Consultation requirement in the redundancy process

Prior consultation of employees is one of the requirements for a redundancy to be genuine under section 389 of the Fair Work Act 2009 (Cth) (Fair Work Act). This section requires, among other things, employers to comply with any consultation obligation found in a Modern Award or Enterprise Agreement.

Who do employers need to consult?

Generally, there is a requirement for employers to consult with any employee affected by a redundancy, not only those in the position that may be made redundant, before making a decision to make a position redundant.

For employees covered by a Modern Award, employers have an obligation to consult with the employee in a position to be made redundant, and any other affected employees, before making any decision as to whether the position is redundant.

Similarly, all recent Enterprise Agreements require the inclusion of the model consultation clause, which specifies that employees must be consulted in relation to any major change, which includes a restructure and redundancy.

What does consultation involve?

Consultation as part of the redundancy process requires employers to:

  • discuss with the employee (and their representative if the employee chooses to have one) the introduction of the change, the effect the change is likely to have, and possible measures to avert or lessen the adverse effects of the changes;
  • consider any matters raised by the employee about the changes; and
  • provide, for the purposes of this discussion, information about the changes, their effects and any other matter likely to affect the employee.

Consultation requires that employees are given a “genuine opportunity to be heard”. It does not carry an obligation to seek or reach agreement and it is not an exercise in collaborative decision-making. All that is necessary is that a genuine opportunity to be heard is given to employees before any final decision is made.

The process used for consultation will depend on several factors, but generally:

  • employees should be given prior written notice of the consultation including that there is a possibility that their position may be made redundant;
  • employees should be  informed that they may have a support person or another person represent them in the consultation; and
  • employers should keep files notes of the consultation for later evidence if required, the employer may need to demonstrate that they consulted adequately in the event of a dispute.

In terms of files notes, in addition to keeping a record of the conversations, it is good practice to also summarise the discussion in writing and send it to the employee to confirm what occurred during the consultation.

Consequence for not consulting with employees

Generally, an unfair dismissal claim cannot be made for dismissals that are a result of a genuine redundancy. However, failure to follow the consultation process correctly means that the redundancy may not be considered a genuine redundancy – exposing the employer to a claim for unfair dismissal, and potentially orders to compensate the employee, or reinstate the employee.

Failure to follow the consultation process could arise where, for example, an employer has not consulted with employees before making the decision – instead notifying them that their position is redundant without no real opportunity for the employee to respond or be heard.

A successful unfair dismissal claim can result in damages being award to an employee equivalent to up to 26 weeks of the employee’s pay.

Failure to properly consult with employees is a common misstep by employers when making positions redundant.

Other issues to consider with redundancies are whether the employee can be redeployed, and whether the position is truly redundant (meaning the employer no longer requires the role to be performed by any person).

For more information about the consultation process or other requirements of a genuine redundancy, contact Griffin Legal.

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