How to avoid an unfair dismissal claim for a fake redundancy

29 December 2019 

Employers can avoid unfair dismissal claims for a fake redundancy by understanding the meaning of genuine redundancy and following best practice guidelines in a redundancy situation.

In a hurry? Jump ahead. 

Section 389 meaning of genuine redundancy

The legal definition of a genuine redundancy is found in section 389 of the Fair Work Act 2009 (Cth). 

Below we'll go through that definition.

 A person's dismissal was a case of genuine redundancy if:

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

And, an employee’s dismissal will not be a case of genuine redundancy if it would have been reasonable in all the circumstances for them be redeployed within:

• the employer's enterprise; or
• the enterprise of an associated entity of the employer.

Next, we'll go through that definition and make use of all the guidance we have from modern awards, enterprise agreements and fair work definitions.

Consultation (even if no award or enterprise agreement applies)       

You can follow model consultation practices below even if there's no applicable award or enterprise agreement. We'll go through the model modern award term for consultation first.

Model award term - consultation

• employers must notify employees and their representatives who may be affected by the proposed changes
• employers must discuss the changes with the affected employees and their representatives, and provide information in writing to them, as soon as practicable after a definite decision has been made about:
  • the nature of the changes
  • effects the changes are likely to have on employees
  • measures to prevent or reduce the adverse effects of such changes on employees
• employers must then give prompt consideration to matters raised by the employees and their representatives in relation to the changes.

What about the enterprise agreement model? You can also use the enterprise agreement model for consultation in your business. We'll go through that next.

Model enterprise agreement term - consultation

This model term is found in the Fair Work Regulations (regulation 2.09) and outlined below. 

This term applies if the employer:

[1) (a) has made a definite decision to introduce a major change to production, program, organisation, structure or technology in relation to its enterprise that is likely to have a significant effect on the employees; or

(b) proposes to introduce a change to the regular roster or ordinary hours of work of employees.

[2] Major change

For a major change referred to above:

[a) the employer must notify the relevant employees of the decision to introduce the major change; and

(b)  subclauses (3) to (9) apply.

(3)  The relevant employees may appoint a representative for the purposes of the procedures in this term.

(4)  If:

(a)  a relevant employee appoints, or relevant employees appoint, a representative for the purposes of consultation; and

(b)  the employee or employees advise the employer of the identity of the representative;

the employer must recognise the representative.

(5)  As soon as practicable after making its decision, the employer must:

(a)  discuss with the relevant employees:

       (i)  the introduction of the change; and

       (ii)  the effect the change is likely to have on the employees; and

       (iii)  measures the employer is taking to avert or mitigate the adverse effect of the change on the employees; and

(b)  for the purposes of the discussion—provide, in writing, to the relevant employees:

       (i)  all relevant information about the change including the nature of the change proposed; and

       (ii)  information about the expected effects of the change on the employees; and

       (iii)  any other matters likely to affect the employees.

(6)  However, the employer is not required to disclose confidential or commercially sensitive information to the relevant employees.

(7)  The employer must give prompt and genuine consideration to matters raised about the major change by the relevant employees.

(8)  If a term in this agreement provides for a major change to production, program, organisation, structure or technology in relation to the enterprise of the employer, the requirements set out in paragraph (2)(a) and subclauses (3) and (5) are taken not to apply.

(9)  In this term, a major change is likely to have a significant effect on employees if it results in:

(a)  the termination of the employment of employees; or

(b)  major change to the composition, operation or size of the employer’s workforce or to the skills required of employees; or

(c)  the elimination or diminution of job opportunities (including opportunities for promotion or tenure); or

(d)  the alteration of hours of work; or

(e)  the need to retrain employees; or

(f)  the need to relocate employees to another workplace; or

(g)  the restructuring of jobs.

Now that we’ve covered the steps to follow for consultation, let’s look at redeployment, the other element in the section 389 Fair Work Act 2009 (Cth) genuine redundancy definition. 

Redeployment

A person's dismissal will not be a case of genuine redundancy if it would have been reasonable in the circumstances to redeploy the person within: 

• the employer's enterprise, or
• the enterprise of an associated entity of the employer.

So what exactly does reasonable in the circumstances mean?

Reasonable in the circumstances

Whether redeployment of an employee is considered reasonable will depend on the circumstances that exist at the time of the dismissal.

The factors below are relevant:

• whether there exists a job or a position or other work to which the employee can be redeployed[2]
• nature of any available position
• qualifications required to perform the job
• the employee's skills, qualifications and experience, and
• the location of the job in relation to the employee's residence and the remuneration.

Associated entity

An employer must consider whether it is reasonable to redeploy an employee to an associated entity.

The degree of managerial integration between the different entities is likely to be a relevant consideration.

Alternative job, position or work must be identified

The Fair Work Commission must find, on the balance of probabilities, that there was a job or a position or other work within the employer's enterprise (or that of an associated entity) to which it would have been reasonable in all the circumstances to redeploy the dismissed employee. 

Evidence would usually include canvassing the steps taken by the employer to identify other work which could be performed by the dismissed employee.

The job must be suitable

The job must be suitable, that is, the employee should have the skills and competence to perform it either immediately or within a reasonable period of retraining.

Other considerations may be relevant such as:

• location of the job, and
• level of remuneration.

Roles with lower income & less responsibility to be considered

If an employer has other positions available, even at a lower level, that the redundant employee has the skills to perform, the employer should not assume the employee will reject the position.

Otherwise, the Commission may find it would have been reasonable in all the circumstances for an employee to have been redeployed.

Open selection processes

Open selection process may impact on whether redundancy is genuine

For example, if the employer fills a vacancy by requiring the employee to compete with other employees, it might be found that the resulting dismissal is not a case of genuine redundancy.

The next part is understanding what an associated entity is. 

Associated entity

Associated entities are businesses or other bodies that are connected to each other in some way. For example, when a business owns or controls the other business for the purpose of a transfer of business. Section 50AAA of the Corporations Act provides a full definition.

If it would have been possible for the redundant employee to be redeployed into an associated entity, then the dismissal will not be a case of genuine redundancy.

Do you have questions or comments about redundancy? Be sure to leave them below. 

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