Factors to consider when a business carries out redundancies

Redundancy – an unfortunate yet (sometimes) necessary action. Simply put, redundancy is when a business no longer needs an employee’s role to be done by anyone.

Despite how common the process is, businesses aren’t always aware of their obligations under the Fair Work Act 2009 (Cth) (FW Act). Failure to comply gives rise to significant legal risks and opens the door to unfair dismissal and general protections claims or claims for breach of an award or enterprise agreement.

To ensure you’re aware of your rights and obligations, we have compiled the below ‘tips and tricks’ to keep in mind in 2024.

Genuine redundancy

As a starting point, businesses must satisfy the genuine redundancy test set out in the FW Act – which includes establishing the employee’s role is no longer required to be performed by anyone in the organisation due to changes in operational requirements. While seemingly simple, this obligation becomes significantly more nuanced when the restructure requires roles/duties to merge or transfer to another employee(s).

Employers are also required to comply with obligations imposed by an applicable modern award or enterprise agreement to consult about the redundancy. Whilst employers are technically not required to consult with ‘award/agreement free’ employees, we suggest this takes place as a matter of best practice.  

Consultation obligations

Employees cannot be made redundant summarily. Accordingly, employers should engage in a consultation process in accordance with an applicable modern award or enterprise agreement, which includes:

  1. information about the organisational restructure;
  2. the likely impact on the employee(s);
  3. the measures the employer has taken to avoid or reduce the adverse effects on the employee(s); and
  4. the employee’s feedback and/or response to the above.

Consultation should:

  • be meaningful and not pre-determined; and
  • include written correspondence which explains the nature of the issue, sets out alternative employment options and confirms the business is considering input from affected employees.

Discharging consultation obligations is a key aspect of the redundancy process, as it mitigates legal risks in relation to unfair dismissal and general protection claims.

Clear procedures, letters and file notes can greatly assist in ensuring the correct process is followed and all parties are afforded the opportunity to respond.

Redeployment considerations

An employee’s termination will not be a case of genuine redundancy if it would have been reasonable, in all of the circumstances, for the employee to be redeployed within the organisation (this also includes assessing redeployment opportunities within the employer’s associated entities). Whether redeployment is/was reasonable will depend on the circumstances that existed at the time of dismissal.

In determining whether redeployment was reasonable, the Fair Work Commission (Commission) will have regard to a number of factors. The general indica considered by the Commission is vast, and an assessment of your specific situation is recommended.

Redundancy and termination entitlements

It is critical to correctly calculate the employee’s redundancy and termination entitlements. Failure to provide the correct entitlements gives rise to significant legal risks, particularly in regard to underpayment claims. Employers should have regard to an employee’s accrued entitlements arising from this process, including notice of termination, redundancy pay, annual leave and long service leave.

how we can help

The genuine redundancy process is fluid and often gives rise to a number of discrete questions. Engaging legal representation early is critical in understanding your rights and obligations when commencing (or being subject to) a genuine redundancy process.

For questions or more information, please contact me on 07 3224 0323.

This article was written in collaboration with Solicitor Bronte Jackson. 

“The content of this publication is for reference purposes only. It is current at the date of publication. This content does not constitute legal advice and should not be relied upon as such. Legal advice about your specific circumstances should always be obtained before taking any action based on this publication.”
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