Redundancy Requirements Post COVID-19

The recent COVID-19 pandemic has caused significant workplace disruption, forcing businesses to restructure their organisations in response to government direction (such as directing employees to work from home) and also to remain competitive in an evolving environment.

We anticipate that many workplaces in the near future will look different, with restructures causing some jobs to no longer be required. As a result, employers have and will dismiss employees performing those jobs on the grounds of redundancy. Redundancy is a controversial but necessary action for employers, which can be problematic and costly if the redundancy is not ‘genuine’.  This article will briefly touch on redundancy and the unfair dismissal law.

Genuine Redundancy

Pursuant to section 389 of the Fair Work Act 2009 (Act):

Meaning of genuine redundancy

• A person’s dismissal was a case of genuine redundancy if:
  • the person’s employer no longer required the person’s job to be performed by anyone because of changes in the operational requirements of the employer’s enterprise; and
  • the employer has complied with any obligation in a modern award or enterprise agreement that applied to the employment to consult about the redundancy.
• A person’s dismissal was not a case of genuine redundancy if it would have been reasonable in all the circumstances for the person to be redeployed within:
  • the employer’s enterprise; or
  • the enterprise of an associated entity of the employer.

Job no longer required because of a change in operational requirements

In order to determine whether the job is no longer required as a result of the change in operational requirements, the question is whether there are any duties left for the relevant employee to discharge. If the answer is no, then the employee’s position may be redundant. The key inquiry is whether the specific ‘job’ is required, not necessarily the ‘duties’ of that job. This is because a redundancy can be genuine even if the duties are still performed by other employees.

The Act does not define ‘operational requirements’, but it typically relates to business restructures, site closures and the completion of specific projects.

Compliance with a modern award or enterprise agreement

Many employees are covered by a modern award or enterprise agreement. These place binding obligations on the employer and must be considered carefully. Most of the modern awards contain consultation obligations for a ‘major workplace change’, and it will likely not be a case of genuine redundancy (and therefore result in a potential breach of section 389(1)(b) of the Act) if the consultation provisions are not followed.

The idea behind the legislation is to provide the parties with an opportunity to discuss the matter in a cooperative and productive manner allowing each party the opportunity to be heard and allow ideas and proposals to be put forward. It is imperative that the consultation between the employee and the employer is a genuine consultation, and not simply a case of informing the employee about a fixed decision. Therefore, a failure to properly consult can lead to a finding that the redundancy was not genuine, entitling the employee to relief under the Act

This requirement is one of the most common causes of issues for employers.

Redeployment that is reasonable in the circumstances

Whether redeployment is reasonable in the circumstances will depend on the specific circumstances relevant to the redundancy, such as:

• whether a vacancy exists that the employee is able to perform;
• the employee’s qualifications, skills, and experience and suitable for the vacancy; or
• the location and pay of the vacancy.

Notably, The Fair Work Commission has previously found that employers should not dismiss a lower income job with less responsibility as being unsuitable.

Further, employers need to consider whether redeployment is available in associated entities of the employer. An associated entity is defined in section 50AAA of the Corporations Act 2001 (Cth), and includes related bodies corporate and wholly owned subsidiaries, and consideration should also be given to the level of control between the employer and any associated entities.

It is also important to consider the application of the Act and whether the employee falls under the statutory protections of section 389, or whether the employer business is covered by the Small Business Fair Dismissal Code (fewer than 15 employees).

Conclusion

Unfair dismissal law can be complex and is frequently the subject of legal proceedings. If you need assistance in navigating the Act, any applicable agreements or understanding your rights and obligations, please contact us.

Nicholson Ryan delivers expert advice across all areas of corporate and commercial law and is assisting clients on a broad spectrum of legal issues in relation to COVID–19. If you have any queries as to the matters addressed in this article, please contact us at (03) 9640 0400 or email us at admin@nrlawyers.com.au

This article is prepared by Gerard Maxted and Stuart Hogg. Gerard and Stuart specialise in commercial law and litigation at Nicholson Ryan Lawyers and can be contacted direct on gerardm@nrlawyers.com.au, or stuarth@nrlawyers.com.au .

This memorandum is intended as general information only. It does not purport to be comprehensive legal advice. Readers must seek professional advice before acting in relation to the aforementioned matters.