Are you thinking of restructuring your business? If you are doing so and looking to make a position redundant, make sure that you are aware of the steps and consequences of doing so, or you may end up in a situation where the employee can bring a claim against you.

As an employer, you need to be aware of the risks of making an employee redundant and make sure that your business restructure isn’t viewed as a “cover-up” for an alternate reason for terminating an employee.

According to s 389 of the Fair Work Act 2009 (the Act) a person’s dismissal is a case of genuine redundancy if:

  • the employer, due to changes in the operational requirements of its enterprise, no longer requires the employee’s job to be performed by anyone; and
  • the employer has complied with any obligation to consult about the redundancy under a relevant award or enterprise agreement.

A person’s dismissal was not a case of genuine redundancy if it would have been reasonable for the employee to be redeployed within:

  • the employer’s enterprise; or
  • the enterprise of an associated entity of the employer.

According to s 385 of the Act a person has been unfairly dismissed if the dismissal:

  • was harsh, unjust or unreasonable; and
  • was not consistent with the Small Business Fair Dismissal Code; and
  • the dismissal was not a case of genuine redundancy.

Case Example

In the case of Heraud v Roy Morgan Research Ltd (No 2) [2016] FCCA 1797, the Fair Work Commission (FWC) determined that the employer had taken adverse action against the employee when her position was made redundant while she was on maternity leave. The employer was subsequently ordered to pay compensation for both economic and non-economic loss.

The employee had made a request for a flexible working arrangement and was then informed that her position was being made redundant as a result of a company restructure – just as she was nearing the end of her maternity leave.

In the case, the FWC decided that the employer had taken adverse action against the employee by making her role redundant, due to her exercising her workplace rights in taking maternity leave and requesting a flexible work arrangement.

The Employer was ordered to pay the employee $52,000 in compensation for a “serious contravention” of the FWA. The Court took into consideration both the economic loss suffered as a result of bringing the claim, and the non-economic loss including loss of enjoyment, distress and embarrassment. The FWC held that the employee was in a vulnerable position following maternity leave and that the contraventions of s 340 of the FWA by the employer were of a “serious nature”.

What do you need to do as an employer?

If you are considering making a role redundant, as an employer you need to be mindful of your obligations including:

  1. Advising the employee/s that you are considering making their role/s redundant,
  2. Consulting with employee/s who are covered by a Modern Award or Enterprise Agreement to see if there are alternative roles for the employee/s to avoid redundancy,
  3. Being aware of the current entitlements under s 119 of the FWA in regard to redundancy payments for the employee/s and notice requirements, and
  4. Consider any additional entitlements under Awards/Enterprise Agreements or employment agreements.

If you are restructuring and considering any redundancies, you should obtain legal advice in relation to “genuine redundancies” and the redundancy process to ensure you minimise the risk of an employee having a successful Adverse Action or Unfair Dismissal Claim against your business.

Please contact Jeremy Kennedy or Grace Tully if you would like advice for your business in relation to redundancies or employment issues.


***Assisted by Grace Tully***