When faced with a redundancy situation employers have a number of boxes they need to tick to ensure that any redundancy is a “genuine redundancy”. Part of this is considering the redeployment of an employee to avoid dismissal. But how far does an employer have to go when considering whether there are any alternative positions to which the employee can be redeployed?
This question was answered by the High Court of Australia (“HCA”) in a decision which has clarified the scope of employer obligations when it comes to considering redeployment in the redundancy process.
The employer experienced a downturn in demand due to the covid pandemic and commenced a restructure. As a result, the employer made 90 employees redundant. 22 of those employees filed unfair dismissal proceedings in the Fair Work Commission (“FWC”) claiming their redundancies were not genuine redundancies as they should have been redeployed into positions held by contractors of the employer.
The employer held service agreements with two external parties that provided the employer with contractors. The contractors did not perform any specialised work and only required minor additional training to carry out their roles, which were of a similar nature to the work performed by the redundant employees.
The FWC initially decided that the employer could have reasonably restructured its business operations to redeploy the employees into the contractor roles given the similar nature of work. Therefore, the FWC found that the dismissals were not genuine redundancies. The employer made a series of appeals arguing that the FWC was not permitted to investigate alternative ways to use their workforce when implementing the redundancies.
When the appeal reached the High Court of Australia (“HCA”) the key issue considered was the extent to which employers must consider redeployment options in accordance with the Fair Work Act 2009 (Cth) (“FW Act”).
What did the High Court say?
The HCA upheld the FWC’s ruling and made the following points:
the FWC has broad powers to inquire and consider “all of the circumstances”, which includes the employer’s workforce, any contractor arrangements and operational structure;
the FWC can consider whether the employer could make changes to its workforce or operational arrangements in order to reasonably redeploy its employees within its enterprise; and
considering redeployment options, a role does not need to be vacant or exist at the time the employee is dismissed. Employers need to consider any anticipated changes within their organisation and potential vacant positions when considering redeployment opportunities.
Tips for employers
When terminating an employee’s employment due to redundancy, employers have always had to consider redeployment options in accordance with the FW Act. What this recent HCA case now requires is that this consideration must go further than looking at available positions at the time of dismissal which are intended to be occupied by employees. It’s a good reminder for employers to:
consider whether any adjustments to operational structure, inclusive of work reallocation, insourcing of contractor roles or additional restructure, would assist in providing redeployment opportunities;
thoroughly document any decisions and rationale around workforce adjustments and keep records of what redeployment options were considered, and why they were or were not reasonable; and
remember that the FW Act requires consideration of redeployment into related entities, so an employer should assess whether there are any roles within any related entities into which redundant employees could reasonably be redeployed.
If you would like a refresher on genuine redundancy obligations, you can read our article here.
