Australia: When is Redundancy Genuine?

IN BRIEF

Employers who fail to observe the Fair Work Act 2009 (Cth) (the Act) requirements relating to redundancies can find themselves exposed to unfair dismissal claims in circumstances in which they may have had good business reasons for termination.

A recent decision before Fair Work Australia (now Fair Work Commission) highlights the legal requirements under the Act that employers will need to consider, when proposing to terminate due to redundancy.

HORN v MASTERMYNE ENGINEERING PTY LTD [2012] FWA 10846

WHAT HAPPENED?

Mr Horn was employed by Mastermyne as a Mechanical Fitter until his employment was terminated. Mr Horn subsequently lodged an unfair dismissal claim with Fair Work Australia which was unable to be settled by conciliation. The matter was then heard by Senior Deputy President Richards.

Mastermyne claimed that the termination could not constitute unfair dismissal under the Act, as the termination and steps taken by the employer in relation to it, meant that it had satisfied the test of "genuine redundancy" under the Act. Fair Work Australia therefore did not have jurisdiction to deal with the claim brought by Mr Horn.

Mr Horn refuted the assertion by the employer that there was a "genuine redundancy", amongst other things, on the following basis:

• aside from being informed that the company was downsizing and that employees would be told who stays and who goes, there was no consultation or any demonstrated effort to identify alternative positions in Mastermyne's business for Mr Horn;
• following his termination his duties were allocated to other employees not qualified to undertake the work; and
• Mastermyne subsequently advertised positions he was qualified for.

Mastermyne submitted that Mr Horn's role was no longer required to be undertaken by anyone due to changed operational requirements, in response to a downturn in the coal industry.

THE DECISION

Richards SDP considered that it did not matter whether Mastermyne redistributed Mr Horn's former duties to other employees, who were not qualified, as that was a matter for Mastermyne. He reconsidered that had it not been for the financial circumstances that led to the sizing review, Mr Horn would in all likelihood have remained an employee of the company. Further he noted that Mastermyne let go of 10 engineering employees and 200 employees across the Mastermyne Group.

Mastermyne provided evidence that they had investigated the availability of alternative positions in the Mastermyne Group, however, those investigations were unsuccessful. The positions advertised after Mr Horn was terminated, were for fitters undertaking underground work – something Mr Horn did not meet the regulatory requirements for. Mr Horn had only undertaken above ground work. Richards SDP accepted evidence that there was a very appreciable gap in skills and experience between these two types of work in the coal industry, and determined that there was no obligation on the company to overcome this gap by retraining.

Richards SDP's comments are illuminating on the issue of whether (to satisfy the relevant obligations under the Act) an employer may be required to retrain a redundant employee for an alternative position for which they are not immediately qualified or experienced. He stated:

Richards SDP next considered the allegation by Mr Horn that as there had been a failure by the company to properly comply with the consultation provisions in the relevant industrial award, the termination did not satisfy the test of "genuine redundancy" under the Act.

Richards SDP noted that Mastermyne had held a "pre-start meeting" with employees at which the organisation review was explained, the memorandum of that meeting was publicly available and employees had been invited to proffer suggestions to offset, avert or mitigate the proposed changes. In this context Richards SDP found that the consultation provisions of the Manufacturing and Associated Industries and Occupations Modern Award had been complied with by Mastermyne.

Richards SDP concluded that Mr Horn had been made genuinely redundant for the purposes of s 389 of the Act and Mr Horn's application was dismissed.

WHAT SHOULD WE TAKE AWAY FROM THIS CASE?

This case illustrates that for a redundancy to fall within the "genuine redundancy" defence to an action for unfair dismissal under the Act:

• a person's job is no longer required due to changes in the operational requirements of the employer's enterprise;
• the employer has complied with any obligation in a modern award or enterprise agreement to consult about the redundancy (this is likely to involve informing employees (both verbally and in writing) of: the process of reorganisation, of the expected effects of the changes, measures to mitigate the changes, any other matters likely to affect employees, who to contact if they have any queries or ideas, and then considering any employee/employee representative's suggestions);
• it would not have been reasonable for the person to be redeployed by the employer or within any group of associated entities of the employer (the employer needs therefore to carefully consider redeployment);
• employers will need to give consideration to the issue of retraining in the context of possible redeployment (if only modest retraining is required for redeployment then redeployment may be required to be offered).

For further information please contact:

Richard Ottley, Partner
Phone: + 61 2 9233 5544
Email: rbo@swaab.com.au

Laura Sowden, Solicitor
Phone: + 61 2 9233 5544
Email: lms@swaab.com.au

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.