Australia: Thinking of downsizing your workforce? Make sure you get the consultation process right — Or redundancies could turn out to be unfair dismissals

Downsizing a workforce is sometimes necessary, and when it is, it can be a difficult process. Modern Awards require the employer to give employees as much notice as possible, and consult with them about what can be done to avoid or minimise job losses. Rushing the process, or engaging in tokenistic gestures, is not only likely to upset employees, but also give rise to unfair dismissal claims that would not otherwise exist – as a recent decision of the Fair Work Commission (FWC)amply demonstrates.

In Williams and Others v Staple Australia Pty Ltd [2017] FWC 607 (Williams), Commissioner Cambridge found that:

"Regrettably, in this instance the evidence has disclosed an approach to consultation in respect to the redundancies of warehouse jobs that was unduly hasty and largely tokenistic. Staples management did not engage in genuine or meaningful consultation with its employees and their representatives, but instead it made disingenuous gestures which it sought to portray as consultation."

In that case the FWC found that the dismissals of the four employees subject to the decision "were not cases of genuine redundancy and the dismissals were harsh, unreasonable and unjust". Orders were made reinstating the four employees with continuity of employment and restoration of lost pay.

Section 385 of the Fair Work Act 2009 (FWA) prescribes that a person has been unfairly dismissed if the FWC is satisfied that firstly, "the employee has been dismissed" and secondly, with respect to a dismissal on account of redundancy, that "the dismissal was not a case of genuine redundancy".

Section 389 of the FWA sets out that a person's dismissal was a case of genuine redundancy if:

  1. the person's employer no longer required the person's job to be performed by anyone because of changes in the operational requirements of the employer's enterprise; and
  2. the employer has complied with any obligation in a modern award or enterprise agreement that applied to the employment to consult about the redundancy.(emphasis added)

In William's case it was found that the process adopted by the employer "whereby it advised employees on 11 July of the decision to make between 10 and 14 warehouse employees redundant, and the selection of the particular 12 individuals made by the following evening, could not, on any reasonable and objective contemplation, provide for the discussion and provision of relevant information as contemplated by clauses 5(a) and 5(b) of Annexure 3 of the Agreement"

The FWC further found that there was "no proper opportunity for discussion about measures that might avert or mitigate the adverse effects of the decision to implement redundancies in the warehouse. As an example, the prospect that a number of existing full-time employees may have contemplated altering their work arrangements to part-time, and perhaps job share as a means to avoid job losses, did not emerge as a discussion topic. There was simply insufficient time for discussion about a topic such as job share.

It can be seen from the above extracts how vital it is to have proper and meaningful consultation with the affected staff and their representatives prior to any selection of the staff to be made redundant.

Each modern award contains a consultation clause and section 205(1) of the FWA requires that an enterprise agreement must include a consultation term that:

  1. requires the employer or employers to whom the agreement applies to consult the employees to whom the agreement applies about major workplace changes that are likely to have a significant effect on the employees; and
  2. allows for the representation of those employees for the purposes of that consultation.

Fair Work Regulation 2.3 prescribes a model consultation term for inclusion in enterprise agreements.

What then must be done by an employer to minimise the likelihood of unfair dismissal claims being made as a consequence of making an employee(s) redundant? Whether it is one or 100 employees affected the rules are the same.

  1. Once the employer has made a decision to introduce major change to its enterprise which is likely to have a significant effect on employees of the enterprise, the employer must notify the relevant employees of the details of such change.
  2. The employees may appoint a representative (who may be a union) to represent them in the consultation and if the employee(s) notifies the employer of the representative the employer must recognise the representative.
  3. As soon as practicable after making its decision the employer must hold meaningful discussions with the relevant employees about:
    1. The introduction of the change; and
    2. The effect the change is likely to have on the employees; and
    3. Measures the employer is taking to avert or mitigate the adverse effects on employees ;and
    4. Provide in writing detailed information concerning the change and the affect it will have on the employees. It is important to advise the employees of the date of effect of such changes
    5. It is extremely important that the employer give prompt and properly considered responses to all issues raised by the employees.
    6. It is vital that the employer give consideration to whether the affected employee(s) can be transferred to another position the employer has available in the enterprise.
    7. In choosing employees whose positions are to made redundant the employer should develop selection criteria that are fair and applied consistently.

Finally, it is vitally important for an employer to totally adhere to the requirements of the consultation clause in the relevant award or enterprise agreement. Non- compliance could lead to successful claims for unfair dismissal.

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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