Australia: Have you really considered redeployment?

A recent decision of Fair Work Australia involving the dismissal of a manager for reasons of redundancy places employers at risk if they do not offer employees lesser roles before making them redundant. A failure to do so may lead to the redundancy being held not to be genuine for the purpose of excluding an employee's ability to apply for an unfair dismissal remedy.

What happened?

An employee previously employed as a manager was made redundant following a decision by the employer to combine two jobs into one. The employee challenged her dismissal in Fair Work Australia, alleging her dismissal was harsh, unjust or unreasonable, and her former employer objected to her claim on the basis that her employment had ceased for reasons of a genuine redundancy.

Fair Work Australia found that the operational decision leading to the employee's position being made redundant was appropriate. However, Fair Work Australia found that the employer had not satisfied two of its obligations to demonstrate that the employee's employment ceased for reasons of a genuine redundancy. Those obligations were to:

• comply with its obligations to consult with the employee under the applicable modern award (although the employer claimed the employee was not an award covered employee)
• demonstrate it was not reasonable, in all the circumstances, to redeploy the employee.

In regards to redeployment, the employer gave evidence that it did not offer the employee another position because offering the employee an available job would have been an insult to the employee. This was due to the fact that the employee's remuneration would reduce from in excess of $200,000 to that associated with an entry level role. Fair Work Australia found however, that 'by being precious about not wanting to "insult" the [employee] with an offer of redeployment to a lower paid position the [employer] denied both itself and the [employee] the opportunity of properly considering the reasonableness in all the circumstances of redeployment of the [employee] to a lower paid position within the [employer's] enterprise'.

In this case, Fair Work Australia accepted the employee's evidence that she would have accepted a lower paid role with fewer hours because this would have allowed her to spend more time with her 18 month old daughter. This evidence was supported by the fact the employee subsequently accepted another role which involved fewer hours and only attracted a salary of around $55,000.

On that basis, Fair Work Australia determined that the employer had failed to satisfy two obligations for the dismissal to be a genuine redundancy. Having rejected the employer's jurisdictional challenge, Fair Work Australia will now determine the merits of the case.

Key lessons for employers

Where there is any doubt about whether or not a modern award or enterprise agreement applies to an employee that contains an obligation to consult an employee about redundancy, employers should heed Fair Work Australia's comments that 'prudence would...suggest to an employer that even if the employer has no modern award or enterprise agreement obligation to consult...the employer should consult with the employee'.

Further, employers should not assume that an employee will reject an offer of redeployment to a role attracting lesser remuneration, seniority, hours or responsibility. It appears that asking the employee if they would consider redeployment to a lesser role will be sufficient.

Despite the above, employers should be clear that a refusal by an employee to take a lesser role will not necessarily render the employee ineligible for redundancy pay. However, it will assist the employer to defend an application for an unfair dismissal remedy by establishing the dismissal was for reasons of a genuine redundancy.

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This report does not comprise legal advice and neither Gadens Lawyers nor the authors accept any responsibility for it.