Redundancy: the basics

Introduction

Unfortunately, too many employers trip themselves up and speed into the redundancy process without a solid understanding of the relevant law and how to best protect their legal interests.

This article provides a straightforward explanation of redundancy - what it means, what needs to be considered when making an employee redundant, and the downside of getting it wrong.

What does redundancy mean?

In simple terms, an employee is redundant when their job ceases to exist because the employer no longer requires that employee's job to be performed by anyone because of changes in the "operational requirements" of the employer's enterprise. The term "operational requirements" is not defined in the Fair Work Act, meaning Courts have filled in the gaps with their own interpretation.

As it currently stands, "operational requirements" can cover a plethora of things, including:

• an economic downturn,
• a machine being available to do duties ordinarily performed by an employee,
• a restructure so as to increase efficiency by redistributing duties ordinarily performed by one employee to other employees, or
• the "outsourcing" of services, resulting in the employer's duties being performed by independent contractors.

It is critical to note that the Fair Work Act specifically refers to "job", not "duties". As a result, the applicable legal test is whether the job (being the collection of an employee's duties) remains intact after a downturn or restructure, not the employee's specific, individual duties. This means that an employee can still be made redundant where some of their duties continue to be performed by others.

What is a 'genuine' redundancy?

According to section 389 of the Fair Work Act 2009 (Cth), a redundancy is genuine when there are changes in "operational requirements" (as discussed above), and the employer has complied with any obligations in a modern award or enterprise agreement to consult with the employee about the redundancy.

What this means is that where a modern award or enterprise agreement applies to an employee, the employer must follow the consultation requirements (if any) that are set out in an applicable modern award or enterprise agreement when making an employee redundant.

However, it does not end there. Additionally, a redundancy will not be genuine if it would have been reasonable to redeploy the employee within the employer's enterprise, or within an enterprise of an associated entity of the employer.

In other words, if it is reasonable to redeploy the employee, then they must be redeployed. When it comes to determining whether redeployment is reasonable, a number of matters must be considered, including:

• whether an alternative job exists that can be performed by the employee, and
• the skills and qualification required to perform that alternative job, along with the skills and qualifications of the employee.

The question of whether redeployment is reasonable or not is a particularly challenging one and cannot be fully canvassed here. However, some questions that often trip up employers include what to do when there is an available job, but at a lower level of pay and/or responsibility? Also, if there is an available job, can you advertise it and place the redundant employee through a competitive selection process along with other prospective employees?

What happens when a redundancy is not genuine?

An employer who ensures an employee's redundancy is genuine is protected from an unfair dismissal claim.

However, where an employer makes an employee redundant, but fails to ensure that the redundancy is genuine (because there was not satisfactory operational requirements, the employee was not consulted, or the employee was not redeployed when redeployment was reasonable), may be open to an unfair dismissal claim on the basis that the redundancy actually constituted an unfair dismissal.

How Sharrock Pitman Legal can assist?

The above article is a snapshot only of the process and procedures for redundancy. As an employer, it is vitally important that you obtain professional advice when it comes to making an employee redundant. If you are an employer and you need advice, please contact us. It would be our pleasure to assist. Call Sharrock Pitman Legal today on 1300 205 506 or complete the form below.

The information contained in this article is intended to be of a general nature only and should not be relied upon as legal advice. Any legal matters should be discussed specifically with one of our lawyers.

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