In a landmark decision, the High Court of Australia has clarified the relevant considerations employers must consider when determining the reasonableness of redeployment, which have significant implications for employers in respect to redundancy obligations.
Case Background
The case involved 22 workers who were dismissed during the COVID-19 pandemic from the Metropolitan Coal Mine which was operated by Helensburgh. The pandemic significantly reduced demand for coal extracted at the mine and, as such, Helensburgh gave notice to its employees that it was restructuring its operations. Relevantly, the restructure involved reducing the number of crews and days per week worked.
During the consultation process with the affected workers, Helensburgh was asked to mitigate the impact of its restructure by reducing its reliance on contractors. At the time, Helensburgh engaged two contractors, Nexus Mining Pty Ltd and Menster Pty Ltd, who provided various services at the mine. The restructure ultimately resulted in the number of workers engaged via the contractors to fall by approximately 40% and Helensburgh dismissing 90 of its employees (with 47 forced redundancies).
At the time of the dismissals, 90 Nexus workers and 8 Menster workers remained at the mine. Relevantly, there were enough jobs performed intermittently by workers supplied by Nexus alone for all the former employees to have been redeployed. Helensburgh was not obliged to engage any workers from the contractor companies (in its agreements with Nexus and Menster), and there was “little evidence of substance” of a cost difference to Helensburgh in engaging contractors or its own employees.
Decision History
Following termination, 22 former employees brought unfair dismissal applications in the Fair Work Commission (Commission). Helensburgh objected to the applications on the basis their terminations were cases of “genuine redundancies” under section 389 of the Fair Work Act 2009 (Cth) (FW Act). The Commission had to determine if it would have been reasonable in all the circumstances for the employees to have been redeployed within Helensburgh’s enterprise. If redeployment would have been reasonable, the employees’ dismissals would not be genuine redundancies.
The Commission ultimately held that the terminations were not cases of genuine redundancy, as it would have been reasonable for the employees to be redeployed to perform the work undertaken by the contractors. Helensburgh applied to the Full Court of the Federal Court of Australia to overturn the Commission’s decisions. The Full Federal Court dismissed the application, and Helensburgh subsequently appealed to the High Court of Australia (High Court).
The High Court Decision
The primary issue the High Court considered was the scope of inquiry required by section 389(2) of the FW Act (redeployment obligations). Specifically, whether the Commission had jurisdiction to consider whether Helensburgh could have changed the structure/nature of its workforce, so as to create or make available positions for employees (that were otherwise occupied by contractors).
The High Court unanimously confirmed the Commission, as part of its inquiries, could consider other ways the employer might use its workforce to operate its enterprise. Hence, Helensburgh’s appeal was dismissed. This is relevant as High Court decisions cannot be appealed and sets binding legal precedent.
Nature of inquiry under section 389(2)
Gageler CJ, Gordon and Beech-Jones JJ noted that section 389(1) of the FW Act requires a factual inquiry of what occurred. The section refers to a decision by the employer to no longer require a person’s job to be performed by anyone, meaning the provision looks to whether their “job” (i.e. the nature of the work they performed) is no longer required. Therefore, there is no reasonableness inquiry in section 389(1).
Unlike section 389(1), section 389(2) is qualified by a requirement of reasonableness. Their Honours noted the language is broad and held:
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- The employer’s “enterprise” is its “business, activity, project or undertaking”. This is the scope of the inquiry, and it is not appropriate for the Commission to disregard the very nature of the employer’s enterprise. It cannot change the nature of its enterprise, however “enterprise” is not defined by refence to how the employer uses its workforce to operate its enterprise and why it does so in that manner.
- The inquiry is whether it would have been reasonable in all the circumstances for the person to be “redeployed” within the employer’s enterprise. Redeployment does not require there to be a vacant position. “Redeploy” does not exclude or prohibit some change. Indeed, its ordinary meaning means to “rearrange, reorganise, or transfer”. Section 389(2) does not refer to a “job”. Accordingly, “redeployed” looks to whether there was work, or a demand for work, within the employer’s enterprise (including that of associated entities) that could have been performed by the otherwise redundant employee (i.e. the job does not need to be readily available).
- The inquiry is whether the redeployment “would have been reasonable”, which directs the Commission to consider a hypothetical situation at the time of dismissal of what could have been done to redeploy the employee within the employer’s enterprise (including that of associated entities).
- The inquiry is a reasonableness inquiry, to be objectively determined by the Commission (in the context of the employer’s enterprise and with regard to the nature of their enterprise).
- The inquiry is whether redeployment would have been reasonable in “all the circumstances”. The words are unmistakably broad, pointing against the existence of binding rules. “All the circumstances” can include attributes of the otherwise redundant employee and attributes of the employer’s enterprise that concern its workforce. For example,
- business choices – such as a decision to terminate or keep using contractors;
- decisions regarding the nature of its workforce – such as whether it has a blended workforce of employees and contractors;
- contract terms – such as whether they are “as needs” contracts or a long-term fixed commitment;
- practical concerns – such as whether redeployment would require the employee to undergo further training; and
- anticipated changes – such as another employee going on parental leave or retiring, or a contract expiring.
“The language of section 389 does not prohibit asking whether an employer could have made changes to how it uses its workforce to operate its enterprise so as to create or make available a position for a person who would otherwise have been redundant. None of the statutory language, context or purpose supports such a proscriptive rule”
As this was the basis of Helensburgh’s appeal, the proposition was rejected.
In a separate, supporting judgment, Justice Edelman provided that a “simple example might be an employee who was dismissed from an enterprise in which another employee, performing an identical job, was to retire the next day.” In those circumstances, the Commission would be open to consider if the dismissed employee could have redeployed. Accordingly, it could be reasonable in all of the circumstances of the employer’s enterprise at the time of dismissal, for an employee to be redeployed, even where there was no vacant job at the time.
Justice Edelman also provided that if there was no job available or imminently available, then it could require a change to the employer’s enterprise for a new job to be created for the dismissed employee to be redeployed. In this circumstance, the Commission would be in error by engaging in such a reasonableness enquiry, as it would not be looking to the nature of the employer’s enterprise at the date of dismissal. In Helensburgh’s case, there were jobs imminently available that the employees could have been redeployed to without any change in any “essential or important facets” of its enterprise. The Contractors were supplied on an “as needs” basis and the contract with Nexus was due to expire shortly after the employees were dismissed.
Justice Steward also issued a separate, supporting judgment. His Honour confirmed it would be difficult to conclude in the ordinary case that redeployment is reasonable if that meant another person with a job, for which there is a business need, had to make way for someone else whose job is no longer needed. Redeployment at the expense of another would be a “grave step to take”. That being said, having regard to circumstances discussed by Justice Edelman, Helensburgh’s circumstances were not an ‘ordinary case’.
Section 389 expressly requires the Commission to consider redeployment opportunities, and this appeal confirms the authority of the Commission to undertake such an inquiry.
Key Takeaways
This High Court decision provides the relevant inquiries the Commission can consider when addressing the elements in section 389(2) of the FW Act. Following this decision, it is clear employers need to consider potential redeployment opportunities, in the context of their entire enterprise and workforce, especially where there are outsourcing arrangements in place (such as contractors) or associated entities.
If you would like to discuss how this case impacts your business and strategies to minimise risk during restructuring or redundancies, please don’t hesitate to contact us.
Authors – Managing Partner, Sam McIvor, Associate Bronte Jackson and Graduate, Ariane Hogno