CONSIDERING REDUNDANCY IN A COVID-19 WORLD — LESSONS FROM THE FAIR WORK COMMISSION

What is Redundancy?

A position is redundant when an employer no longer requires an employee’s job to be carried out by anyone.

Genuine Redundancy under the Fair Work Act 2009 (Cth)

A person’s dismissal is a case of genuine redundancy, pursuant to section 389(1) and (2) of the Fair Work Act 2009 (Cth) (FW Act) where:

  • the employer complies with any obligation in the relevant modern award to consult with the employee regarding a redundancy; and
  • it would not be reasonable to redeploy the person elsewhere within the employer’s enterprise or the enterprise of an associated entity of the employer.

Where the job is no longer required due to changes in operational requirements

A job involves ‘a collection of functions, duties and responsibilities entrusted, as part of the scheme of the employee’s organisation, to a particular employee’. It is the “job” that must no longer be required to be performed by anyone. Please note, duties can still survive and be assigned to another employee in a case of a genuine redundancy.

Redeployment

Section 389(2) of the FW Act states that a person’s dismissal is not a case of genuine redundancy if it would have been reasonable in all the circumstances for the person to be redeployed within:

  • the enterprise of an associated entity of the employer.
  • make all genuine attempts to redeploy the employee, within the company, or within an associated entity.

Reasonable in the circumstances

Whether redeployment of an employee into a vacant position is considered reasonable will depend on the circumstances that exist at the time of the termination.

  • the qualifications required to perform the job;
  • the employee’s skills, qualifications, and experience; and
  • the location of the job in relation to the employee’s residence and the remuneration (pay and entitlements) which is offered.

The job must be suitable

The job must be suitable, in the sense that the employee should have the skills and competence required to perform it to the required standard either immediately or within a reasonable period of retraining.

  • the level of remuneration.

Consultation Obligations

The obligation on an employer to consult about redundancy only arises when a modern or enterprise agreement applies to an employee and that modern award or enterprise agreement contains requirements (which they often do) to consult about redundancy.

  • provide the employee with a real opportunity to provide his or her views and opinions on the proposed decision and the impact of the proposed change (including any impact in relation to his or her family or carer responsibilities);
  • provide comprehensive information to the employee about the proposed decision and make sure it is in writing;
  • remain open to suggestions;
  • keep records of conversations involving consultation;
  • give prompt consideration to any matters raised by the employee; and
  • if deciding to implement the original decision to introduce changes or to terminate the employee’s position on the basis of a redundancy, explain the rationale for this to the employee and provide the decision to him or her in writing as soon as practicable.
  • substantial legal costs; and
  • a greater exposure to successful unfair dismissal claims.

DECISIONS FROM THE COMMISSION: COVID-19 DOES NOT ABSOLVE AN EMPLOYER OF ITS LEGAL OBLIGATIONS, SPECIFICALLY ITS OBLIGATION TO ENGAGE IN GENUINE CONSULTATION

Despite these unprecedented times, the Commission has taken the view that the COVID-19 pandemic is not an excuse to forgo processes when making employees redundant.

DECISIONS FROM THE COMMISSION: THE EMPLOYEE’S ROLE IS NO LONGER REQUIRED BUT THE BUSINESS CANNOT AFFORD TO PAY REDUNDANCY PAY; WHAT DO I DO?

The Commission may reduce, on application by an employer, redundancy payments that would otherwise become due and payable to employees but where the employer does not have the cash reserves to make such significant payments.

DECISION FROM THE COMMISSION: CAN AN EMPLOYER REDUCE AN EMPLOYEE’S REDUNDANCY PAY ON THE BASIS OF THE EMPLOYEE OBTAINING OTHER ACCEPTABLE EMPLOYMENT

The FW Act provides that an employer which is liable to pay statutory redundancy under the FW Act may apply to the Commission for a determination which reduces that liability in circumstances where the employer “obtains other acceptable employment for the employee”.

  • the scope of duties which the employee could be required to perform was reduced; and
  • the employee’s title was changed to one suggesting reduced seniority.

DECISION FROM THE FEDERAL COURT: IS AN EMPLOYEE STILL ENTITLED TO REDUNDANCY PAY WHEN THE EMPLOYER CHANGES THE EMPLOYMENT CONDITIONS BUT THE EMPLOYEE CONTINUES WORKING FOR THE EMPLOYER

Many employers in the current COVID-19 pandemic environment have debated the need to reduce employees’ hours and assign them to different roles as an alternative to termination. The Federal Court of Australia, in the case of Broadlex Services Pty Ltd v United Workers’ Union [2020] FCA 867 recently dealt with the issue of whether an employee who was required to transfer from her full-time position to part-time was entitled to redundancy pay, because the employer no longer required the full-time job to be performed by anyone.

  • the relationship in which the employee entered after she accepted the repudiation was a fundamentally different relationship (part-time employment) from the relationship the parties previously enjoyed (full-time employment); and
  • the employee was no longer a full-time employee but a part-time employee, performing a fraction of the work she formerly undertook for a fraction of the remuneration she formerly received.

CONTACT MURFETT LEGAL FOR ASSISTANCE

If you are considering restructuring your business or making positions redundant, please contact our employment law partner, Kate Walawski, to help minimise the risk of potential claims. For further information or assistance contact Murfett Legal on +61 8 9388 3100.

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