Specialist Corporate and Commercial Lawyers
Redundancy and Redeployment – What are your obligations?
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Employee termination can be a difficult landscape for any employer to traverse, and redundancy in particular can present its own unique set of issues and risks. When considering dismissing an employee for redundancy, great care must be taken to ensure compliance with the Fair Work Act 2009 (the Act) in order to avoid potential exposure to any unfair dismissal claim. One of the more difficult pitfalls to contend with is the “redeployment” requirement under the Act. In this article, Susan Moran, Principal of our Dispute Resolution team, provides her insights into an employer’s redundancy and redeployment obligations under the Act. Susan has expertise in advising on all aspects of the employee termination process, including redundancies and claims of unfair dismissal.
Employees who would otherwise be eligible to make unfair dismissal claims will be prevented from doing so if the ‘genuine redundancy’ exemption applies (section 389 of the Act). This requires an employer to demonstrate that:
- the redundancy was legitimate – i.e. the employer no longer required the person’s job to be done because of changes in the operational requirements of its enterprise;
- if the employee was covered by an award or enterprise agreement, the employer consulted in accordance with it; and
- it was not reasonable to redeploy the employee in the employer’s enterprise or that of an associated entity.
An employee is entitled to receive redundancy payments under the National Employment Standards (NES) in the event of a ‘genuine redundancy’. Section 389 of the Act provides that a ‘genuine redundancy’ occurs where the employer no longer requires the job to be performed by anyone as a result of changes in the operational requirements of the employer’s enterprise. Whilst the definition of ‘genuine redundancy’ is clear, the Act also imposes an obligation on employers to consider whether the employee can be redeployed.
The termination of an employee’s employment on the basis of redundancy will only be a ‘genuine redundancy’ where it would have not been reasonable for the person to be redeployed, either within the employer’s enterprise or the enterprise of an associated entity. It is therefore important, when the issue of redundancy arises, to ensure that redeployment opportunities within the business have been considered.
In many instances, redeployment will not be an available option. However, in order to minimise any exposure to allegations that the redundancy is not ‘genuine’ and amounts to unfair dismissal, the possibility of redeployment should not be ignored.
The redeployment obligations under the Act require consideration of whether there are other positions within the organisation that the employee is suitably qualified to perform, and that are available. There is no obligation on an employer to create a position, nor to remove other employees to allow for redeployment. What is required is that the employer undertakes an assessment within its enterprise and considers whether there are any openings available for an employee facing termination due to their present role no longer being required. Where the possibility of redeployment is identified, the offer to the employee must be certain. Merely offering the employee the opportunity to apply for a position along with other applicants will not amount to redeployment.
Consultation is essential in any redundancy situation. All modern awards impose an obligation on an employer to consult with employees regarding major workplace change. Termination of an employee’s employment will clearly fall within this obligation. Even in circumstances where the employee does not fall within a modern award, consultation is recommended to avoid allegations by the employee that the termination of their employment on the grounds of redundancy was subjective or discriminatory.
Consultation is significant in the context of the employer’s obligation to consider redeployment. An employer, after considering options within their organisation, may conclude that there are no opportunities for redeployment. The employee, however, may be willing to relocate, accept alternate duties or even consider taking a reduction in salary.
Australian courts and tribunals have found in a number of instances that the need to relocate of itself, even overseas, does not necessarily mean the position is not one available for consideration in terms of suitable redeployment. Similarly, the fact that an available position may entail a reduction in salary or responsibility, is not, of itself, conclusive that the position is not suitable for consideration in relation to redeployment. These decisions demonstrate why the need for consultation is essential.
Redundancy can be a necessary part of an employer’s decision-making process when reexamining business efficiency or restructuring its operations. It can also be a source of significant legal exposure for an employer if care is not taken to ensure compliance with the Act. If a proper assessment process is not undertaken (or adequately documented), an employer may find itself facing allegations of unfair dismissal, and potentially defending proceedings before the Fair Work Commission. Before terminating an employee for redundancy, it is critical for an employer to assess whether the redundancy is genuine, including whether there is any potential for redeployment, and to engage in a consultation process with the affected employee. The circumstances surrounding employee redundancy will differ case by case, and it is always wise to obtain legal advice if the correct approach is unclear.
This article is not legal advice. It is intended to provide commentary and general information only. Access to this article does not entitle you to rely on it as legal advice. You should obtain formal legal advice specific to your own situation. Please contact us if you require advice on matters covered by this article.