Unfair Dismissal Applications – When an employee alleges their termination of employment was harsh, unjust or unreasonable, the Fair Work Commission (the FWC) is required to consider a number of preliminary matters[1] including whether the employee was a person protected from unfair dismissal. One of these matters is whether the employee’s dismissal was a case of ‘genuine redundancy’.
NB Lawyers – Lawyers for Employers has recently (successfully) defended an unfair dismissal application[2] (the Application) on behalf of one of our valued clients, the Lone Pine Koala Sanctuary. The operations of the Sanctuary, like many other businesses, were impacted by COVID-19. Specifically, the reduction in the number of tourists attending the Sanctuary required it to take steps to ensure it could continue to provide financial resources to care for its (adorable) wildlife. One of these steps were to make a number of roles redundant as they were no longer required (due to the reduction in attending guests).
What is a redundancy?
A redundancy occurs where a role is no longer required to be performed by anyone (as opposed to an employee no longer being required) due to changes in operational requirements of an employer’s business. A redundancy does not focus on whether the duties of a role are still required to be performed by an employer.
As an example, if an employer makes a decision to outsource the duties of an internal bookkeeper to an external accounting firm, they still require bookkeeping duties to be performed but no longer require an internal bookkeeper role. This would be a redundancy.
What is a ‘genuine redundancy’?
A ‘genuine redundancy’ under the Fair Work Act 2009 (Cth)[3] requires an employer to demonstrate the following:
- it no longer required the person’s job to be performed by anyone;
- it has complied with consultation obligations under an award or enterprise agreement; and
- it was unreasonable for the employee to be redeployed.
If an employer can demonstrate all three (3) requirements to establish a genuine redundancy, the FWC will not have jurisdiction to determine an Unfair Dismissal application.
What happened in the Application?
A jurisdictional objection was made to the Application on the basis the former employee’s dismissal was a case of genuine redundancy.
Were there changes to operational requirements?
The Sanctuary argued they were no longer permitted to trade due to government restrictions on its trading (at the time of dismissal). Guests were no longer able to attend. Even if guests were permitted to attend, the Sanctuary would no longer require the former employee’s role to be performed by anyone because the role itself (involving guests holding koalas) would not be compliant with social distancing requirements.
In its decision, the FWC emphasised the “The test…is whether or not the Employer made the decision it no longer required the position to be performed due to a change in operational requirements”. It rejected the former employee’s argument that just because some aspects of his duties were still being performed, he was not genuinely made redundant.
Was there compliance with consultation obligations?
In the Application, a modern award (specifically the Amusement, Events and Recreation Award 2010) covered the employee which imposed a number of consultation obligations. The Sanctuary argued it complied with its obligations under the award by providing relevant information in writing as well as providing a genuine opportunity for the former employee to provide his views prior to making any definite decisions. Of course, this was contested by the former employee, who stated a decision had already been made prior to consultation.
In its decision, the FWC referred to the restrictions caused by COVID-19 and noted “the facts pointed to the inevitability of major changes having to occur, the facts do not establish Lone Pine’s consultation was not genuine”. It rejected the former employee’s argument that he was not given a genuine opportunity to influence the Sanctuary’s decisions (and noted the former employee was given an opportunity to do so).
Was redeployment reasonable?
Finally, the FWC considered whether it would have been reasonable for the former employee to be redeployed in the circumstances. The Sanctuary argued there were no vacant roles at the time of the former employee’s dismissal. The former employee argued he should have been offered work in preference to other employees (who retained their roles).
The FWC clarified the former employee’s assertion was irrelevant and stated “[the former employee’s] argument on redeployment is not that a vacant position remained for him to be redeployed into, but more that he should have been offered redeployment into other casual work, in preference to other casuals retaining the work that remained to be performed. That is not the test. It was accepted by the FWC that due to the lack of alternative and available vacant roles, the former employee could not have been reasonably redeployed.
Finally, the former employee asserted it would have been preferable for the Sanctuary to have done all things necessary to allow him to receive JobKeeper payments. In this regard, the FWC noted that determining whether a genuine redundancy has occurred does not involve considering “whether the employer’s decision to make certain operational changes is a good or bad decision.” In practical terms, an employer’s decisions do not have to be in the best interests of the Company’s employees – it is merely required to consult with employees prior to making decisions.
Practical guide for employers
In order to demonstrate a genuine redundancy has occurred, here are three (3) practical tips:
- Keep records of changes to operational requirements
In the Application, the Sanctuary was able to demonstrate changes to operational requirements by providing evidence on the reduced number of guests attending its premises. It was also able to produce evidence demonstrating a reduction in revenue. These matters influenced the changes to operational requirements.
If employers decide that a position is no longer required to be performed by anyone, they should be prepared to justify that decision before a Court/Tribunal. A Court/Tribunal does not consider whether the decision was in the best interests of the employer or the employee (which was made clear in the Application’s decision), but rather it needs to be satisfied the role was no longer required to be performed by anyone. Keeping records of changes to operational requirements will assist an employer in explaining a redundancy process to a Court/Tribunal.
- Conducting a genuine consultation process
As noted in the Application, where an employer is under an obligation under an award or enterprise agreement to consult with employees regarding changes with significant effects, the opportunity provided to employees (to consult with an employer) must be genuine. Whether a consultation process is genuine is dependent on whether an employee is genuinely given an opportunity to influence an employer’s decision making. If a decision has already been made (prior to consulting with employees), it is very unlikely an employer will be able to demonstrate compliance with its consultation obligations.
Our suggestion to employers is to commence discussions with employees (holding roles which have been identified as potentially redundant) as soon as practicable after a decision has been proposed and of course prior to any irreversible decisions being made. We also suggest responding to the feedback provided by employees (preferably in writing) to demonstrate genuine consideration has been given.
- Review opportunities for redeployment within the organisation
The Application clarified the proper test (for considering redeployment) is whether a vacant role exists for redeployment, as opposed to whether an employee can be redeployed into a role held by another employee.
Prior to making a decision to terminate an employee on the basis of the redundancy of their role, an employer should make an assessment of vacant roles within its organisation. If the employee has sufficient competence and skill to perform the role immediately or after a period of training, the employer may have an obligation to offer the employee redeployment into the vacant role. If an employer has identified a vacant role but deems the role to be unsuitable, contemporaneous notes should be kept justifying why the vacant role is unsuitable (which can be relied upon at a later date).
Lessons for Employers
We understand businesses may be considering their options in light of the (expected) cessation of Jobkeeper payments late-September 2020. In the event definite decisions are made to restructure the business or otherwise reduce staff members (which will have the effect of creating redundancies), it is important for employers to be aware of their consultation obligations (if an award applies to their employees).
Many employers have recently reviewed their financial position after finalising their tax returns for the previous financial year. Of course, proactive employers have also reviewed their expected income at the end of September 2020 (when Jobkeeper payments are expected to cease or at least reduce). Nonetheless, merely demonstrating changes in operational requirements (such as a difficult financial position) does not establish a genuine redundancy.
Failure to comply with consultation obligations prior to making roles redundant (resulting in termination of employees) may result in an employer being unable to demonstrate a genuine redundancy has occurred (i.e. an employer will not be able to argue a jurisdictional objection to an unfair dismissal application). Without being able to demonstrate a genuine redundancy, an employer may be at risk of a finding (by a Court/Tribunal) their dismissal procedures were unfair.
If you are an employer seeking to restructure your business or otherwise make changes to the number of roles required within your business (which may result in redundancies), we offer an obligation free consultation – please call +61 (07) 3876 5111 to arrange an obligation free consultation to discuss your inquiries and we will do our best to provide a helpful, practical solution.
Written By
Principal
NB Lawyers – Lawyers for Employers
Assisted By
NB Lawyers – Lawyers for Employers
About the Authors
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. With a core value of helping first and providing practical advice, Jonathan is a sought after advisor to a number of Employers and as a speaker for forums and seminars where his expertise is invaluable as a leader in this area as a lawyer for employers.
Dan Chen is a lawyer at NB Lawyers, the lawyers for employers, and specialises in employment law. Dan is passionate about assisting business owners, small and large understand their obligations under Australia’s complex workplace relations system.
[1] Such as whether the employee has completed the minimum period of employment or whether the employee earned less than the high income threshold (if not covered by a modern award).
[2] Samuel McClelland v Kamori Australia Pty Ltd T/A Lone Pine Koala Sanctuary [2020] FWC 3707.
[3] Section 389 of the Fair Work Act 2009 (Cth).