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14 June 2023

Recent unfair dismissal case shines light on requirements for ‘genuine redundancy’

A recent decision of the Fair Work Commission serves as a timely reminder of the requirements that must be followed when terminating an employee by way of redundancy.

A recent decision of the Fair Work Commission serves as a timely reminder of the requirements that must be followed when terminating an employee by way of redundancy.

Background

A recent decision of the Fair Work Commission serves as a timely reminder to employers of the requirements under the Fair Work Act 2009 (Cth) that must be followed when making an employee redundant.

The applicant was engaged by telecommunications company, Isoton Pty Ltd, as a permanent full time software engineer. The requirements of her role included providing development, enhancement, troubleshooting and maintenance of software.

In mid-2022, Isoton decided to implement an increased technical support presence in India to improve its competitiveness in Australia. Isoton expected to engage 12 employees in India. However, in late 2022, as a result of a number of significant financial challenges, Isoton was required to reduce its costs base, which included removing a number of positions in Australia and reducing the number of positions previously intended to be recruited in India.

Isoton determined that four positions in its Australian operations were redundant, including the applicant’s position as a software engineer.

The applicant applied to the FWC under section 394 of the Act, alleging unfair dismissal because her termination by way of redundancy was not ‘genuine’. Isoton defended the claim, maintaining that the applicant could not have been unfairly dismissed because the dismissal was a case of genuine redundancy.

By way of brief refresher, the Act at section 385 states that a person has been unfairly dismissed if the FWC is satisfied all of the following factors have been met:

  • the person has been dismissed
  • the dismissal was harsh, unjust or unreasonable
  • the dismissal was not consistent with the Small Business Fair Dismissal Code
  • the dismissal was not a case of genuine redundancy.

Under section 389 of the FW Act, a person’s dismissal will be a case of genuine redundancy and therefore not unfair dismissal if:

  • the person’s employer no longer required the person’s job to be performed by anyone because of changes in the operational requirements of the employer’s enterprise (first limb)
  • the employer has complied with any obligation in a modern award or enterprise agreement that applied to the employment to consult about the redundancy (second limb).

It further states that a person’s dismissal will not be a case of genuine redundancy if it would have been reasonable for the person to be redeployed within the employer’s enterprise or the enterprise of an associated entity of the employer (third limb).

FWC satisfied of change in company’s operational requirements

In relation to the first limb, the applicant argued that there had not been any change in the company’s operational requirements and that the General Manager’s conduct in interviewing a variety of persons for various roles between 29 November 2022 and 9 January 2023 (when the applicant was made redundant) indicated the work that the applicant performed was still required to be undertaken.

The FWC, however, accepted Isoton’s evidence that its financial predicament did in fact result in a change in its operational requirements (by way of headcount in Australia) in order to reduce costs. The FWC was therefore satisfied that the first limb of section 389 had been met.

Decision had already been made before ‘consultation’

The FWC then considered the second limb of section 389, namely consultation.

Isoton accepted that the applicant’s role was covered by the Professional Employees Award 2020 and that clause 24 of the Award requires specific consultation in relation to major workplace changes.

The applicant gave evidence that, on 8 December 2022, she was told that there might be redundancies and that, if that were the case, her position would be one of them.

Isoton gave evidence that, on 9 December 2022, the applicant attended an online meeting with two managers and two other employees during which the applicant and the other two employees were notified that their positions were being made redundant. The next day, the applicant was blind copied into an email from the General Manager informing her that her position has been made redundant and her last working day would be 9 January 2023.

The FWC considered the interpretation of the meaning of ‘consultation’ in CFMMEU v Mt Arthur Coal [2021] FWCFB 6059, which sets out a list of propositions about what constitutes consultation.

The FWC considered that the conversation on 9 December 2022 did not constitute proper consultation because the applicant was not given an opportunity to be heard and to express her views such that they might be taken into account in the company’s decision making process.

The FWC considered that the company’s consultation was ‘at best a perfunctory exercise’ and that the decision to make the applicant’s position redundant had already been made before the discussion of 9 December 2022. The FWC therefore considered that the second limb failed.

Positions still required in related entity

The FWC considered the third and final limb, namely redeployment.

Isoton argued that no vacant positions were available at Isoton for redeployment of the staff whose positions were being made redundant and therefore the only option was to dismiss those staff members.

The applicant argued that Isoton was still recruiting senior software engineers, software engineers, test analysts and Java developers in its related entity in India in December 2022.

It was clear to the FWC that the work performed by the applicant would have enabled her to perform at least one of the roles in the Indian operation.

Isoton gave evidence that it did not offer the Indian based role to the applicant because it did not believe she would have accepted a position in India and because it had a lower level of remuneration compared to the Australian role.

Employers with redeployment options must not fetter offers based on own prejudices

The FWC was critical of Isoton and said that had Isoton consulted with the applicant as it was required to, she may have advised that she was keen to work in India, prepared to travel and, despite the lower wages, would have liked to experience the role for 2-3 months. The FWC said ‘it is dangerous for Employers with redeployment options to fetter offers based on their own prejudices.

The FWC found that Isoton had a role available in an associated entity that would have been reasonable in all the circumstances for the applicant to be redeployed in, and therefore the dismissal was not a genuine redundancy because Isoton did not meet the requirement of the third limb of section 389.

Key takeaways?

For the purpose of ensuring an employer is protected from a claims of unfair dismissal arising out of redundancy, an employer should ensure it satisfies the requirements of genuine redundancy before making any decisions as to the redundancy of employees’ positions.

Those requirements will be met where the employer:

(a)        no longer requires the employee’s job to be performed by anyone because of changes in the operational requirements of the enterprise

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

(c)        cannot reasonably redeploy the employee within the employer’s company or within an associated entity of the company.

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This publication is for information only and is not legal advice. You should obtain advice that is specific to your circumstances and not rely on this publication as legal advice. If there are any issues you would like us to advise you on arising from this publication, please let us know.

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