Australia: Effecting a fair redundancy under the Fair Work Act: redeployment

Workplace Relations and Employment Update
Last Updated: 19 October 2011
Article by Andrew Ball, Joel Davis and Leah Dowling

The current industrial sphere is witnessing significant restructuring by some of Australia's largest companies in a bid to weather the present economic climate. The high Australian dollar paired with decreasing demand in some industries has forced many companies to rethink their employment needs. Qantas recently announced it will cut 1000 jobs as part of a restructure and BlueScope has indicated that it will cut 1000 export steel jobs at two mill locations. Direct responses to economic circumstances can have serious industrial repercussions for any business if redundancies are not carried out in accordance with the relevant industrial instrument and legislation.

Accordingly, it may be time to look at recent developments in the area of redundancy under the Fair Work Act 2009 ("Act"), specifically in relation to the issue of redeployment.

Determining whether a redundancy is genuine requires a two-stage approach under section 389 of the Act. Firstly, the employer must establish that it no longer requires the dismissed person's job to be performed by anyone because of changes in the operational requirements of the enterprise, and that it has complied with any obligation to consult about the redundancy under a modern award or enterprise agreement. Secondly, the employer must then establish that it would not have been reasonable in all the circumstances for the dismissed employee to be redeployed within either the employer's enterprise or an associated entity.

Commissioner Ryan's recent decision in Iryna Magolina v Jenny Craig Weight Loss Centres Pty Ltd [2011] FWA 5215 is a timely illustration of an employer's obligation to comply with section 389 of the Act when effecting a redundancy. In this matter, the respondent company made a decision to make both the applicant's role and another role redundant, creating a new position intended to cover both roles. The other employee whose job was made redundant was then chosen to fill the newly created position, while the applicant's employment was terminated.

The applicant filed an unfair dismissal claim in Fair Work Australia ("FWA"). The respondent objected the claim on the basis that the termination was a genuine redundancy. Although Commissioner Ryan was satisfied that the matter was as a result of changes in operational requirements, he then determined that the applicant was covered by an award and that the consultation clause had not been complied with. The commissioner also went on to determine that the applicant could have been redeployed.

The respondent argued that the only redeployment opportunities available were entry level positions, and that to offer them to the applicant would be insulting, given her relatively senior role. The commissioner found that the respondent, in being 'precious' about not wanting to insult the applicant with the offer of a lower-paid position, denied itself and the applicant an opportunity to consider the reasonableness of redeployment.

The commissioner dismissed the respondent's objection, making the observation that an employer should not "arrogate themselves the role of concluding how the redundant employee will respond to an offer of redeployment to a lower-paid position".

Needless to say, the important steps that an employer must take to redeploy a redundant employee, in an effort to avoid an unfair dismissal claim, can be complex. Commissioner Ryan's decision adds another factor to the authoritative guide to redeployment contained in last year's seminal FWA Full Bench decision of Ulan Coal Mines Limited v A. Honeysett & Ors [2010] FWAFB 7578. The Full Bench indicated a number of key considerations for employers, which included:

  • reasonability of redeployment will be determined at the time of the redundancy;
  • redeployment opportunities in associated entities need to be considered;
  • factors such as distance will be relevant when considering redeployment;
  • an employer would ideally redeploy an employee made redundant directly into a position that is suitable, instead of requiring a competitive application process; and
  • merely offering a redundant employee the opportunity to reapply for another position and providing preferential treatment if there is a competitive process may not be enough to avoid unfair dismissal liability.

Restructuring can be complicated and sometimes costly if an employer appears to effect a "sham redundancy". It is clear that redeployment must be taken seriously include making offers to work for less money, a lower title or at a location further away in order to avoid a costly and inconvenient unfair dismissal claim.

A measured and well thought out approach to the restructuring of the company workforce, particularly in relation to redundancy, will act to decrease exposure to potential future claims. For more information please contact the DLA Piper Workplace Relations, Employment and Safety Team.

© DLA Piper

This publication is intended as a general overview and discussion of the subjects dealt with. It is not intended to be, and should not used as, a substitute for taking legal advice in any specific situation. DLA Piper Australia will accept no responsibility for any actions taken or not taken on the basis of this publication.

DLA Piper Australia is part of DLA Piper, a global law firm, operating through various separate and distinct legal entities. For further information, please refer to

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