Spotlight on redundancy and unfair dismissal: are you acting legally?

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A staggeringly high number of redundancies and dismissals continue to be poorly executed by HR professionals, and the result can be a costly, litigious nightmare.

According to experts at one employment law firm, as many employers grapple with juggling greater labour flexibility, the number of redundancies is on the increase, and so too is the number of unfair dismissal claims.

TressCox Employment Law Partner, Rachel Drew, said she is dealing with as many as three unfair dismissal claims each week, and she noted there has been a significant increase since 2011. Although a genuine redundancy is a genuine defence to an unfair dismissal claim, employees who are not aware of the company’s overall profitability, or not aware of changes in the company’s client base or strategic direction, may see their redundancy as contrived, and therefore unfair.

“This can be costly and time consuming for employers who may not have done anything wrong, strictly speaking,” Drew said.

Despite the limitations of unfair dismissal claims under the Fair Work Act, such as small business exemptions and the threat of costs awards in unreasonable claims, Drew believes businesses should be vigilant in guarding against false unfair dismissal claims by implementing stringent workplace procedures. “It’s important that employers are aware of ways that they can implement fair dismissal in the first instance and prevent legal action,” she commented.

“For example, one aspect of current legislation many employers overlook is the compulsory obligation of employers to consider whether an otherwise redundant employee could be offered an alternative role within a business. The obligation is company-wide, not just in the subsidiary which employs the worker. This can be a positive step to avoid any issues arising from disgruntled employees,” she said.

The following practical advice was offered for employers to address unfair dismissal claims:
 

  • Undertake consultation with employee groups once redundancy becomes likely

  • Check industrial agreements for industry specific obligations

  • If appropriate, avoid redundancies by offering alternative employment within the business

  • If selecting one employee over another, as opposed to redundancy of a whole group or division, consider the strengths and weaknesses of each impartially

  • Ensure correct notice and redundancy pay are offered

As an indication of the extent of intervention by the Fair Work Ombudsman and back pay to workers, recent action in the Brisbane CBD alone includes:
 

  • $15,400 for a manager at a retail outlet underpaid wages, annual leave and long service leave entitlements on termination,

  • $15,000 for an executive assistant underpaid redundancy entitlements upon termination of employment,

  • $14,700 for a manager underpaid redundancy entitlements,

  • $13,400 for a retail worker underpaid redundancy entitlements,

  • $8,800 for a tradesperson not paid overtime and penalty rates,

  • $8,000 for a worker based at the Port of Brisbane underpaid wages between 2007 and 2010,

  • $7,600 for a manager underpaid a vehicle allowance,

  • $7,300 for a retail worker underpaid wages between 2009 and 2012,

  • $7,100 for a retail worker underpaid wages between 2008 and 2012,

  • $6,800 for an apprentice underpaid wages,

  • $6,400 for a manager not paid accrued entitlements upon termination,

  • $5,400 for a manager not paid annual leave entitlements and travel expenses upon termination.
  • Ed Watts on 19/11/2012 3:52:34 PM

    I don't see the link in this article between the first inflammatory paragraph quote "A staggeringly high number of redundancies and dismissals continue to be poorly executed by HR professionals, and the result can be a costly, litigious nightmare" and the remainder of the article.

    From my experience any qualified professional HR should know how to manage a redundancy and pay out a retenchment/dismissal benefit correctly. It would sadden me if they didn't know some of the basics that were mentioned in the article.

    In regard to payout errors, is the author confusing HR with a payroll function that may not be managed within HR?

  • Michael Cosgrove on 20/11/2012 10:14:11 AM

    taking the dollar figures out of the equation there is a staggering number of dismissals that cost companies money purely from the point of a complete lack of process and procedural fairness. HR should be advising Managers of their obligations and assisting them through a proper structured process, not simply agreeing with them and then trying to pick up the pieces after it gets out of control. In terms of payroll it is historically a HR function but is now becoming more independent, even outsourced, but that still does not detract from the point that payroll compliance should be on HR's to do list.

  • Linda Norman on 21/11/2012 11:26:48 AM

    As a senior HR consultant I am also insulted by the headline. Large orgs usually have very experienced and competent HR professionals at the helm and underpayment decisions are rare. However, I would agree that these outcomes are not uncommon in SME organisations that usually operate without HR expertise or with junior 'HR' staff .

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