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Genuine Redundancy – Guaranteed!

Downsizing…. Streamlining….. Restructuring…. Rationalising! Currently in Western Australia, these are all too common terms. But when considering making redundancies, it is essential to ensure they are genuine, or pay the price.

What is a genuine redundancy?

Under the Fair Work Act 2009 (FWA) a genuine redundancy occurs when the following criteria are met:

  • The job is no longer, and will not be required, for the foreseeable future (i.e. at least 6 months);
  • The employer followed consultation requirements; and
  • It was not reasonable or possible to move the employee to another role within the organisation or associated entities.

If the redundancy is found to be non-genuine the dismissal may be ruled as unfair.

So how do you protect yourself, and ensure it is genuine?

1.     Ensure operational requirement changes are valid

There are a range of legitimate changes that may result in reduced staffing requirements for your business: 

  • Introduction of new technology;
  • Downsizing as a result of reduced sales or production;
  • Closure of part or all of the business such as a particular service or product line/s;
  • Outsourcing or contracting out a function of the business to a third party; and/or
  • Restructuring due to a merger, takeover or change of the business model.

In each case it is crucial that you demonstrate a lawful process is followed when determining who will be made redundant, particularly when downsizing and restructuring.

2.     Consult… Consult…. Consult

Action the following points when proposing a redundancy to an employee:

i.         Review the relevant Award, agreement etc. to confirm consultation obligations. In the case Ball v Metro Trains Melbourne (2012) FWA 838, not following relevant enterprise bargaining agreement consultation processes resulted in payment of $38,946.80 damages to the employee;

ii.         Comply with your organisation’s redundancy policies and procedures. A breach of your own procedure can be costly. In the case Barker v CBA (2012) FWA 942, a breach of company procedure resulted in $317,500 employee damages;

iii.         Provide the employee/s with information about the change and expected effects;

iv.         Discuss each step to avoid/ minimise negative effects on the employee/s.

v.         Consider redeployment and options including outplacement or time off for interviews;

vi.         Consider employee ideas or suggestions about change; and

vii.         Document all consultation.

 

Even if you have a valid reason, failure to comply with consultation obligations will mean that the redundancy is not genuine.

3.     Consider Redeployment

If you have similar work in another part of the business or a related business, that the employee is …or could be capable of performing after reasonable re-training, you are required to offer the role as an alternative to redundancy. The Fair Work Commission will consider a number of factors if you have been reasonable in finding redeployment, the main factor being the employee’s suitability for identified alternate roles. In the case of Crema and others v Abigroup Contractors Pty Ltd (2012) FWA 5322, the redundancies were ruled as not genuine and the employees were found to be unfairly dismissed because Abigroup was seen to have hired and offered a 10 week training course and supervision to new employees hired for new projects.

Even if the redeployment alternative is in a different location or is at a lower salary, it is still advisable to offer the role to the employee and let them decide whether it is acceptable. In the case Irnya Margolina v Jenny Craig Weight Loss Centre Pty (2011) FWA 5215, the redundancy was ruled as not genuine as the employee (employed as a Manager) was not consulted about redeployment. The employer had not offered an alternate non-managerial role in the belief that the redeployment opportunity was inferior for the employee, however the employee stated she would have accepted the offer due to personal circumstances.

It should be noted, the Fair Work Commission has clarified that, although the employee may identify options during the consultation process, it is the employers’ responsibility to find possible redeployment.  The employer should identify and offer the alternative position without requiring the employee to work through a full selection processes. If an employee is to be made redundant but applies and is successful in attaining an alternative role through an internal recruitment process, they may still be entitled to a redundancy payment.

Contact WCA Solutions- People & Culture Solutions if you require any assistance with Human Resources and Industrial Relations on (08) 9383 3293 or admin@wcasolutions.com

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