What does a genuine redundancy look like?

Redundancies
Aaron Goonrey
Emily Burgess

By and

written on September 6, 2017

Redundancies are a fact of life, although you don’t need to face legal action in the process of enacting them.

So you’re looking to restructure your business. Maybe your funding has been cut, there’s been a stern word from above, or perhaps you just can’t justify having three people operate the label-maker anymore.

When undergoing a restructure, many businesses are keen to announce the grand plans for structural change and put the resulting redundancies into motion as soon as possible. While we can understand the desire to get on with a speedy transition, there are a few things to remember before ripping off the redundancy band-aid.

What’s the big concern?

Two of the biggest danger words a manager can hear after making an employee redundant are ‘”unfair” and “dismissal”. The Fair Work Act says that a person will not be considered  “dismissed” under the unfair dismissal system if that person’s employment was terminated because of a “genuine redundancy”. In essence, if an employer can show that the redundancy is “genuine” enough, the employee will be excluded from accessing the unfair dismissal system.

Steps to take

So how do we make sure a redundancy is the real deal?

Firstly, check whether the affected employees are engaged under a modern award or enterprise agreement. If they are, the business will likely have consultation obligations as part of the redundancy process.

Case law shows us that consultation means informing the affected employees about the restructure with plenty of time for them to understand what’s happening and to respond with any questions or concerns. The timeframe for response will differ depending on the size of the business and the nature of the proposed changes, but to give you some indication, being told about possible redundancies in the workplace one day, and finding out that you’re the un-lucky candidate the next is unlikely to cut the mustard.

Secondly, consider whether it is reasonable to redeploy the person elsewhere within the business. Again, what is reasonable really depends on the facts; but if there is much the same position available at another office site in the same city, or in a related business, it may be unreasonable not to offer redeployment as an option before making the employee redundant.

Finally, consider if there are genuine reasons why the person’s job is unneeded. In addition to the consultation requirement, and the redeployment requirement, the Fair Work Act says that a redundancy will only be genuine if the person’s job is no longer required to be performed at all because of ‘operational changes’ in the business. If robots really do win the ‘people vs machines’ battle and successfully automate half the jobs in the office, the operational requirement is likely to be met. Most importantly, the position must genuinely not be needed at the time the redundancy is made by the business.

So how should your business approach a restructure?

Effective restructuring requires careful consideration and planning, and ensuring a smooth transition for employees is vital to its success. Next time you are considering a restructure, remember to tick off these three prerequisites.

Aaron Goonrey is a Partner and Emily Burgess is a Lawyer in Lander & Rogers’ Workplace Relations & Safety practice.

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Comment

One thought on “What does a genuine redundancy look like?

  1. From my memory of Modern Awards, consultation is only required when the employer decides to make MAJOR (my capitals) changes to structure etc. There’s no clarification of what constitutes “major”, but let’s say an employer of 200 staff makes 2 employees redundant following a minor restructure. While the effects would meet the “significant” definition in the Awards, the structure change wouldn’t likely fit the “major” definition.

    Nevertheless, having said that, in my last place of employment we went through a series of redundancies due to decreasing business, and we tried both ways. And consulting with staff first, and giving them some notice, worked far better for both the staff being made redundant, and the ones who remained employed.

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