Fair Work redundancy minefield

Employers need to be wary about terminating employees for reasons of redundancy under the Rudd Government’s new Fair Work arrangements. 

Under the Howard Work Choices regime, employees whose employment had been terminated because of redundancy were excluded from making an unfair dismissal claim: full stop. The Fair Work Act retained this provision, but qualified it with requirements to consult employees and unions and to explore redeployment. 

A recent decision of the industrial tribunal, Fair Work Australia, shows that the new requirements might open up access to unfair dismissal claims more than employers might have expected.

In a claim made by 10 former employees of an Xstrata group company, FWA found that the employer’s briefing of its entire workforce was not sufficient to meet its obligations to consult with the employees “directly affected” or ”concerned”. 

The company had an enterprise agreement which obliged it to consult with unions and employees about significant workplace change. The terms of that clause are similar to those which appear in many agreements and Modern Awards. 

An argument by the employees’ union, the CFMEU, that the company had not properly consulted with it was rejected by FWA. However, FWA found that the company should have held separate discussions with the group of employees selected for redundancy, either as a group or individually. As a result the redundancies were not “genuine” redundancies as defined in the FW Act and the employees were entitled to continue with their claims.

While FWA did not make a decision on the redeployment issue, the reasons of the Commissioner in this case, as well as a separate decision of FWA, suggest that there is some obligation on the employer to be proactive about exploring redeployment opportunities with the employee. 

Further decisions will no doubt clarify this issue, but it seems unlikely that an employer who simply turns up after the fact with evidence that there were no alternative positions available, might fail to meet the redeployment obligations under the FW Act.

While the economy is in recovery mode and job shedding appears to be off the agenda, it is inevitable there will be further redundancies in the coming months in those sectors which remain under pressure, such as manufacturing and to a lesser extent construction.

This decision emphasises the need for employers to understand the new rules around redundancy, particularly in the areas of consultation and redeployment.

The lessons for employers:

• Make sure you understand what your obligations to consult regarding redundancies are and have a plan to consult with employees as a group and individually;
• Be proactive about exploring and discussing redeployment opportunities with affected employees, particularly if you are part of a larger corporate structure.

Peter Vitale is the principal of CCI Lawyers.