What is a redundancy?
Redundancy can occur when an employer either doesn’t need an employee’s job to be done by anyone, or the employer becomes insolvent or bankrupt.
Redundancy can happen when the business:
- restructures
- introduces new technology (for example, the job can be done by a machine)
- slows down due to lower sales or production
- closes down
- relocates interstate or overseas and/or outsources operations
- has other employees / another employee that has capacity to absorb other employees’ duties (i.e. one person’s job is made redundant because their duties can be absorbed by 5 other team members by splitting that one employees’ duties out between the other 5)
For a redundancy to be considered ‘genuine’ within the meaning of the Fair Work Act 2009 (Cth), an employer must be able to demonstrate that:
- they no longer need the job to be performed by anyone; and
- they have complied with any consultation requirements in a contract of employment, modern award or enterprise agreement; and
- it would have been unreasonable in the circumstances to redeploy an employee into another role in the business or one of the business’ associated entities.
It is always advised to check the redundancy and consultation requirements in the applicable modern award, enterprise agreement or contract of employment when planning for a redundancy to ensure you can meet these obligations as an employer.
Consultation
One of the critical components of the redundancy process (and where employers often fall over) is in the consultation phase.
Modern awards and enterprise agreements have strict criteria for consultation processes, often requiring certain parts of the consultation process be documented in writing and stipulate time frames for responses from employers to questions that may arise from employees during the consultation process.
An obligation of when an employer is required to begin the consultation process will often be contained in a modern award or enterprise agreement, and less frequently in a contract of employment.
Consultation is essentially a two-way process, in which an employer communicates the changes in the business and why they are occurring, and considers the impacted employees’ views in response and provides these responses to the employee(s).
It is important to be aware however that the final decision maker in a case of redundancy is always the employer and the proposed changes being made to the business do not require the employees’ consent.
Employers are however required to inform the impacted employees (including those who are on any type of leave at the time the redundancy decision has been made) of the changes being made and operational reasons as to why, and, how they will impact the employees in question.
Another cornerstone of consultation is that the employer genuinely considers the employees’ responses to the proposal, seek to redeploy the employees into another role in the business (or associated entities) and keep documented evidence of the process.
Consultation Meetings
Consultation requires an employer to discuss with the impacted employees what the changes to the business are (i.e. restructuring), how the changes will impact the impacted employees in a series of meetings.
This may include discussing the following during the meetings:
- what changes are being made to the business
- why the changes are being made (note – you are not required to disclose any commercially sensitive information or any confidential information; a high-level explanation as to why the changes are being made should be sufficient)
- the time frames for redundancies
- estimate of redundancy entitlements
- the selection criteria (i.e. by way of a skills matrix)
- proposals for alternative employment/redeployment
- details of an EAP provider
There is no rule as to how long the consultation must be. It will depend on the circumstances of each individual case. However, typically at least two meetings will be the minimum amount necessary to have with an employee, as they need to be notified of the changes and criteria mentioned above (first meeting) and have reasonable time to consider redeployment opportunities and form their views in response (second meeting).
A final outcome meeting (which may be in the second meeting if no redeployment is available for example), needs to be held to provide an employee with the outcome of the process and always needs to be followed up in writing if the employees’ role is made redundant by way of a termination letter.
Redeployment Obligations
Redundancy has nothing to do with conduct of an employee or their performance. The only time performance becomes relevant is if the employer is considering employees to retain in the same role and employees to be made redundant and a skills assessment is undertaken and the employee(s) that are at the lowest performance level are selected.
As such, when redeployment is considered, an employer should seek to retain employees and move them into another suitable role.
The general rule with redeployment is ‘never assume’. Some examples of what to ‘never assume’ are, to never assume an employee will not:
- take a reduction in pay
- relocate to another office
- move into a more junior role
If these positions are available, you should put them to the employee as part of the redeployment process. Of course, many employees will not want to accept roles with this criteria, but the consequences of not at least providing the employee(s) the opportunity to consider these kinds of roles is that in the event of an unfair dismissal claim being brought by an employee post termination on grounds of redundancy, the redundancy may not be considered legally ‘genuine’ as redeployment obligations may not be seen to have been fulfilled.
Many businesses will provide employees a list of all available roles in the business during the first meeting and seek their feedback on those roles after the employees’ consideration in the second meeting.
It is important to note, just because a role is available that suits the employee does not mean they are automatically entitled to it, the hiring manager or whoever in the business has the responsibility of hiring the role has the final call and there may well be better suited candidates.
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Redundancy is one of the most common unfair dismissal case types and while businesses may have genuine operational reasons for needing to make redundancies, many of these claims succeed because employers are not across their consultation and redeployment obligations. Always refer to the employment contract, modern award or enterprise agreement as a first step and if anything is unclear,
And as always, we welcome you to contact our team if you have any questions regarding this matter or any other HR concerns.