Employers who fail to comply with legal obligations in redundancy situations can face hefty penalties.
As tough economic times are forcing corporations across Australia to lay off staff in mass redundancies, HR professionals must successfully navigate an employment law minefield, or risk costly repercussions for their companies.
Senior Associate Trent Hancock from McDonald Murholme sits down with HC Online to talk us through the crucial stages of managing the downsizing process.
“When faced with the difficult task of selecting staff for redundancy, best practice HR should incorporate a number of steps, all of which should be confirmed in writing,” Hancock says.
The first step for HR and employers should involve meeting with employees, both individually or collectively, in order to notify them of the changes that are proposed and the reasons these changes are necessary, he says.
“Secondly, it would involve consulting with employees with a view to exploring any alternate proposals they may have,” Hancock says.
Thirdly, if no proposed outcomes are viable, HR would be involved in communicating the decision to employees and explaining to them the steps that will be taken to assist in averting or mitigating any loss that arises.
“This may include exploring opportunities for redeployment, confirming the entitlements that will be paid on termination, offering an outplacement service or allowing employees a reasonable amount of time during any notice period to look for alternate employment,” Hancock says.
He says HR professionals and employers should ensure that they are familiar with all obligations that arise in these circumstances both under contract and statute.
Employers must ensure that any redundancies are fair and lawful, by complying with the terms of each individual employment contract.
Some employment contracts may include a redundancy policy, while modern award or enterprise agreements can also impose obligations with respect to notification, consultation, redeployment, retrenchment and entitlements.
Australia’s workforce is reeling from a string of corporate redundancies, such as the death of retail giant Dick Smith which saw 3,000 jobs lost from its Australian and New Zealand operations, while mining giant Rio Tinto is expected to slash up to 700 local jobs from its WA operations in coming months.
Fairfax Media last week shared plans to cut 120 editorial jobs and newspaper reports claim that telco giant Optus plans to axe about 1,000 workers in a $215 million cost-cutting exercise.
Hancock says companies facing mass redundancies where they need to dismiss 15 or more employees may also need to comply with additional notification and consultation obligations under Part 3-6 of the Fair Work Act 2009 (Cth).
Most importantly, employers must ensure that a fair selection criterion that is free from bias or discrimination is applied when determining which positions are made redundant.
Hancock warns that employers that fail to comply with these obligations can be slapped with a range of penalties, from individual claims for unfair dismissal or breach of contract to larger claims regarding breaches of civil remedy provisions of the Fair Work Act 2009 (Cth).
In some situations, employers may opt for voluntary redundancy process, calling for staff who are prepared to accept redundancy packages and end their employment.
Hancock says the advantages and disadvantages of voluntary and involuntary redundancies are numerous.
“Voluntary redundancies can also ensure that employees who are prepared to accept redundancies and cease their employment do not otherwise remain employed and take the place of an employee who has a greater desire or need to retain their position,” Hancock says.
“For this same reason voluntary redundancies will also ordinarily reduce the amount of subsequent claims that are made by retrenched employees who might otherwise have retained their position.”
However, he warns that those who put their hands up are not necessarily the workers an employer wants to make redundant.
And while voluntary redundancies are said to be better for staff morale, if this doesn’t attract the number required then employers may have to move to involuntary redundancies, which adds to workforce uncertainty and instability.
