Harvesting 'green shoots' - alternatives to redundancies

Recent media and market reports have indicated that there are some 'green shoots' beginning to emerge in the Australian economy. Economists will, however, say that unemployment rates are often the last indicator to improve and that employment issues will remain volatile for some time.

Employers have the difficult task of ensuring that their businesses remain afloat during this period while keeping good relationships with staff to enable the business to thrive once those green shoots start to bloom.

It is also the unfortunate case that during times of economic downturn, employee claims for compensation complaining of unfair treatment or injury increase sharply. This is probably a combination of there simply being more terminations occurring and employees' fears of longer periods of unemployment following termination.

Employers therefore have the additional threat of expensive litigation which will place even more pressure on the business.

Businesses cannot be managed just to minimise legal risks. However, the planned, thoughtful management of employees including the consideration of options instead of redundancy can minimise the risk of disputes and preserve employment relationships.

Union involvement
There is little doubt the Fair Work Act 2009 provides a greater opportunity for union involvement in the workplace, including greater opportunities to represent employees while workplace bargaining and marginally greater access to worksites combines to increase union profile. This leads to increased onsite membership and then greater involvement in the worksite.

Employers will understand that it is a union's job to look after the industrial interests of its members particularly where employees' jobs are at risk. This is their reason for existence. Based on legislation, if an employer intends to make 15 or more employees redundant there is a requirement under the Fair Work Act that they notify relevant unions and give them the opportunity to consult on measures to minimise or avoid terminations or mitigate their effect.

Redundancies of fewer employees may give rise to claims by the unions that the terminations are procedurally or actually unfair and this itself may spark union involvement. In these circumstances, the process of union consultation is left up to the employer and union to determine.

The combination of a decline in union numbers in some sectors and recent less favourable union rights of access has meant that, in many workplaces, unions have not had a regular presence and there is little or no ongoing relationship with employers.

Often in these circumstances, a union will be seen as an 'interloper' when they seek to intervene or question employer's redundancy decisions. Engaging with a union in these circumstances, and at this time in the economic downturn is seen by many employers as risky and 'stirring the pot'. 
Employers should have a plan for union involvement. If an employer has acted fairly with knowledge of their responsibilities any union consultation may be limited to showing fair treatment and fair process.

In short, as employers will need to be aware that if they are initiating redundancies, which may ultimately involve 15 or more employees, they will need to make contact with the relevant unions. It is irrelevant if the employer decides to make the redundancies in stages if they all arise from the one decision. That is it is no excuse to make 10 employees redundant in the first week and 10 employees redundant in the second week to avoid the provision.

In circumstances where fewer than 15 employees are to be made redundant, employers need to consider their relationships with unions and have an understanding of their staff's attitude to union involvement.

It is, however, critical to realise that even in circumstances where the workforce is predominantly non-unionised, unions must be consulted when terminating 15 or more employees.

Discrimination
While the Fair Work Act provides some protection for employers who wish to make employees redundant for reasons of 'economic, technological or structural' change, an employer cannot unlawfully discriminate even when an employer does not intend to.

Direct discrimination is often easy to avoid. An employer who for reasons of reducing staff costs terminates all female staff, or pregnant staff, or all union members would be in clear breach of both the Fair Work Act and state and federal discrimination legislation. 

What is more difficult is indirect discrimination. This is almost always done unintentionally by an employer. 

For example, in a sector where employers have taken initiatives to engage young or female employees to address a skills shortage, and then seek to impose a 'last on - first off' redundancy policy may find themselves guilty of indirectly discriminating against employees on the basis of age and sex.

Similarly if the profile of a company is that it contains largely female, part time or casual employees and these employees are targeted as the first candidates for redundancy an employer may be discriminating on the basis of sex.
That is not to say that if an employer's process results in a greater proportion of females or people of a certain age being identified for redundancy that it is automatically unlawful discrimination.

It does, however, focus the employee's need to ensure that their selection process is based upon specific criteria of which is justifiable as being the best workforce to take the employer's business forward. If the process does create an unbalanced result the employer should always ask why to ensure that they do not fall foul of the law.

Alternatives to redundancy
Many employers learned during the recession of the early 1990s that cutting ties with employees and not acknowledging loyalties had significant long-term consequences for the business. While in the short term the business was able to remain on track, its longer term prospects of re-engaging employees and growing was significantly impacted. 

With this in mind, more sophisticated employers are now looking at ways to retain their workforce while reducing labour costs. Almost all of these measures involve two common themes. 

First, a medium term commitment and cost to the employer of maintaining an employee who is not producing to their capacity because of lack of work.

Secondly it involves a sacrifice on behalf of the employee of some of the benefits of the employment relationship.

This means that there needs to be consent and commitment by both parties to the strategy for the short to medium term.

Traditional initiatives including reducing staff working hours or overtime can be combined with redeployment and retraining of staff. While this can involve short-term cost it inevitably enhances the employment relationship.

Suggesting, by agreement, that employees take long periods of paid leave which has already been accounted for by the employer is also an easier ask of both parties when the work is simply not there. 

The short-term conversion of full time jobs to part time jobs is also available in many sectors, but again this must be done with the complete agreement with the employee.

A plan
Employers in 2009 are becoming aware that burning bridges with employees for short-term financial relief often has a significant impact on future growth of the business and on reputation. Looking at processes from a Union and an employee perspective can lead to decisions being made which avoid expensive and disruptive litigation later.

A medium-term plan which enables the employer to keep the business afloat while maintaining employment relationships is critical - particularly when we are beginning to see some positive signs in the financial outlook. 

About the author
Tim Longwill is a partner at McCullough Robertson. He can be contacted on (07) 3233 8974 or via email at tlongwill@mccullough.com.au