Australia: Avoid findings of unfair dismissal: When is redundancy "genuine redundancy"?

The Fair Work Commission (the Commission) has recently ordered the reinstatement of four employees of Staples Australia Pty Ltd (Staples) after finding that they were not made "genuinely redundant".

The employees applied to the Commission claiming that they had been unfairly dismissed. Staples objected to the applications on the basis that the dismissals were cases of genuine redundancy, and any dismissal for genuine redundancy could not be held to be an unfair dismissal. It was for the Commission to decide, firstly, whether the dismissals were cases of genuine redundancy before it could consider whether the dismissals were harsh, unjust or unreasonable.

Background

The applicants were four of twelve employees, who worked at a warehouse of Staples, who were made redundant in July 2016. The employees were not dismissed for any reason related to particular performance, capacity or conduct events. Rather, the decision was made to reduce the operating costs of the warehouse and a reduction of 12 employees was determined necessary to provide some improvement in the budget position. Importantly there was a Staples Enterprise Agreement 2014-2016 (the Agreement) in place in respect to the employment of those employees.

Staples followed the following process in respect to making its decision:

  • A meeting of a Joint Consultative Committee was held, at which point some employee members expressed displeasure at the announcement of redundancies.
  • All warehouse employees were provided with a letter which confirmed the implementation of the redundancies and confirmed that employees would be assessed by use of a selection matrix.
  • A further meeting was held at the warehouse, which was attended by a National Union of Workers (NUW) official, who expressed strong criticism regarding the selection criteria and the consultation process employed.
  • The 12 employees who were selected for redundancy were individually advised of and provided with a letter confirming their circumstances. Each employee who was selected for redundancy was also provided with a list of role vacancies currently available in the business. All employees were paid the required redundancy entitlements as stipulated in the Agreement.

The Commission's Decision: Genuine redundancy

The Commission held that the dismissals were not cases of genuine redundancy.

Firstly, the Commission concluded that Staples failed to comply with its specific obligations outlined in the Agreement in connection with consultation regarding redundancy. The Commission expressed particular concern of the fact that in the space of 2 days, employees were first informed of and then selected for redundancy where they were not previously made aware of performance issues of the warehouse. It was determined this timeframe could not allow for the reasonable and objective contemplation and discussion as required by the Agreement.

The Commission determined that the nature and extent of the non-compliance was significant and described the approach of consultation to be "unduly hasty and largely tokenistic" consisting of "disingenuous gestures which [Staples] sought to portray as consultation".

Secondly, the Commission found that there was no evidence of examination of potential redeployment opportunities that may have arisen from involvement and interaction with the other business units that operated at the site. The Commission concluded that it would have been reasonable in all the circumstances for the employee applicants to be redeployed.

In particular, Staples engaged 19 new permanent warehouse employees in December 2016 (which Staples committed to doing under the Agreement), approximately 5 months after the 12 employees were made redundant. The Commission considered that those new employees essentially were engaged in the jobs that were made when the employees were dismissed.

The Commission's Decision: Unfair dismissal

The Commission considered that the dismissals were invoked by way of the adoption of a severely flawed process which denied the applicants substantive and procedural fairness. Consequentially, it was held that the dismissal of the employee applicants was harsh, unreasonable and unjust and the Commission made orders that the employee applicants be reinstated, and Staples restore lost pay.

What this means for your business

This case highlights the importance of being aware of the meaning of "genuine redundancy" to avoid employees filing an application for unfair dismissal. In particular, it shows the need to be mindful of, and follow carefully any obligations stipulated in an enterprise agreement or modern award which applies to the employees.

In unfair dismissal applications, it is for the employer to convince the Commission that there has been a genuine redundancy. As per the Fair Work Act 2009 (Cth), there is a genuine redundancy if:

  • You no longer required the person's job to be performed by anyone because of changes in the operational requirements (importantly, if you hire someone else to do the job, there will be no genuine redundancy); and
  • You have complied with any obligation in a modern award or enterprise agreement that applied to the employment to consult about the redundancy.

Additionally, there is no genuine redundancy if it would have been reasonable in all the circumstances for the person to be redeployed within the employer's enterprise or the enterprise of an associated entity of the employer (such as a subsidiary or holding company).

Consultation requirements include:

  • Notifying the employees who may be affected by the proposed changes.
  • Providing the employees with information about these changes and their expected effects.
  • Discussing steps taken to avoid and minimise negative effects on the employees.
  • Considering employees ideas or suggestions about the changes.

Interestingly, in this case the Commission noted, as an example, if the proper consultation process was followed it was possible that a number of full-time employees may have contemplated altering their work arrangements to part-time and perhaps job share arrangements as a means to avoid job loss. You as the employer need to consider any such alternative ideas presented by employees.

This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.

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