The importance of getting redundancies right

The decision to make a role redundant is not an easy one to make in terms of timing and ensuring compliance with industrial instruments. Discussing with affected employees about a potential redundancy is an obligation under industrial instruments and there are ramifications for not getting the process right.

Navigating these conversations requires employers to be aware of their consultation obligations and in doing so making sure that they get redundancies right (because often, redundancies go wrong).

What is a genuine redundancy?

Redundancies often go wrong when employers are unfamiliar with their consultation obligations and do not follow the right process.

Section 389 of the Fair Work Act 2009 says that a redundancy is a genuine redundancy if: the employer,

1. no longer requires the person's job to be performed by anyone because of changes in the operational requirements of the employer's enterprise; and

2. has complied with any obligation in a modern award or enterprise agreement that applied to the employment to consult about the redundancy.

Modern awards and enterprise agreements contain a clause requiring consultation when there is a major workplace change e.g., an employer making a definite decision to make major changes in production, program, organisation, structure or technology that are likely to have significant effects on employees.

Key consultation requirements

Generally, the consultation provisions require employers to:

Give notice

Notify the employees who may be affected by the proposed changes and provide the employees with information about these changes and their expected effects.

Meet with employees

Discuss the introduction of the changes, their likely effect and any measures to avoid and minimise negative effects on the employees.

For the purposes of this discussion, the employer must give to the affected employees (and if any, their representatives), in writing, all relevant information about the changes including the nature, the expected effects and any other matters likely to affect employees.

An employer should allow an employee to bring a support person if they wish to have one and consider employee ideas or suggestions about the changes.

These discussions should commence as soon as practicable after a decision has been made on the changes that will be proposed. As further outlined below, this meeting is to be an opportunity for the employee to share any suggestions or ideas which may influence the decision maker.

Time for consideration and response

Employers should give employees reasonable time to consider and respond.

Consider responses and redeployment opportunities

It is important to carefully consider an employee’s response and any redeployment opportunities.

Genuine & timely consultation

Before there is a final decision to terminate, employers need to engage in a consultation process that is genuine. The process should be a bona fide opportunity provided to the employee to influence the decision maker.

A recent case example

Recently the FWC in Frederick Deon Du Preez v MSWA Limited [2024] FWC 1793 (9 July 2024), reminded a charity of its consultation obligations and that consultation involves "not merely telling an employee" that they have been made redundant and months after the decision had already been made to restructure the team. 

It was found that the decision to “review and restructure” the analyst’s team was made as early as June last year as well as there having been discussions on how to carry out the restructure and having a meeting with "every executive, senior and middle manager to understand the team and what was required moving forward". The analyst was not informed until October 2023, about 4 months after the decision had already been made to restructure the team.

Whilst the Commissioner found that operational changes meant that it no longer required anyone to perform the relevant role, it was not a genuine redundancy as they failed to meet the consultation obligations.

It is important to note that the consultation obligations do not only apply when a decision has been made but applies “where there has been a decision to take an action that is likely to have a significant effect on an employee or where there has been a decision to introduce major changes”.

Key points to remember

The obligation to consult does not require an employer to disclose any confidential information if disclosure of that information would be contrary to the employer’s interests.

Complying with the consultation provisions will go towards whether a redundancy is genuine or not.

Where an employer has an obligation to consult and does not do so, there cannot be a genuine redundancy. If the redundancy is not genuine, the employee may bring a successful unfair dismissal claim against the business.

Practical tips

·       Consult early and often. Follow the correct consultation process under the relevant modern award or enterprise agreement.

·       Consultation obligations apply where there is a decision to take an action that is likely to have a significant effect on an employee or where there has been a decision to introduce major changes.

·       A decision to terminate should not be decided before the meeting with the employee - the meeting with the employee to discuss the proposed changes should be viewed as an opportunity provided to the employee to influence the decision maker.

·       Properly consider any ideas and suggestions put forward by an employee (and allow sufficient time for consideration) as well as any reasonable redeployment suggestions.

·       Keep detailed file notes of discussions with employees.

Should you require advice on redundancy or any other employment matters, do not hesitate to contact our team.

Author: Shawn Skyring & Kristina Tato