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.
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]
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
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
Long experience representing many of Australia's leading employers has taught us that in employment litigation the identity of an employee's representative is a major factor in how employee litigation runs.
Australian employees receive certain entitlements (such as annual leave and superannuation) where contractors do not.
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