Frontline Intelligence: Legal - What is “genuine” about a “genuine redundancy”?

by External19 Feb 2013

Kathryn Dent provides key tips to minimise exposure to legal risks relating to termination such as unfair dismissal.

As difficult economic times continue to plague employers, increased exposure to legal risks from termination such as an unfair dismissal, even where the termination is due to redundancy, warrants a proper pre-termination process of assessment, consultation and redeployment.

Section 389(1) of the Fair Work Act 2009 (Cth) (the “FW Act”) sets out the requirements for a genuine redundancy which will provide an exemption from an unfair dismissal action pursuant to s.385(d). These requirements are that:

 

  • the position no longer exists
  • there has been consultation as required under any relevant industrial instrument.

 

Section 389(2) states that it will not be a genuine redundancy if there are opportunities for reasonable redeployment either within the employing entity or within the employing entity’s “associated entities”.

The position no longer exists

This reflects the traditional common law definition of “redundancy” established by years of case law and should be relatively straightforward to establish if the employer has assessed its workforce and the need to implement change.

The “non-existence” of the position can be due to either the position being totally abolished or the duties of the position being performed differently. If the position is advertised or recruited in close proximity to the termination, the subject of an unfair dismissal claim, then the strength of this argument is significantly, if not totally, diminished. However, there is no legislative timeframe within which re-establishing the position is prohibited and in Shepherdson v Binders Compendiums Menu Covers Pty Ltd T/As John Batman [2012] FWAFB 7675, Fair Work Australia “allowed” an 11-month period between dismissal and then re-establishment of the position.

There has been no consultation required

Consultation is required if there is an applicable award or enterprise agreement (both to avoid an unfair dismissal as well as an action for breach of an industrial instrument). The failure to consult in UES (Int’l) Pty Ltd v Harvey [2012] FWAFB 5241 rendered the termination “unfair” because such a failure was unreasonable.

However, had consultation occurred, the employment would have been terminated, but later – two weeks later – and that formed the basis of the compensation ordered.

Reasonable redeplyoment

The obligation to undertake “reasonable redeployment” is one of the most recent, and therefore the most difficult and controversial aspects to this defence to an unfair dismissal claim, and a failure to do this may render a dismissal unfair because it is unreasonable or because there was no valid reason for termination. Redeployment must also be considered across a number of entities being the employer and its “associated entities”.

The Fair Work Bill’s Explanatory Memorandum provided examples of where redeployment may not be reasonable, such as in a small business or where the employer has “no positions available for which the employee has suitable qualifications or experience”.

However, since then, there have been cases which have provided clearer guidance. It is now well established that if the redeployed position is of lower status then it may still be reasonable (it is up to the employee to reject it) – Jenny Craig Weight Loss Centres Pty Ltd v I Margolina [2011] FWAFB 9137 – as may be a position in a different location provided that the employee agreed to it or did not insist on unreasonable relocation terms – Aldred v J Hutchinson Pty Ltd [2012] FWA 8289. This latter case also indicated that redeployment was a process which the employer, and not the employee, should initiate.

In order to avoid a redundancy becoming an unfair dismissal an employer should – where the employee is otherwise eligible to bring such an action – therefore:

 

  • be able to establish that the position no longer exists
  • consult as any applicable award or agreement requires
  • explore redeployment to any available position for which the employee is qualified, regardless of location, remuneration or status, within the employer or an “associated entity” of the employer.

 

About the author

Kathryn Dent is a director at People + Culture Strategies. For further information phone: 02 8094 3107 M: 0412 126 366 E: kathryn.dent@peopleculture.com.au.

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