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Facing up to the harsh realities of business

IT seems hardly a week goes by in the present economic environment without a major Australian employer making an announcement about cutting its workforce.

No matter what label is given to it – redundancy, downsizing, retrenchment, restructuring, or right sizing – for the individual employee, the harsh reality is the loss of a job and principal source of income, often in circumstances where alternative employment will be difficult to find.

It is little wonder that employees are becoming increasingly aware of their rights and entitlements when they lose their jobs due to redundancy, and there are a number of recent examples where sacked workers and their

representatives have been willing to use the courts and industrial tribunals to obtain orders for compensation and lost entitlements.

Given the legal risks involved, there are a number of fundamental considerations for any employer contemplating a retrenchment. These include meeting legal requirements in relation to:

p notification/consultation with both individuals and, in some circumstances, unions;

p notice of termination of employment;

p adequate severance payments; and

p unfair and unlawful dismissal.

The WA Minimum Conditions of Employment Act 1993 includes obligations on all employers to notify an employee when the employer has decided to take action that is likely to have a significant effect on the employee

or to make an employee redundant. The requirements extend to holding certain discussions with the employee.

There are also obligations under the Federal Workplace Relations Act 1996, which apply when a decision has been made to dismiss 15 or more employees, to consult with relevant unions and to inform Centrelink.

All employees are entitled to notice of termination of employment. The Workplace Relations Act 1996 sets out minimum periods of notice which increase with an employee’s service and, in some cases, age. However, awards, agreements and individual contracts of employment should be checked carefully for more generous entitlements. Even if a contract of employment is silent, it should not be assumed that a greater period of notice

will be implied, or that payment in lieu of that notice period can be made.

Currently, in WA, there are no minimum severance payments prescribed under legislation. However, industrial awards and agreements often require such payments to be made. Further, even where there is no apparent legal

entitlement to severance payments, the WA Industrial Relations Commission has been willing to make orders in relation to payments, either on the basis that a right to such payments is an implied contractual term, for example, based on a company policy or industry standards, or on the basis that it is unfair to retrench an employee without making such payments.

As is the case whenever an employer is considering termination of employment, whether because of redundancy or any other reason, laws relating to unfair dismissal and unlawful discrimination should be considered. Not only must there be a sound business reason for the decision to reduce staff, where an employee is selected for redundancy from amongst a number of others, selection criteria and processes may come under scrutiny.

Criteria or processes that are unfair or discriminatory may result in a tribunal or court overturning a dismissal, or ordering the payment of compensation.

A fair procedure also will be important. For example, tribunals will consider whether the employer took adequate steps to identify alternatives to termination of employment, such as redeployment, in determining an unfair dismissal claim.

The way the decision is communicated to employees may also be taken into account.

There is a range of other issues that may arise, depending on the circumstances of the individual contract of employment, and, where relevant, the contents of awards and agreements. For example, consideration will need to be given to other entitlements that may arise on termination, such as payment for accrued annual leave or long-service leave. Further, employees may have loan accounts, or share options, which need to be considered.

Some basic planning that takes into account these fundamental obligations will go a long way towards ensuring employees are treated in accordance with the law, and the risk of successful litigation is reduced.

Of course, these are just my views on the subject and should be taken only as a guide. If you think some of this information pertains to your current circumstances you should seek legal advice before taking any action.

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