The Fair Work Commission’s early COVID-19 decision is a stark reminder for employers to meet their consultation obligations.
Keywords: COVID-19, Coronavirus, Consultation, Fair Work Commission, Redundancy, Employee Termination, Termination of Employment, Consultation.
COVID-19 has wreaked havoc on industry around the globe. Undoubtedly, businesses will still be feeling the effects for years to come – but for now the focus for many remains fixed firmly on survival in the short term. For some employers, hasty decision making intended to ensure survival may come at the cost of complying with procedural responsibilities. It is in these abnormal times that we will undoubtedly see a substantial spike in disputes before the Fair Work Commission (Commission).
Employers acting on the adage of “desperate times call for desperate measures” may soon find themselves with more problems to deal with. A recent decision[1] by the Commission to refuse to allow Auscript Australasia Pty Ltd (Auscript) to shirk its consultation obligations has sent a warning to employers that any ‘pandemic concessions’ will require thorough analysis which will need to stand up to scrutiny.
Background to the Dispute
The dispute was filed on 20 January 2020 by the Australian Municipal, Administrative, Clerical and Services Union (ASU) in response to Auscript’s decision to make 25 employees redundant without proper consultation occurring. The ASU sought the Commission’s assistance in ensuring Auscript complied with its consultation obligations to its employees and to the ASU in accordance with the terms of the Auscript Australasia Enterprise Agreement 2010. As part of the proceedings, the parties agreed to draft and implement a consultation protocol to avoid potential future failures by Auscript to meet its consultation obligations.
On 27 March 2020, whilst the dispute was still on foot, Auscript advised an additional 58 employees that it would need to implement drastic measures in response to the impact of COVID-19. Auscript proposed a number of options for employees to consider including voluntary redundancy, job share, reduced hours of work, or closure of offices. Auscript provided further correspondence to staff on 30 March 2020 advising that it would enter a consultation period and requested that employees inform them by 1 April 2020 if they opted for redundancy.
The ASU sought urgent assistance from the Commission to avoid further redundancies, to urge Auscript to consider alternatives to redundancy, and to ensure Auscript met its consultation obligations. Accordingly, a conference was held by the Commission on 30 March 2020 and correspondence ensued over the coming days.
Auscript’s failure to Consult
Over the course of negotiations between the parties and discussions with the Commission, it became evident that Auscript had already made a decision to make the affected employees redundant despite supposedly being in a “consultation period”.
The Commission made the following key observations leading to its decision:
- Auscript provided verbal assurances to the ASU and the Commission in terms of compliance with its obligations, but then ignored those assurances. This included the decision to close its Melbourne office and make many employees redundant despite providing assurances that alternative solutions would be genuinely considered (such as working remotely or relocation).
- The Commission was not satisfied that Auscript’s participation in conciliation was genuine. This was made apparent during a conference on 3 April 2020 in which Auscript’s CEO (US based) joined the discussion and revealed the intention to terminate every employee who had nominated for voluntary redundancy on 6 April 2020, and then terminate the remaining employees by way of compulsory redundancy the following day. This fact had previously been concealed by Auscript.
- Auscript did not provide a substantial answer to the Commission’s question as to how employees were to be selected for redundancy. Auscript simply said that it would be based on performance but provided nothing further.
The Commission was not satisfied Auscript actually gave genuine consideration to any other option other than redundancy and it favoured the submissions of the ASU. Relevantly, the Commission described consultation as having a purpose that “cannot be conducted for mere show”.
The Commission made orders including the immediate implementation of redundancies be ceased and required Auscript to enter into a genuine consultation period with specific guidelines prescribed by the Commission.
Economic loss due to COVID-19 was not a significant factor
Auscript’s submissions outlined the significant economic loss faced by the Company due to COVID-19. Auscript stated it could not risk the economic collapse it would face if its business remains affected for as long as projected and that it was already experiencing a decline in demand for its services between 60% – 87%. Further, Auscript submitted “that it must execute its proposed restructure to ensure its ongoing viability as a matter of urgency”.
Whilst the Commission acknowledged that Auscript had “seen a drastic drop in its services”, it evidently did not see it to be pertinent to the issue of its consultation obligations.
The Commission’s steadfast position despite the bleak situation faced by Auscript is a firm reminder that employers must keep a clear head when implementing redundancies. Whilst unprecedented, the Commission is unwavering in the face of COVID-19 and will not suffer it as an excuse to shirk procedural obligations especially as obligations such as consultation will force an employer to at least consider alternatives.
Potential Jobkeeper Implications
The Commission was not satisfied Auscript had given genuine consideration to options other than redundancy. It was noted by the Commission that the Federal Government had already announced plans to assist employers in dealing with COVID-19 before Auscript’s decision to make a second round of redundancies due to its effects. Auscript rejected the possibility of participating in Jobkeeper as a genuine option instead of redundancies on the basis that the announcements were not yet written into law. In the next paragraph of the decision, the Commission goes on to emphasise “the purpose behind consultation clauses is to ensure that an employer genuinely considers options so that measures such as a redundancy are a last resort”.
What does this mean for employers? Certainly, now the Jobkeeper legislation has been formalised a reasonable implication can be drawn that eligible employers will have to genuinely consider nominating for Jobkeeper before implementing redundancies. It will be interesting to see the outcome if a claim is brought on that basis.
Key take-away for employers
- Employers must ensure their consultation obligations are met before terminating employees by way of redundancy. Consultation obligations may arise from a Modern Award, enterprise agreement, employment contract, or in limited instances under the Fair Work Act 2009.
- Further, the Commission’s decision highlights that simply following procedure or consulting for “mere show” will not suffice. Genuine consideration must be had to alternative options to redundancy (which may arguably include Jobkeeper).
For employers who are unsure of their consultation obligations, we would be happy to assist. We offer an obligation free consultation – please call +61 07 3876 5111
Written By
Jonathan Mamaril
Director
NB Lawyers – Lawyers for Employers
[email protected]
+61 07 3876 5111
Assisted By
William Sherry
Lawyer
NB Lawyers – Lawyers for Employers
[email protected]
+61 07 3876 5111
About the Author
Jonathan Mamaril leads a team of handpicked experts in the areas of employment
law and commercial law who focus on educating clients to avoid headaches,
provide advice on issues before they fester and when action needs to be taken
and there is a problem mitigate risk and liability.
[1] Australian Municipal, Administrative, Clerical and Services Union v Auscript Australasia Pty Ltd [2020] FWC 1821