A lesson in how redundancy can go wrong without the right processes

For any business, redundancies often present themselves as an immediate remedy to solve growing financial pressures. And while they’re also a necessary evil during company restructures, mergers, and acquisitions, the process of carrying through with a genuine redundancy can be tricky even for the most experienced HR managers and business owners.

Here we explain the importance of having fair and compliant processes in place when completing a redundancy and share a recent lesson on how this process can go horribly wrong without them.

A recent lesson in genuine redundancy and unfair dismissal

In Alesia Khliustova v Isoton Pty Ltd [2023] FWC 658, a software engineer applied for unfair dismissal after being made redundant by their employer. It was concluded by the Fair Work Commission (the Commission) that this dismissal wasn’t a genuine redundancy as defined in section 389 of the Fair Work Act 2009 (Cth) (the ‘Act’).

The Act defines genuine redundancy as:

a) 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

b) the employer has complied with any obligation in a modern award or enterprise agreement that applied to the employment to consult about the redundancy.

It goes further to define that a dismissal is not a case of genuine redundancy if it would have been reasonable in all the circumstances for the person to be redeployed within:

a) the employer’s enterprise; or

b) the enterprise of an associated entity of the employer.

This employer in the unfair dismissal case fell short on two fronts when managing the redundancy process:

1. Consultation obligations under a relevant modern award; and
2. Offering its employee, a redeployment option available in one of its offshore associated entities.

The importance of consultation

The employer hadn’t genuinely consulted with its employee which is a provision in most modern awards or enterprise agreements. The purpose of consultation allows an employee who will be impacted by a major workplace change, the opportunity to be heard and express their views on the proposal for redundancy. At the stage of consultation, no firm decision to make an employee redundant should be made yet.

A consultation isn’t a collaborative discussion whereby an employee is invited to contribute to the decision-making; however, it’s a requirement and an employee’s legal right for their views to be considered if it has the potential to persuade the decision-maker to look to other potential possibilities.

The Commission found that the applicant, in this case, wasn’t given the opportunity to be heard. This is because the employer had already made the decision to make the role redundant and simply met with the employee for the purposes of communicating this decision, rather than meeting with the employee for the purposes of hearing the employee’s feedback and genuinely considering this prior to making the decision.

It was held that the employer failed to meet the requirements of the consultation clause (24.2) of the Professional Employees Award 2020.

Are there redeployment options?

In consideration of s 389 of the Act, an employer is obligated to consider and look for redeployment options when seeking to propose a genuine redundancy, not just within the enterprise of the employee’s employment, but also in any associated entities of the employer. When considering whether there are any reasonable redeployment opportunities available, regard must only be had to the skills of the employee. That is, if there is a position available but it is at a different location, at an associated entity of the employer, or carries a lower remuneration and seniority, the position must still be offered to the employee so long as the employee has the skills to perform the role. Failure to do so will put the business at risk of potential claims.

In relation to the above case, the employer argued that there were no available opportunities within its business, however, conceded that its Indian operations were conducted by a related entity and that this entity was recruiting for roles. Despite the company arguing that they had no vacancies to offer the applicant, the Commission heard that if the employer had consulted with their employee, it would have been ‘advised that she would have been prepared to travel overseas, experience the role for two to three months even despite the lower wages.’ But due to a preconceived opinion that the employer didn’t think the employee would be open to accepting the role due to it being overseas, offshore roles that they were hiring for in its related entity, weren’t offered to the employee.

Fair Work Commissioner Platt, warned that it’s ‘dangerous for Employers with redeployment options to fetter offers based on their own prejudices’.

It’s crucial businesses proceed with caution when proposing redundancies. Employers must meet all provisions for redundancy and the requirements for consultation outlined in relevant modern awards or enterprise agreements. Redundancy can be tricky, but if you follow a fair and compliant process, there is no need to fear an employee making an unfair dismissal risk on the basis of the redundancy not being genuine.

About our author

Amanda Curatore is a qualified Senior Associate at Citation Legal and Citation HR. Amanda is highly experienced in providing workplace relations advice and assistance to clients in a wide range of matters including employment contracts, modern award interpretation, managing performance, bullying and harassment, terminations and managing risk.