Redundancy occurs when an employer no longer requires the employee’s job to be performed by anyone because of changes in the operational requirements of the employer’s enterprise. However, simply determining that a position is redundant is not enough to ensure a resulting dismissal is not unfair. Employers must also consider redeployment and comply with any consultation obligations under a modern award or enterprise agreement for it to be a genuine redundancy. If an employer can prove that a dismissal was a case of genuine redundancy, they will have a jurisdictional defence to unfair dismissal claims before the Fair Work Commission (the “FWC”). If any of the requirements are not met, the dismissal will not be a genuine redundancy, it remains open for the FWC to find the dismissal unfair.  A recent case before the FWC explored how there’s ‘more than one way to botch a redundancy’.

Background

The employee was employed at a Fast Food shop owned by the employer on a permanent part-time basis from 3 June 2022 until his dismissal on 17 November 2023. He often worked 28-30 hours a week until 22 September 2023 when the Fast Food Shop was unable to operate because the landlord had changed the locks. The employer assured the employee of work at another branch and during this period made irregular payments. The payslips also incorrectly stated that the employee’s superannuation was being paid. The employee subsequently only worked at the other branch once. The employee claimed he had been “put on annual leave and told to stay on annual leave until further notice”.

On 4 October 2023, the respondent sent a letter that communicated a reduction of the employee’s “hours of employment with [the employer] in the interim” so as to ensure his ongoing employment. On 17 November 2023, the employee ‘exhausted’ his annual leave payments and his employment was terminated. The employee claimed that he was unfairly dismissed whilst the employer characterised the situation as an unfortunate but nonetheless, genuine, case of redundancy.

Was it a case of genuine redundancy?

The FWC noted that it appears, if the employer’s account is accurate, that the factual preliminary requirements were met, and that the employee’s position was ‘redundant’ because the employer no longer needed the role to be performed by anyone following the branch closing (with no realistic chance of reopening).

The FWC then considered whether it was reasonable for the employee to be redeployed within the employer’s broader enterprise, particularly considering that he was actually provided a single shift at another branch. The FWC did not make a clear finding here because the employer did not attend the proceedings, however an analogous question was discussed in greater depth by the FWC in PCS’ recent article.

The FWC did consider whether the employer complied with the consultation obligations in the applicable Fast Food Industry Award 2020 Award (the “Award”). That Award has a requirement for employers to consult about major workplace changes. The Commission noted that the employer must give notice to the affected employee and discuss the changes as part of the consultation. An alteration to the employee’s hours and his subsequent termination both fell within the scope of decisions that result in ‘major change.’ The FWC found no evidence of consultation about those two decisions by the employer. The FWC accepted the employee’s assertion that it was only when he was terminated in November that he realised it was a possibility.

Additionally, the FWC found that the employer forcing the employee to ‘exhaust’ his annual leave while not alerting the employee to the prospect of his employment being terminated compounded the unfairness that arose from the lack of consultation, because the employee could have used that time to look for other work. This was taken into account in increasing the compensation the FWC ordered the employer to pay to the employee.

For these reasons, the FWC could not find there was a genuine redundancy because the employer failed to consult under the Award, which ultimately lead to a finding of unfair dismissal.

Takeaways

There are several general takeaways for employers who have determined that a role is redundant and are considering termination of the employee’s employment.  Employers should ensure that:

• they do not force employees to take annual leave (unless they are able to under a term in the contract, award or enterprise agreement);
• they no longer require the person’s job to be performed by anyone;
• it is not reasonable in all the circumstances to redeploy the redundant employee within the employer’s enterprise or in an associated entity; and
• they have complied with the relevant modern award or enterprise agreement to consult about the redundancy.

Complying with these steps will ensure that an employer can rely on the defence of genuine redundancy where an employee claims there was an unfair dismissal.