making staff redundant to ensure their survival.

But how do you make sure you do it in an ethical, strategic and legal way that won’t make your redundancies redundant? Here is a step-by-step guide to doing it the right way.

Base redundancies on position not person

A genuine redundancy is when you no longer need an employee’s job to be done by anyone. It is not a genuine redundancy if you still need the job done, but don’t want the employee.

For this reason, you need to be clear in your discussions that your staff member isn’t being made redundant, their role is, and why they couldn’t have done anything to stop or change the redundancy from happening.

Be prepared to provide genuine operational reasons for the redundancy

To guard against an unfair dismissal claim you need to provide clear reasons why you can’t economically or structurally retain certain positions or a set amount of employees. A genuine operational reason could be:

  • Business has slowed due to lower production or sales
  • Introduction of new technology allowing the job to be done by machine
  • Business or office is closing down or relocating interstate or overseas
  • Restructure is happening due to merger or takeover
  • Organisation is insolvent or bankrupt

Keep in mind that with an unfair dismissal claim an employer will need to establish that the dismissal is not a manufactured redundancy to deal with disciplinary issues or hide discriminatory behaviour. The more preparation and reporting you can do before announcing a redundancy the better.

Check your obligations under workplace agreements

An employer wanting to make an employee redundant must comply with the conditions set out in the workplace or employment agreement, as well as any conditions prescribed by the Modern Award.

All awards and registered agreements have a consultation process for when there are major changes to the workplace, like redundancies. This consultation needs to be completed as soon as possible after the decision of redundancy has been made.
Consultation requirements include:

  • Notifying employees who may be affected by the proposed changes;
  • Providing employees with information about these changes and their expected effects;
  • Discussing steps taken to avoid and minimise negative effects on employees; and
  • Considering employees’ ideas or suggestions about the changes

It is important to note that consultation requirements don’t necessarily require an agreement to be met between the employer and the employee. However, it does require more than simply talking with the employee.

You may find other conditions need to be met too. These could include the redeployment of staff within the organisation, the need to consult with unions, set notice periods and severance pay amounts or timeframes.

Consider redeploying redundant staff

Genuine operational reasons for redundancy aren’t always enough to guard off an unfair dismissal claim; you may also need to prove that it is unreasonable to redeploy the redundant person/s in other areas of your organisation or an associated organisation (a legally related entity).

If it is found that you could have in the circumstances, reasonably given the employee another job within your business or an associated entity, you may be liable for unfair dismissal.

But be warned, it is not sufficient to find an employee in danger of redundancy any other job (like a lower-level or lower-paid one), unless the employee willingly agrees to it. Otherwise, a demotion or employment conditions that are substantially less favourable to the employee will amount to a breach of the employment contract, resulting in an unfair dismissal or a genuine redundancy where redundancy entitlements will need to be paid.

Past decisions show that courts and tribunals take the following factors into account when determining whether redeployment is legitimate:

  • Whether the work performed is similar to what they did previously (uses similar skills, knowledge and abilities)
  • Whether new terms and conditions of employment are similar to previous terms and conditions, and no less favourable overall
  • Whether the new work location doesn’t significantly inconvenience the employee, compared to the old one
  • Whether the employee’s previous service has been taken into account when calculating service-based benefits
  • Whether the employee willingly agreed to any changes that were less favourable, and whether the employer applied any duress.

Courts and tribunals have tended to look for positive evidence that the change disadvantaged the employee, an absence of evidence one way or the other tends to be interpreted that the change was acceptable.

Determine your notice period and severance pay obligations

If you do continue with redundancy instead of redeployment, it is important to consider the notice period required before entering into redundancy discussions with affected employees. The notice period can be dictated by:

  • The employee’s contract or workplace agreement; or
  • The federal award which again provides a sliding scale, from one week of notice for staff who have worked for the business for less than one year through to four weeks for staff have worked for more than five years.

While you will be required by law to compensate redundant staff for the length of their notice period, you do get to decide on how long they stay in the office. In some cases, you may need to escort staff out of the building immediately to protect customer data and other sensitive information.

Severance pay also needs to be considered before you enter into discussions. Similarly to the notice period, your severance pay obligations can be determined by:

  • The employee’s contract or workplace agreement; or
  • The federal award that sets out minimum severance payment standards. The sliding scale provides four weeks’ pay for employees who have been with a company for one to two years, right up to 16 weeks’ pay for employees who have been with a company for 10 or more years.

Have a support person present

When you are delivering the news to staff, have a support person for you as the employer to witness the discussion. Not only is this good business practice, in Queensland law it is legal for someone to record conversations when there are only two people present. A third person may ensure a recorded conversation is inadmissible in court.

Offer outplacement services

Offering outplacement services to an employee after redundancy can help them move on faster, and help you maintain good relationships with staff, customers and suppliers.

NB Lawyers, the lawyers for employers offer a consultation to discuss how they can assist you with any concerns you may have.

Written by
Jonathan Mamaril, Principal & Director
NB Lawyers – the Lawyers for Employers
[email protected]
07 3876 5111