Employment Law Series: Ending Employment – Redundancy
What is redundancy?
In general, a position is redundant if the employer no longer requires the job to be performed by anyone. In enacting redundancy an employer must comply with the requirements of:
- Fair Work Act 2009 (Cth) (FWA) relating to dismissal on grounds of genuine redundancy, severance pay and consultation over large-scale redundancies
- any applicable modern award, enterprise agreement or employer policy/HR manual, relating to (for example) consultation over redundancies or severance pay
- the employee’s individual employment contract, e.g. entitlements to severance pay and (for executive employees) share options or bonuses
- Part 3-1 of FWA, protecting employees from dismissal (including for reason of redundancy) where an employee has exercised certain workplace rights in relation to their employment or engaged in lawful industrial activity, and
- applicable federal, state or territory anti-discrimination legislation.
Redundancy can also still arise even if the duties or functions attached to that position are redistributed to several remaining employees.
What is a genuine redundancy?
The FWA defines a genuine redundancy as:
- the dismissal was effected because the employer no longer required the person’s job to be performed by anyone, because of changes in the operational requirements of the enterprise (e.g. the introduction of new technology, a restructure of work or positions, or a reduction in workforce size in response to financial imperatives);
- the employer has complied with any obligation in an applicable modern award or enterprise agreement to consult about the redundancy; and
- there was no reasonable opportunity for the employee to be redeployed in the employer’s enterprise or the enterprise of an associated entity.
The following are examples where the Courts and Commission have considered what is a genuine redundancy:
- Mr Grant Skinner & ors v Asciano Services Pty Ltd T/A Pacific National Bulk. The Full Bench concluded in this case that the employer should have considered voluntary job swaps due to factors such as:
- It was a large business with lots of employees undertaking the same role (including those being made redundant)
- Voluntary job swap would not place onerous training requirements on the employer
- Voluntary job swaps had been allowed previously by the employer
Ultimately the Court found that the possibility of swaps should have been considered and that the respondent’s failure to do so, resulted in the respondent having failed to comply with its obligations under s.389(2) FWA.
- Ms Deborah Hallam v Sodexo Remote Sites Australia Pty Ltd. The Court held that it was a genuine redundancy, although the employee was not consulted about the redundancy. The Hospitality Industry (General) Award 2010 (the Award) applied to Sodexo’s business and this included a provision for a consultation clause in relation to redundancy.
The Court found that the employee was not covered by this award and accordingly the failure to consult her as prescribed by the award did not alter the redundancy.
- Geoff D’Alessandro v Gallery Homes Pty Ltd. The worker was employed by Gallery Homes as a Business Development Manager in the newly established Melbourne office in an endeavour to develop the business in the Victorian market. Following a downturn in business, they were required to reduce staff numbers to remain profitable and they decided to no longer seek to obtain new home building projects in Victoria. Therefore, the employee’s position was no longer required.
The commission accepted this as a genuine redundancy.
How does an employer best manage redundancy?
The requirement for consultation can vary depending on any applicable award or agreements. Some employers may have more detailed obligations than others. We do not propose to explore this in any detail, however, prudent practice would involve having a “meaningful” consultation.
In some circumstances, it is not enough to simply meet with the employee and put them on notice of a restructure or the fact it might affect them. The employer must explain how the restructure might affect the employee, and should give the employee the opportunity to influence the decision-maker
The idea is that adverse effects can be mitigated, such as giving the employee the chance of exploring alternative roles.
Once the consultation process has been completed and the decision to proceed with redundancy has been made, the subject employee is to be paid proper Notice (as discussed above) in addition to redundancy pay. The current minimum amounts for redundancy pay are set out below (s119 FWA).
|Employee’s period of continuous service with the employer on termination||Redundancy pay period|
|At least 1 year but less than 2 years||4 weeks|
|At least 2 years but less than 3 years||6 weeks|
|At least 3 years but less than 4 years||7 weeks|
|At least 4 years but less than 5 years||8 weeks|
|At least 5 years but less than 6 years||10 weeks|
|At least 6 years but less than 7 years||11 weeks|
|At least 7 years but less than 8 years||13 weeks|
|At least 8 years but less than 9 years||14 weeks|
|At least 9 years but less than 10 years||16 weeks|
|At least 10 years||12 weeks|
Employers are not required to make redundancy payments:
- to employees with less than 12 months’ service
- where the employer is a small business (i.e. less than 15 employees)
- if the employer obtains other acceptable employment for the employee
- to certain categories of excluded employees (e.g. trainees, fixed-term or casual workers).
Redundancy will not be genuine where it would have been reasonable for the employee to be redeployed within the employer’s business.
To fulfil this obligation an employer should at least offer an employee a lower-level position with a reduced salary if it is available (although the employee does not have to accept).
- If 15 or more employees are dismissed for “reasons of an economic, technological, structural or similar nature”, Notice must be given to the Chief Executive Officer of the Commonwealth Services Delivery Agency (Centrelink) as soon as practicable after the decision to terminate is made and prior to dismissing an employee. The written Notice must set out:
- the reasons for the terminations
- the number and categories of employees likely to be affected
- the time when or the period over which the employer intends to carry out the terminations.
There are civil penalties for noncompliance.
 Mackay Taxi Holdings Ltd v Wilson (2014) 66 AILR ¶102-109(66);  FWCFB 1043 (12 February 2014) (genuine redundancy occurred even though new role included almost 70% of the duties of position abolished); Foster’s Group Ltd v Wing (2005) 149 IR 224, where the original position basically remained (to be filled by another employee).
  FWCFB 574
  FWCFB 1496
  FWC 5440
 S530 & 785 FWA