Redundancy Law – What is the Meaning of Redundancy under the Fair Work Act?

August 26, 2017

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Being made redundant can be a difficult time for many employees. However, while losing your job is never pleasant provisions under the Fair Work Act mean that employees must be treated fairly throughout the redundancy process. With the Fair Work Act there is redundancy law in Victoria which can help. You may be questioning whether your redundancy is genuine. In this article, PH Solicitor shares some information on the law around redundancy law that applies in Victoria and the meaning of redundancy under the Fair Work Act. PH Solicitor is a Melbourne-based employment legal firm. Paul Horvath has been a lawyer for over 25 years and is experienced on giving advice in relation to redundancy under the Fair Work Act. Paul can be contacted on (03) 9642 0435.

Genuine redundancy definitions

Employers have a right to terminate an employee’s employment where a person’s role is no longer required because of operational changes.

However, in order for a dismissal to be considered a genuine redundancy, and to minimise the likelihood of an unfair dismissal claim being made by an employee, a number of conditions under the Fair Work Act 2009 (FWA) must be met. These conditions are in effect the definition of redundancy.

These conditions are set out in s 389 and state that a person’s dismissal is a genuine redundancy if:

a. The person’s employer no longer required the person’s job to be performed by anyone because of changes in the operational requirements of the employer’s enterprise; and

b. The employer has complied with any obligation in a modern award or enterprise agreement that applies to the employment to consult about the redundancy.

Section 389 also imposes a further condition if a redundancy is to be genuine. A person’s dismissal is not a case of genuine redundancy if it is reasonable, in all the circumstances, for the person to be redeployed within the employer’s enterprise or an associated entity of the employer.

When redundancies occur in a workplace that simply shuts down a line of business and the operations associated with it no longer exist, termination of employment is generally relatively straightforward. However, where a position is made redundant but the line of business, or the business activities associated with the role that is made redundant, continues things can be more complicated.

Fair Work Commission Rulings

A number of recent Fair Work Commission (FWC) cases have examined the issue of the meaning of operational requirements in circumstances where jobs were made redundant because the person performing the role had insufficient skills to meet the changing needs of the employer’s enterprise.

In Mackay Taxi Holding Ltd T/A Mackay Whitsunday Taxis v Ms Kaye Wilson the Full Bench of the FWC, in affirming an earlier decision of the FWC in Ulan Coal Mines Limited v Howarth and Others, held that a redundancy is genuine even when particular duties of a now redundant position survive.

The FWC found that the question that needs to be addressed, in determining whether a position ceases to be required because of changes to an enterprise’s operations is not one of whether particular duties continued to be required, but whether the former position itself survives.

To put this another way, the decisions of the FWC in these cases makes it clear that an enterprise’s operational requirements are determined, not by duties associated with particular jobs, but by the business plans and needs of the organisation as a whole. While the original duties or tasks an individual carried out in a particular role may continue to be required to be performed, this is a separate issue as to whether the position itself continues to be required in an organisation.

In Davood Ailizadeh v Central Queensland University T/A CQUniversity the issue of changes to operational requirements and dismissal were considered in the higher education sector. In this case, the Applicant’s position as an academic staff member was made redundant because, among other things, the Applicant didn’t have a PhD and the University now required its academic staff to have one for the purposes of supervision of postgraduate students and the production academic research.

Following Mackay and Ulan Coalmines, the FWC found that the dismissal was a genuine redundancy because the Applicant did not have the qualifications to give effect to the University’s  operational objectives.

Redundancy Law says that employers must consult

The second requirement for a dismissal to be a genuine redundancy is that employers must comply with any obligation, where an employee covered by a relevant award or enterprise agreement, to consult with their employees and/or their representatives.

Employers can’t just pay lip-service to consultation. Rather they are required to have meaningful discussions with staff. Employees need to be given a genuine opportunity to put the case against the proposed redundancies. Consultation does not however mean there is joint decision making. Decisions regarding redundancy ultimately rest with the employer.

Employers must take reasonable steps to redeploy

The final requirement that a dismissal is a genuine redundancy is that reasonable efforts must be made by the employer to redeploy the person to be made redundant elsewhere in the employer’s enterprise or in an associated entity.

What constitutes reasonable steps in relation to redeployment includes consideration of such things as the nature of any available position, qualifications to perform the job, the employees’ skills, qualifications and experience, the location of the job in relation to where the employee lives, and the remuneration offered. If an employee whose position is made redundant lacks the skills or qualifications required for an available position there is no obligation on the employer to redeploy.

Lessons for employers

Employers have a right to make positions redundant if there are changes to operational requirements. However, this is not enough. Employers must consult with their employees as to the reasons for change and the change process itself. Where appropriate, employers must also take reasonable steps to redeploy staff whose positions are made redundant into other roles. By complying with these obligations under the FWA employers will be well placed to defend a claim against unfair dismissal.

Paul Horvath Solicitor is here to assist and provide advice in this area of redundancy law. Call today on (03) 9642 0435 to speak about your individual situation.

Redundancy Law – Case reference

Davood Ailizadeh v Central Queensland University T/A CQUniversity [2015] FWC 4595

Mackay Taxi Holding Ltd T/A Mackay Whitsunday Taxis v Ms Kaye Wilson [2014] FWCFB 1043

Ulan Coal Mines Limited v Howarth and Others [2010] FWAFB 3488