Australia: 23 redundancies with no consultation? Federal Court says thats OK

An employer decides to abolish 23 full-time positions due to a lack of funding. Surely this is a major change likely to have a significant effect on employees which obliges the employer to consult with those employees as per the consultation term in their enterprise agreement?

While many would say 'yes, of course', the Federal Court in Australian Nursing and Midwifery Federation v Bupa Aged Care Australia Pty Ltd [2017] FCA 1246 recently found the answer to be a clear 'no' and, accordingly, there was no requirement for the employer to consult.

Background

Due to a decrease in the level of available funding, Bupa Aged Care Australia Pty Ltd (Bupa) made a decision to abolish 53 Care Manager and 25 Clinical Manager positions across 26 aged care facilities in Victoria. In their place, Bupa intended to appoint 55 Clinical Care Managers, which would result in 23 redundant positions.

The Australian Nursing and Midwifery Federation (ANMF) brought proceedings in the Federal Court alleging that Bupa had breached cl 7 of the applicable enterprise agreement (Agreement), Consultation regarding major workplace change, which requires Bupa to consult employees where:

  1. Bupa has made a definite decision to introduce a major change to production, program, organisation, structure or technology in relation to its enterprise; and
  2. the change is likely to have a significant effect on employees of the enterprise.

The ANMF sought orders to prevent Bupa taking steps to abolish the 23 positions at its facilities and introducing the Clinical Care Manager positions. The ANMF also sought a declaration from the Court that Bupa had breached s 50 of the Fair Work Act 2009 (Cth) by breaching cl 7 of the Agreement which, if established, would lead to penalties being imposed on Bupa.

Decision

Although the ANMF asked the Court to decide a number of questions regarding cl 7, Justice O'Callaghan held that, on a proper construction of cl 7, it had no application. This was because the 'definite decision' to introduce the change was neither a 'major change' nor a change that was 'likely to have a significant effect on Bupa's employees'. As cl 7 did not apply, the ANMF's application was dismissed.

The redundancies were not a 'major' change

The Court held that it was not possible to conclude that the proposed amalgamation of positions would introduce a major change to the structure of Bupa's enterprise. In this regard, O'Callaghan J cited Port Kembla Coal Terminal Ltd v Construction, Forestry, Mining and Energy Union1 with approval. In that case, a Full Bench of the Federal Court stated that a number of circumstances should be considered in order to determine whether a change is a major change, including:

  1. the seniority and importance of the employees being made redundant;
  2. the extent to which the employees work in an integrated or disconnected manner; and
  3. the consequences of the redundancies and terminations for the remaining employees.

O'Callaghan J noted that the ANMF did not provide any evidence about the possible impact of the implementation of the decision 'more broadly' and that, to the contrary, all evidence suggested that there was no major change likely to have a significant effect on Bupa's employees. This was because:

  • the number of redundancies was only 23 out of 3,000+ employees; and
  • the changes impacted employees who worked only 7.5 hours out of a 24-hour day, on a five-day week.

Nor were the redundancies likely to have a 'significant effect' on employees of the enterprise

The ANMF submitted that the proposed change would not only result in the termination of the employment of 23 employees, but it would also result in '[a] major change to the composition, operation or size of the employer's workforce or to the skills required of employees, requiring persons employed as clinical managers or care managers to perform different roles and utilise different skills' or 'the elimination or diminution of job opportunities (including opportunities for promotion or tenure) by significantly reducing the number [of] positions at the level above the work performed by ordinary registered nurses'.

O'Callaghan J again noted that 'there is no evidence to support [these submissions], let alone the type of evidence that would be necessary in a case such as this. The evidence, such as it is, suggests the contrary.'2

Key takeaway of this decision

Best practice will usually mean that an employer should consult with affected employees prior to introducing most workplace change. This decision is a timely reminder that not all proposed workplace change will trigger an employer's obligation to consult. This is important because, where an employer breaches this obligation, it can face injunctive relief preventing or delaying implementation of the change and/or penalties.

Clause 7 of the Agreement substantially mirrors the model consultation term in the Fair Work Regulations 2009 (Cth). Therefore, this decision has implications for many employers whose enterprise agreements contain a similar clause.

Prior to determining the strategy for implementing workplace change, employers should carefully evaluate whether the proposed change is a 'major' change (as that term is defined in the relevant clause) and, if so, whether it is likely to have a significant effect on 'employees of the enterprise'. If the consultation obligations are triggered, these need to be strictly adhered to.

Footnotes

1(2016) 248 FCR 18

2 At [34]

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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