Catherine Gillespie, Director of Workplace Conflict Resolution, and Martin Reid, Principal and Head of Litigation at Coulter Roache Lawyers, discuss what employers and managers need to understand about redundancy, particularly with respect to ‘genuine’ redundancy.
Catherine: Hi I’m Catherine Gillespie Director of Workplace Conflict Resolution and I’m speaking with Martin Reid, Principal and Head of Litigation at Coulter Roache Lawyers. Thanks for speaking with me Martin.
Martin: It’s my pleasure Catherine.
Catherine: Great! I’d like to speak with you about the concept of genuine redundancy. It has a meaning under the Fair Work Act, and I’ve seen three different types of redundancies. A genuine redundancy as per the Fair Work Act, one that meets the business needs to cut down staff and the third one which is used because of poor performance, so we make a position redundant and get rid of that person. What does the business need to consider if they really want to follow the Fair Work Act in terms of genuine redundancy?
Martin: That’s a very good question. The definition of a genuine redundancy comes from the unfair dismissal provisions in the Fair Work Act and what it effectively does is it excludes an employer from being punished for dismissing an employee were that employee has been dismissed for reasons of genuine redundancy. Now, the difficulty for an employer is to understand what is in actual genuine redundancy.
Martin: That’s is defined in the Act as under a three step process. The first step of the process is whether or not there has been, the employer no longer requires the employee because of a change in the operational requirements of the business.
Martin: What is important about that is that the position itself is what has been made redundant. The employer no longer requires anyone to be employed in the position that the employee currently holds. The second step in the process, that is for the employer to have consulted the employee in accordance with any award or enterprise agreement that applies to the employment. For example Catherine many of the awards have a consultation processes.
Martin: And it will say that you must meet with the employee involved at the first opportunity available and explain to them what the decision of the employer has been and why it has been taken. And ask the employee if they have any alternatives that they could perhaps consider that they would be able to do, another alternative employment that they can undertake.
Catherine: So the first step is, do they require that position or not? And the second step is consultation.
Martin: Consultation. And then the final step in the processes is, would it have been reasonable for the employer to have taken steps to find another position for the employee within their organisation or an associated organisation which could be another company that is owned by the same directors for example. That can be quite an onerous step. And the decisions of the Fair Work Commission have said, things like you should offer that type of employment to an employee even if it’s a lot less money or a different location. The employee must be offered any alternative.
Catherine: Martin picking up on the third element of genuine redundancy what’s the situation if an employee doesn’t want to take up that alternative position that’s offered to them?
Martin: Okay. That is a situation a lot of times were an employer has found that the actual position being held by the employee has been redundant but perhaps they do have an alternative position. Now an employer obviously has to face redundancy payments for making an employee redundant, section 119 of the Fair Work Act makes that clear. So an employer is entitled to offer the employee another position to say, “Well we have made your position redundant however we’d like to be relieved of the obligation to pay redundancy pay by providing you with alternative employment.” The Act sets out an exemption for an employer were there has been acceptable alternative employment offer. The question about what is acceptable alternative employment of course is something that has been discussed many times and it is what is reasonable under the circumstances. So as you would imagine the employee would have to have a similar location, a similar rate of pay, it doesn’t’ have to be exactly the same job. What would happen if an employee decided not accept that job? It wouldn’t mean that the dismissal hadn’t been a genuine redundancy. It would simply mean that the employer could be relieved of having to pay redundancy for the employee under the circumstances. The protection for unfair dismissal would remain, it was a genuine redundancy, however the employee would not be entitled to redundancy payments because they have refused to accept alternative employment.
Catherine: I’ve seen a number of situations where a business has decided to make some redundancies because of operational reasons or to cut costs. Yet, they still seems to be same amount of work going on and the remaining people need to pick up that amount of work, which creates a lot of stress and then leads to a lot of conflict in workplaces. What would your view or the view of the Fair Work Commission be on that as being a redundancy?
Martin: In the situation you have described Catherine where the employees that had been left behind, are working harder then, to me there would be a question about whether there has been a genuine redundancy, a real change in the operational requirements of the business in the first place. That in fact the employer is try to get rid of the employee for other reasons. That would go to the evidence whether or not it was genuine redundancy and in situations where all the employees have picked up the slack in working harder, I think it would be very difficult for an employer to argue that was a genuine redundancy. As you rightly point that creates stress claims and general disharmony in the workplace.
Catherine: So this really is something that perhaps employers can come and speak to you about to understand what their obligations are? And perhaps for you to guide them in the type of consultation decisions or discussions that they would have with their staff before progressing.
Martin: Obviously, it would be best for employers to take steps to get legal advice about whether or not this redundancy or the termination that they’re considering is a genuine redundancy or not? If it’s not, then there hasn’t the kind of implications we discussed, the unfair dismissal claims and disharmony in the workplace.
Catherine: Yes. Not good for a workplace.
Martin: Not good for workplace.
Catherine: Thank you for bringing that up Martin. I think that whole area of genuine redundancy, I see it from a conflict point of view and really employers should be seeking this from a legal perspective and seeking legal advice and that’s for sharing that with us Martin.
Martin: Thank you Catherine.