Redundancy, especially during a crisis, is a challenging aspect of Human Resources (HR) management. Ensuring compliance with Australian Employment Law is not only a legal obligation, but it also protects an Employer and key individuals such as HR Managers, CEOs, Executives and Managers from risk and liability.
Handling redundancies with care, clarity, and legal compliance may sometimes require a baseline of proper process and advice and then in addition a certain amount of nuance.
1. Genuine Redundancy: The Legal Foundation
According to Employment Law in Australia, a redundancy is considered genuine when the employer no longer requires the job to be performed by anyone. This often arises due to:
- Economic downturns
- Financial difficulties
- Technological changes
- Organisational restructuring
HR professionals must be able to substantiate the claim of redundancy, especially during a crisis, where scrutiny intensifies, questions are asked and mistakes are seldom able to be rectified quickly.
2. Consultation Obligations for Human Resources
Under most Modern Awards and Enterprise Agreements, employers have general consultation obligations where there is a major change and must:
- Notify affected employees in writing
- Discuss proposed changes and business rationale
- Explore redeployment options
Some Employers may well also have similar provisions contained in Employment Contracts and policies.
Failure to consult appropriately can lead to legal challenges in particular a test as to whether a redundancy is genuine. HR leaders should keep in mind to treat consultation not as a formality, but as a critical legal step.
3. Ensuring Fair Selection Criteria in HR Processes
HR managers should apply a fair, consistent, and transparent criteria when selecting roles for redundancy. Common criteria include:
- Performance and skillsets
- Tenure and experience
- Business-critical roles
Avoiding any form of bias or discrimination is a key tenet of redundancy employment laws.
Some examples of steps to take include:
- Putting together a future and/or proposed organisational structure;
- Having board or executive group minutes detailing discussions as to the reasons for the redundancy;
- Obtaining legal advice from an Employment Lawyer for the structural change and if need be gaining privilege over any correspondence or documentation.
4. Notice Period Requirements Under Employment Law
Employees are legally entitled to notice of termination based on their length of service. HR teams must adhere to these statutory periods or provide payment in lieu.
Employment Agreements may specify longer notice periods than those outlined by the Fair Work Act.
5. Redundancy Pay: What Human Resources Must Provide
HR professionals must calculate redundancy entitlements accurately. Not all businesses are bound by the same rules small businesses (fewer than 15 employees) are generally exempt from statutory redundancy pay under certain conditions.
Always check the applicable Modern Award, Enterprise Agreement, or employment contract for any redundancy pay provisions that may need to be adhered to.
Payroll teams must also be notified and provided with instructions on the payments required.
Case Example – Yang v Southern Star Research Pty Ltd [2023] FWC 1802 (Yang Case)
A typical example of a genuine redundancy test is when a new role is created which might be of more seniority or requires higher or different skills, capability and experience.
Facts of the Yang Case
- While recruiting for a new person to fill the CFO position, the board identified that the new CFO (whoever that was going to be) would be better equipped with a Financial Controller in place to assist them.
- Upon commencement of the new CFO, an early part of their role included assessing the need for a Financial Controller and the needs of the finance team more broadly.
- Unfortunately and coincidentally the internal HR Manager was in correspondence with the applicant in regards to a letter confirming her employment that the applicant needed for a bank loan. However in that same correspondence the following was stated:
- “While no decisions have been made at this stage, this review may result to [sic] possible changes in the finance structure which may have an impact your role.
- While I appreciate this may be unsettling for you, I wanted to let you know where we were at in terms of the business and the finance team and what to expect in the near future”.
- Shortly after the CFO upon review, found they needed a more senior person to assist them to undertake the expending finance function specifically a Financial Controller.
- The respondent made the applicant’s role of Senior Finance Manager redundant and terminated her employment effective from 14 October 2022.
- The respondent created a new role of Financial Controller which absorbed the duties of the Senior Finance Manager role but had additional and more senior duties.
- The applicant did not have the required 10 years’ experience as a financial controller for the new role.
- The applicant agreed the Financial Controller role was not suitable for her due to the gap in her skills and experience.
- There were no other available accounting or finance roles within the respondent or its associated entities at the relevant time.
Employment Law Findings
- The applicant’s dismissal was a case of genuine redundancy within the meaning of s 389 of the Fair Work Act 2009 (Cth) because:
- The respondent no longer required the applicant’s job to be performed by anyone due to changes in its operational requirements (s 389(1)(a)).
- There was no obligation to consult about the redundancy as the applicant was not covered by a modern award or enterprise agreement (s 389(1)(b)).
- It would not have been reasonable in all the circumstances to redeploy the applicant within the respondent’s enterprise or an associated entity (s 389(2)).
Reasons for judgment
- The respondent no longer required the applicant’s job to be performed due to changes in its operational requirements arising from an acquisition and international expansion.
- The respondent was not obliged to consult about the redundancy as the applicant was not covered by any applicable modern award or enterprise agreement.
- It would not have been reasonable in the circumstances to redeploy the applicant to the Financial Controller role given she accepted she lacked the required experience, or to any other role as there were no suitable vacant positions.
- The Unfair Dismissal Application was dismissed.
Genuine Redundancy
In times of uncertainty, HR leaders play a pivotal role. By understanding the legal frameworks and seeking expert legal advice Human Resources and Employers can navigate redundancy mitigating the liability and legal risk.
Our Employment Lawyers at South Geldard Lawyers have essential expertise in advising on redundancies and restructures. Feel free to reach out on (07) 4936 9100 or via email to Jonathan Mamaril, Director at jmamaril@southgeldard.com.au. All Employers receive an obligation free consultation.
