PH Solicitor Newsletter – April 2019

April 19, 2018

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Redundancy Lessons for Employees & Employers

Recent key employment cases have provided both employees and employers’ further clarity in relation to when an employer may be exempt from paying redundancy and the factors that may be considered when assessing whether it is reasonable to redeploy a person from a redundant position to another available position.
This newsletter provides a summary analysis of those cases, principles and learnings.
Can an Employer be exempt from the requirement to pay redundancy?
In a significant recent decision handed down by the Federal Court, an employer was unsuccessful in arguing that it was exempt from having to pay its employees redundancy pay on the basis that its decision to terminate their employment was “due to the ordinary and customary turnover of labour”.
Under section 119(1)(a) of the Fair Work Act 2009 (the Act) an employee is entitled to redundancy pay by an employer if the employee’s employment is terminated at the employer’s initiative because the employer no longer requires the job done by the employee to be done by anyone:
(i) except where this is due to the ordinary and customary turnover of labour; or
(ii) because of the bankruptcy or insolvency of the employer.
The Facts
In United Voice v Berkeley Challenge Pty Ltd [2018] FCA 224 a company dismissed 21 employees after it lost a long term security and cleaning contract which those employees performed.
The employer believed that as a result of losing the contract with the client, they were exempt from paying employees redundancy pay on the basis that it was “due to the ordinary and customary turnover of labour”.
The Decision
In determining the matter, the Court had to consider the meaning of “the ordinary and customary turnover of labour”. In doing so, the Court made comment that:
“the exception applies if a particular employer decides to terminate a particular employee’s employment and to render that employee’s job redundant in circumstances where the redundancy component of that decision is for that employer, with respect to its labour turnover, both common, or usual, and a matter of long-continued practice”
The company had held the contract from 1994 to 2014 and while it tendered for a new contract but was unsuccessful, the Court decided that the evidence illustrated that the terminations and the connected job redundancies were uncommon and extraordinary and not a matter of long-continued practice.
Redeployment and redundancy…when is it not reasonable?
In a separate decision the Fair Work Commission has provided further clarity in relation to determining the reasonableness of considering the redeployment of an employee before making them redundant, as is required by employers to satisfy a redundancy being a ‘genuine redundancy’ for unfair dismissal cases.
The Facts
In Velasquez v Cabrini Health Ltd [2017] FWC 5965, an employee filed an unfair dismissal claim on the basis that his redundancy was not a ‘genuine redundancy’ as his employer refused to redeploy him to a lower position which he was clearly qualified for.
Generally, in assessing whether redeployment is reasonable in all the circumstances, the Fair Work Commission or a Court will consider the following at the time of dismissal:
• whether there exists a job or a position or other work to which the employee can be redeployed;
• the nature of any available position;
• the qualifications required to perform the job;
• the employee’s skills, qualifications and experience; and
• the location of the job in relation to the employee’s residence and the remuneration (pay and entitlements) which is offered.
Among other things, the employer argued the employee was overqualified for the role, that there was an indication that he would not accept the positon and had a poor relationship with the manager to which he would report.
The Decision
In determining that the employee had been fairly dismissed and that the redundancy was genuine, the Commissioner outlined that “fit” was also a relevant consideration that employers may take into account at the time of dismissal in considering whether it is reasonable to redeploy an employee.
It was held that the employee had a serious level of distrust and lack of respect for the manager who he would have been redeployed to work under whilst also being clearly overqualified for the position. The Commissioner commented that the likely impact likely impact of redeploying a person into a job, position or other work on the cohesiveness of a work group and its efficiency and productivity because of the relationship that the person has, or has had, with prospective co-workers or supervisors was a relevant factor in considering whether redeployment was reasonable.
Importantly, both cases demonstrate key lessons for employees and employers having regard to matters that must be considered in redundancies. An employer may take into account how an employee may fit into a new team when considering their redeployment within its business in addition to the other relevant considerations listed. That said, an employer should always ensure it has documented evidence and reasons when considering whether an employee could be redeployed at the time their positon becomes redundant.
Finally, it is noted that a loss of a contract or service will not automatically satisfy the exemption for an employer not having to provide redundancy pay when dismissing employees. Such circumstance may not be to the ordinary and customary turnover of labour and could therefore have a significant impact on the employer who may have to make numerous redundancies and redundancy payments.