Thinking redundancy? Think consultation and redeployment first

Redundancies are an unfortunate reality in the present economic climate and legal claims often follow. Gordon Williams explores how consultation and redeployment can play an important role in mitigating the risks, both in unfair dismissal claims and also in relation to redundancy and parental leave

Employees who would otherwise be eligible to make unfair dismissal claims will be prevented from doing so if the ‘genuine redundancy’ exemption applies (s389 Fair Work Act 1996). This requires an employer to demonstrate that:

  • the redundancy was legitimate – ie, the employer no longer required the person’s job to be done because of changes in the operational requirements of its enterprise;
  • if the employee was covered by an award or enterprise agreement, the employer consulted in accordance with it; and
  • it was not reasonable to redeploy the employee in the employer’s enterprise or that of an associated entity.

The role of consultation
Because it is not always easy to determine if an employee is covered by a modern award – and given the importance of consultation in meeting the genuine redundancy exemption – the cautious approach is always to consult with an employee.

The timing of the consultation is also critically important.

Consultation under modern awards is triggered when an employer “has made a definite decision to introduce major changes in production, program, organisation, structure or technology that are likely to have significant effects on employees”. As you would expect, “significant effects” include termination of employment.

Importantly, the decision that triggers the consultation obligation is rarely the redundancy decision itself. It will usually be a decision taken much earlier in the process – for example, a decision to consider restructuring a team or department or to introduce new working arrangements or equipment.

Put simply, if you are only consulting about the implementation of the redundancy decision, it is probably too little too late.

Consultation must also be meaningful. This means employees should be given a real opportunity to present their views before any final decision is taken.

The position was neatly summed up in the case of Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v QR Ltd: “There is a difference between saying to someone who may be affected by a proposed decision or course of action, even, perhaps, with detailed elaboration, ‘this is what is going to be done’ and saying to that person ‘I’m thinking of doing this; what have you got to say about that?’ Only in the latter case is there ‘consultation’.”

A common question is “how long do you need to consult for?”

In Aitken v Virgin Blue Airlines and Vandeven v Virgin Blue Airlines (in the context of an alleged failure to comply with the parental leave consultation obligations), the Judge made the following comment: “Commonly, it may be expected that sufficient consultation would occur over the course of a couple of days; in a situation such as this it is almost certain that it would be concluded during the course of a working week.”

The need for sufficient consultation and for meaningful consultation suggests a longer period of consultation will often be more appropriate, particularly with larger scale redundancies or when unions are involved.

In this particular case, the Judge found that the employer had not complied with its consultation obligations and imposed a penalty of $4,950 (15 per cent of the maximum), which was paid to the employee.

The role of redeployment
To meet the genuine redundancy test, an employer has to demonstrate it would not have been reasonable to redeploy the employee in the employer’s enterprise or that of an associated entity. What is reasonable will obviously depend on the particular facts, but as a number of cases show, an employer must try hard to avoid redundancies where it can.

One of the first cases to consider these redeployment provisions was in 2010, when Ulan Coal made a number of mine workers redundant. The case was Ulan Coal Mines Limited v Henry Jon Howarth and others.

Ulan Coal is part of the Xstrata group, which operated other mines near to the affected Ulan mine. Some of these other mines had vacant roles but Ulan did not offer them to the redundant employees.

As a result, some of the redundant workers brought unfair dismissal claims arguing Ulan had not acted reasonably in considering redeployment. A full bench of the Fair Work Commission considered the case, and concluded that Ulan had not done enough and that the employees’ unfair dismissal claims could continue.

The Full Bench also made some useful remarks about the redeployment obligation, including that:

  • redeployment means to a suitable role – that is, to one the employee has the skills and competence to perform, either immediately or within a reasonable period of retraining;
  • merely inviting a redundant employee to apply for a vacant position, and competing against external candidates, is unlikely to meet the test;
  • if a vacancy exists in a group company, it may be necessary to make it available to the redundant employee, especially if the companies are subject to overall managerial control by one member of the group (as in the Ulan case).

The issue of redeployment within a related company has also been considered in the context of overseas companies.

In the case of Roy v SNC-Lavalin Australia Pty Ltd, Roy was made redundant following a significant downturn in his employer’s Australian business. Roy argued that he could have been redeployed to a vacant position in Canada or the US (in an associated entity) and that his employer’s failure to do so meant his redundancy was not “genuine”.

While in this case the Commission decided for various reasons that it was not reasonable for Roy to be redeployed, it did not rule out the possibility of redeployment overseas.

Turnbull v Symantec (Australia) Pty Ltd is another recent case that considered the issue of redeployment overseas – but under the parental leave provisions, not in the context of unfair dismissal.

Under s84 of the Fair Work Act, an employee on parental leave has a right to return to their original position or, if it no longer exists, to “an available position for which the employee is qualified and suited nearest in status and pay” to their original position (the return to work guarantee).

Section 83 of the Act is also important. It requires an employer to consult with the employee when making decisions that will have a significant effect on the employee’s role.

In this case, Turnbull was made redundant at the end of her parental leave and she argued that her employer’s failure to offer her a vacant role in Singapore breached her return to work guarantee.

The employer argued that s84 of the Fair Work Act was limited to “available positions” within its business, not a separate legal entity. The Judge did not agree and decided that a s84 could apply to an overseas position if it is within the power of the employer to make it available to the employee.

Ultimately, the Judge decided that the role was not one for which Turnbull was “suited” so there was no breach. However, both the Turnbull case and the Roy case make it clear that proper consideration of overseas vacancies may be necessary to meet an employer’s redeployment obligations.

One final case provides a good reminder that employers should not make assumptions about what roles an employee might be prepared to take (or where). That case is Iryna Margolina v Jenny Craig Weight Loss Centres Pty Ltd.

In 2011, Jenny Craig made Margolina, one of its senior managers, redundant. Margolina had managed over 50 staff and in her final year of employment was paid more than $200,000, which included significant performance bonuses. Margolina brought an unfair dismissal claim and Jenny Craig argued the genuine redundancy exemption applied.

It emerged, however, that Jenny Craig had a number of vacant roles that had not been offered to Margolina nor discussed with her. Margolina’s manager explained that because the vacant roles were very junior, and on a much lower salary, he did not want to “insult” her.

Margolina gave evidence that she would have been prepared to accept a more junior role, particularly as it would allow her more time with her family. In the circumstances, therefore, the Commission decided that it would have been reasonable for Jenny Craig to redeploy Margolina and her unfair dismissal claim could proceed.

3 important points for employers
To mitigate the risk of legal claims, employers need to do three important things:

1. Plan redundancies carefully.

2. Build in time for meaningful consultation.

3. Actively consider redeployment options, both in your Australian business and potentially overseas.