Australia: What a shame it's a sham: using a sham redundancy to dismiss a difficult employee

Last Updated: 11 October 2013
Article by Brett Feltham and Mandi Xu

National Tertiary Education Union v Royal Melbourne Institute of Technology [2013] FCA 451

The recent Federal Court decision in National Tertiary Education Union v Royal Melbourne Institute of Technology [2013] FCA 451highlights the issues that can arise for an employer when defending against a general protections (adverse action) claim in a redundancy context, and the consequences of not establishing a rigorous redundancy process.

In this case, Professor Bessant and the National Tertiary Education Union (NTEU) successfully brought an adverse action claim against the Royal Melbourne Institute of Technology (RMIT). That claim was brought on the basis that RMIT had taken adverse action against Professor Bessant in terminating her employment because she had exercised or proposed to exercise "workplace rights", and that RMIT had acted in breach of the terms of an enterprise agreement (EBA).

The Federal Court reinstated Professor Bessant, and indicated that she would be entitled to approximately $2 million in compensation if she was not reinstated. The Federal Court also ordered RMIT to pay a civil penalty of $37,000 for two contraventions of the Fair Work Act 2009 (Cth) (Act) as a warning to employers of the risks of using "sham" redundancies as a means for dismissing difficult employees.

The facts

Professor Bessant was employed as a professor in the Youth Work discipline of a school at RMIT. Professor Bessant reported to Professor Haywood, who was given the task of restructuring that school after he commenced employment with RMIT (Restructure).

Conflict arose between Professors Bessant and Haywood in relation to the Restructure, which resulted in Professor Bessant making a number of complaints to RMIT about Professor Haywood's management practices (including workplace bullying complaints) (Complaints). RMIT conceded in this case that the Complaints constituted the exercise of Professor Bessant's "workplace rights" within the meaning of the Act.

The Complaints were the subject of a formal external investigation. A voluntary redundancy was one of several options proposed by the external investigator for resolving the conflict between Professors Bessant and Haywood. However, RMIT proceeded with a different option, which was to appoint Professor Bessant to a research role for a three year term pursuant to the terms of a settlement agreement.

After Professor Bessant had entered into the settlement agreement, Professor Haywood sought approval from RMIT to target two positions in the Youth Work discipline for redundancy, one of which was Professor Bessant's (now previous) position (Proposal). This Proposal was approved by Professor de la Harpe and Ms Gough, and subsequently Professor Gardner.

Professor Bessant brought an adverse action claim in the Fair Work Commission after she was informed of the proposed redundancy.

During the conciliation process, Professor Bessant was notified by RMIT that her employment would be terminated by reason of redundancy. Professor Bessant sought a review of this decision from RMIT's Redundancy Review Committee (RMIT Committee) pursuant to the terms of the EBA. Interestingly, the RMIT Committee found the rules of natural justice had not been applied in the redundancy process undertaken by RMIT.

Despite the RMIT Committee's findings, RMIT proceeded with the termination of Professor Bessant's employment by reason of redundancy. Importantly, the EBA contained a mechanism for mitigating the effects of redundancies by requiring RMIT to offer an employee the option of participating in a voluntary redeployment process before proceeding with a redundancy. RMIT did not offer Professor Bessant this option before proceeding with her redundancy.

Adverse action

In adverse action proceedings, the reverse onus of proof requires the employer to positively demonstrate that the action taken against the employee was not taken for a prohibited reason.

Employers that are found to have contravened the adverse action provisions of the Act can be subject to civil penalties of up to $33,000 per contravention for companies and up to $6,600 per contravention for individuals, in addition to orders to pay compensation and other relief.

Federal Court decision

RMIT contended that Professor Gardner was the sole decision maker in relation to Professor Bessant's redundancy.

The Federal Court was not satisfied, however, that Professor Gardner's reasons for retrenching Professor Bessant did not include a prohibited reason. The Federal Court concluded that Professor Bessant's redundancy was a "sham" and RMIT had effectively made use of its redundancy process to dismiss Professor Bessant because she was considered to be a troublesome employee, and at least in part, because she had exercised her "workplace rights" by making the Complaints.

In reaching its decision, the Federal Court found that there was no contemporaneous record of Professor Gardner's reasons for retrenching Professor Bessant, the redundancy was not established by a rigorous process, and there was no evidence of any objectively defendable criteria for selecting Professor Bessant's position for redundancy.

The Federal Court also criticised Professor Gardner's failure to critically assess the Proposal put forward by Professor Haywood to target Professor Bessant's position for redundancy, despite being aware of the personal conflicts between Professors Haywood and Bessant (including the Complaints).

In addition, the Federal Court did not accept that Professor Gardner was the sole decision maker, and considered Professor de la Harpe and Ms Gough to also be key decision makers in Professor Bessant's redundancy. Unfortunately, RMIT did not call Professor de la Harpe or Ms Gough to give evidence in this case and there was no contemporaneous records of those key decisions makers' reasons. As a result, the Federal Court was not satisfied that RMIT had discharged the reverse onus of proof.

Lessons for employers

In light of the Federal Court's decision in this case, employers should review their restructure and redundancy processes and procedures, and ensure that:

  • there are objectively defendable criteria for any restructure and for selecting the positions to be made redundant as a result of the restructure
  • the reasons for proposed redundancies are critically assessed, and caution is exercised when retrenching employees who have made complaints to the employer or have unresolved grievances
  • all relevant obligations under any modern award or enterprise agreement, which applies to the affected employees, have been satisfied
  • any requirements that apply under the terms of an employment contract or binding policies and/or procedures have been diligently followed. Please refer to our previous article on the Full Federal Court's decision in Commonwealth Bank of Australia v Barker [2013] FCAFC 83
  • there are contemporaneous records of all discussions with affected employees (and their representatives), and the reasons of the decision makers for retrenching any affected employees (including any redeployment opportunities that were considered), and
  • if faced with an adverse action claim, all individuals involved in the decision making process are identified, and assess which of those individuals should be required to give evidence for the employer to successfully discharge the reverse onus of proof.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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