FWA finds unfair redundancies

by 27 Oct 2011

Fair Work Australia (FWA) has ruled that several redundancy notices issued by a fashion company earlier this year cannot be considered ‘genuine redundancies’ because the company failed to adequately advise the affected employees of the plans prior to the notice.

Specialty Fashion Group (SFG), a listed company involved in the design and sale of women's clothing with 4,700 employees, argued to FWA that the redundancies were not unfair because they had advised staff that restructuring plans were being considered, and there was a genuine business need to make redundancies.

But FWA vice president Graeme Watson said in his finding last week, that the five people in question fell under the Textile, Clothing, Footwear and Associated Industries Award, and the employer was in violation of the agreement. This was because the award contains a particular clause which compels employers to notify employees who may be affected by proposed changes to company restructuring “as soon as practicable”.

Specifically, the clause states that employees must be informed of changed to “production, program, organisation, structure or technology, and/or significant effects which include the termination of employers”.

The case was initially brought forward to FWA as an unfair dismissal case, and industrial relations lawyer Peter Vitale said that for a redundancy to be considered genuine, the employer must demonstrate how it complied with the consultation clause of the agreement.

“What the employer hasn't done, which would have stopped any claim going further, is demonstrate to the tribunal that they consulted with the employees prior to the decision being made,” Vitale said.

He added that at a future hearing the commissioner will look at where the employees may have been redeployed, and therefore consider if their dismissal were unfair, or alternatively the commissioner may find that they were genuinely redundant and consultation might not have made any difference.

“What [this case] really shows is that employers who are planning to implement redundancies need to be aware that if they're not covered by an agreement, then they're likely to be covered by an award which will contain obligations, and if they can't comply with those obligations, it may result in unfair dismissal proceedings being more complex than they need to be," Vitale said.

SFG said their company's HR representatives had considered whether alternative roles existed for the surplus employees, but no alternative roles were found. Further, the CEO told staff that a ‘recalibration of internal sourcing’ was needed, and a psychologist was available.

Those made redundant were given a letter confirming the decision, a payment information sheet, a certificate of service, an employment separation certificate, and information from an outplacement consultancy. The ex-employees were also told the company would contribute up to $1,500 towards career development at recognised education institutes.

But FWA rejected the case by SFG that discussions it held with employees constituted an adequate consultation process.

Vice president Watson said, "The employees were told of the decisions without any invitation for matters relevant to the decision to be raised so that they could be considered by SFG. There was no indication of an opportunity for input or the SFG's open mind on issues such as selection, redeployment, payments and alternatives to redundancy.”


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