Looking To Cut Costs? Who You Gonna Call?

So, the business needs to cut costs. It might want to outsource. Redundancies look inevitable. But you need to be sure: so here comes a high-priced management consultant.

Things are getting expensive. Everything is on the table. There's an enterprise agreement or two driving costs. You could get maintenance cheaper elsewhere. Or how about the supply chain? A 3PL solution can work. The numbers stack up. Your hunch is right – the consultants have confirmed it. Post redundancy costs will be amortised in three years. You press the "go" button and on sound advice. You send in the commercial lawyers to make sure all is in order. This is a commercial issue, after all. Safe hands.

Then HR is handed the task of implementation. But wait, there's the law of workplace outsourcing.

Neither the consultants nor the commercial team have considered consultation or the potential for a dispute or litigation. The employment costs are on the due diligence list, but implementation risks are not on the radar (or, at least, not until now when you raise them at the first implementation meeting).

Now, the union wants to see documents. There has been much talk about the consultants. Their work is no secret. The union claims this is all about avoiding the industrial instruments and the next bargaining round. A court claim is imminent....

Two potential scenarios follow:

• First, your outsourcing is stopped in its tracks by a Court injunction. This is until a final hearing can deal with it, about 6 -12 months down the track. And there are to be no redundancies in the meantime. Unfortunately, recent developments mean that this might actually be the best scenario.
  
  
• The second sees the outsourcing going ahead. But then the damages claims follow. A claim by the union that it's lost membership dues. A claim by employees who have lost jobs and, therefore, income. Add to these claims for "pain and suffering". And this latter claim will take years, not months, to resolve, all the while potential liability continues to accrue, and uncertainty hangs over every step the business takes like a looming storm cloud.

The law of workplace outsourcing is not new. It's basically this: any workplace changes negatively impacting employees must not be for specific unlawful reasons: the existence of an enterprise agreement, the right to bargain for an enterprise agreement, union membership, and certain union activity being just some examples. It's been heavily litigated over the years. And it remains difficult to navigate even where the reasons are commercially driven, as is most often the case.

That's because the law has blurred the lines. Are redundancies to save costs because of the enterprise agreement? Or are they to save money? To save money, of course – but the saving comes by "avoiding" the enterprise agreement, or so the argument goes. At a trial, a judge must unpack the various arguments about the reasons for the decision and their underlying cause. Notes of internal meetings, the consultant's brief and analysis, who said what and to whom internally will all be picked over. Any mention of the enterprise agreement gives the union its gotcha moments.

If the employer cannot positively prove in this contest of competing so-called "reasons", that the enterprise agreement or other workplace rights did not play any part in their consideration, the court can find that the business has not discharged the reverse onus. The business goes down and substantial damages can follow, defeating the cost-savings and more. And, of course, the senior management are obliged to turn their minds to the industrial arrangements in order to discharge their duties to the business and its shareholders.

So, we run the risk that you are damned if you do and damned if you don't. This "trip wire" is not new. But following the High Court developments this month, it's now more opaque than it has been for 20 years. And about to get some renewed focus by union lawyers keen to put the brakes on any workplace change.

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