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News 20 August 2019

Was it a genuine redundancy?

A retailer has successfully defended an unfair dismissal claim lodged by an employee whose role as a Technical Service Manager was made redundant.

Overview of the Facts

In February 2019, having suffered a downturn in business, the employee was dismissed following a restructure which included distributing the employee’s duties among four other employees. During the hearing, there was no dispute from the employee that there had been a 15% reduction in sales and a 15.7% reduction in service activity. However, the employee argued the duties were still being performed and as a consequence the dismissal was not a genuine redundancy.

The Decision

The Fair Work Commission (“Commission”) firstly needed to consider Section 389 of the Fair Work Act 2009 (Cwth) (“the Act”) which confirms a person’s dismissal is a genuine redundancy if the person’s employer no longer requires the person’s job to be performed by anyone because of changes in the operational requirements of the enterprise. The Commission also had regard to earlier case law which clarifies a job is “a collection of functions, duties and responsibilities entrusted, as part of the scheme of the employers’ organisation, to a particular employee”.

The employee argued reorganising his duties and distributing them amongst other employees indicated there were still duties to be performed, even if other employees performed them, and so, there can be no redundancy. The Commission rejected the employee’s argument citing the Explanatory Memorandum to the Fair Work Bill 2008 (“Explanatory Memorandum”) which, when listing examples of changes which may result in a redundancy, states “the employer’s business is experiencing a downturn and therefore the employer only needs three people to do a particular task or duty instead of five”. 

Noting the operational change, the Act and the guidance in the Explanatory Memorandum the Commission confirmed the question was not whether duties survived but whether the job as performed by the employee still existed.

The Commission also needed to ascertain whether the business complied with any consultation obligations in an applicable modern award or enterprise agreement. The business and employee agreed the employee was award free, and as such, the obligation to consult with the employee did not apply.

The business did, however, need to demonstrate it was not reasonable to redeploy the employee. The business submitted that at the time of the redundancy, the only available alternate role was substantially different from the employee’s role as it was a more junior role and on a substantially lower salary. The business submitted it would not have been reasonable to propose the opportunity to the employee as the roles were distinctly different in their function, remuneration and seniority.

The law allows employers to restructure.  In this case the business complied with the requirements of the Act and was not bound by any consultation requirements.  The Commission was satisfied the redundancy was genuine and dismissed the claim.

Lessons for business

A genuine redundancy occurs when an employee’s position is no longer required to be performed by anyone because of changes in the “operational requirements” of the business. This can include when a role has been restructured to improve efficiency and the responsibilities of a role are distributed between several other roles or when a business is experiencing a downturn and only needs a smaller amount of people to do a particular task or duty.

Prior to making roles redundant it is important businesses seek advice to ensure they understand whether they are required to comply with consultation requirements.  In this case, if an award did apply, the employee would have succeeded in his claim, as he was not consulted.

Where duties are reorganised amongst other employees’ businesses should carefully consider the criteria they will use when selecting whose position will be made redundant.  A lack of transparency here can result in other claims including General Protections claims and Discrimination claims.

How we can assist

Under current employment legislation, costly consequences await organisations found to be recruiting, managing or terminating staff incorrectly. Attend our Managing Termination, Redundancy and Unfair Dismissals to increase your knowledge of counselling and discipline processes, and how to best manage an unfair dismissal claim.

Written by Swendy Hoang

Fair Work Commission Decision [2019] FWC 4469

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