In brief - You should follow consultative procedures when
making employees redundant
Even if you have a solid business case for making an employee
redundant, you should consult the employee about the redundancy.
You should also document that you have considered and excluded the
possibility of redeployment elsewhere in the business.
Failure to consult employee about impending redundancy
Terminating an employee for redundancy is just about
unchallengeable. As long as an employer can show that it no longer
wants the job to be done, the decision to make an employee
redundant is almost litigation proof. All the employer has to
ensure is that the right severance payments are made and the worker
is not replaced.
However, things are not always that straightforward. The Fair Work Act
2009 contains a few small traps for employers. The Act
says that a genuine redundancy occurs if an employer no longer
requires the person's job to be performed.
However, redundancy will be held not to be genuine if there is
an award or enterprise agreement that says the employer has to
consult about the redundancy and it would be reasonable for the
employee to be redeployed within the employer's business.
Employee challenges decision to make him redundant
Just how a business fell foul if these obligations is
illustrated in the decision of Fair Work Australia (FWA) in UES
v Harvey. Due to financial pressures, hardware supplier UES
made one of its three storepersons redundant and paid him his
The storeperson, Mr Harvey, challenged the decision. His lawyer
argued that the decision was announced without Mr Harvey's
input and the business failed to consult him or show that it
considered redeployment as it was obliged to do under the Act and
the relevant award.
The business responded by showing overwhelmingly that an
operational and business case justified the redundancy.
Redundancy found to be genuine, but unfair
FWA accepted that Mr Harvey's employment was genuinely being
made redundant. However, the Commissioner said that legislative and
award provisions are there for a reason and cannot simply be
FWA decided that the redundancy was genuine, but not fair. Mr
Harvey should have been given an opportunity to have his say. Who
knows - he may have been able to persuade the employer not to make
him redundant. He was simply denied that opportunity.
Mr Harvey was awarded a sum of $7,198.28 in lost wages and
superannuation, based on an assumption that he would have continued
working for a further period, albeit on reduced hours to cut
Appeal confirms that employee dismissed unfairly
The business appealed and argued that a failure to consult did
not necessarily or logically mean that the termination was
The full bench decided that Mr Harvey had been unfairly
dismissed, simply because he was not consulted before the
termination. The circumstances and the business case justifying his
selection for redundancy were considered relevant, but not the only
The full bench unanimously agreed that the issue was not whether
it was a genuine redundancy, as there were "sound defensible
and well founded reasons" justifying Mr Harvey's
dismissal: he was not replaced by anyone and there was no
reasonable possibility of redeployment to an alternative role.
Nevertheless, FWA decided that the termination was unfair. On
appeal, Mr Harvey was awarded $1,365 plus 9% superannuation on the
basis that he may only have remained working there for a further
two weeks - the time that the commission thought it would take UES
to undertake its consultative obligations.
Employers can take simple steps to avoid litigation following
Even if there is a watertight business case to make an employee
redundant, a consultative procedure needs to be considered. The
good news is that this is straightforward and easy. A small number
of documented short meetings would meet the legal requirements.
Employers also need to consider and document that there is no
possibility of a redeployment, even part time.
As long as the employer has paid all entitlements, the decision
to terminate should be beyond the realm of review for unfair
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.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).