A new High Court decision confirms that, when considering whether to redeploy an employee due to a redundancy, an employer must consider opportunities broadly – including roles performed by contractors or labour hire workers, and the possibility of restructuring to create new roles. Here’s what HR needs to know.

Last week, the High Court confirmed that, when assessing whether a redundancy is “genuine” under the Fair Work Act, employers must do more than simply point to the fact that a role is no longer required and cite a lack of internal redeployment opportunities.

They must also demonstrate that they have considered whether it would have been reasonable, in all the circumstances, to redeploy the affected employee. This extends to positions that are currently being performed by contractors or labour hire workers, as well as the possibility of restructuring the workforce – including creating a new role – to enable redeployment.

Practically, the decision applies only to redundancies that result in the termination of an employee who would otherwise qualify for unfair dismissal. If an employee would not qualify for unfair dismissal protections (perhaps due to not meeting minimum employment duration or working in a small business exempt under the Fair Work Act), this redeployment test doesn’t apply.

What does this mean for HR practitioners advising on redundancies? How can they ensure managers, leaders and clients comply with the law when implementing redundancies, and what steps can they take to help them prepare? HRM asked an employment lawyer to share his advice.

The facts of the case: Helensburgh Coal v Bartley

In 2020, Helensburgh Coal retrenched 90 employees from the Metropolitan Mine in Helensburgh, north of Wollongong, while continuing to engage labour hire workers to perform tasks the retrenched employees were capable of doing.

Twenty-two of the affected employees lodged unfair dismissal claims with the Fair Work Commission (FWC), alleging the redundancies were not “genuine” under s 385(d) of the Fair Work Act.

Under s 389(2) of the Act, a redundancy is not considered genuine if it “would have been reasonable in all the circumstances” for the employer to redeploy the employee. 

The claimants argued that redeployment was a reasonable option, as they could have undertaken the work assigned to the labour hire workforce.

What did the courts determine? 

In 2021, the FWC found for the employees, agreeing that their redundancies were not “genuine”, and that, therefore, they could launch an unfair dismissal claim. 

The employer appealed to the Federal Court and lost, then appealed to the High Court. The High Court confirmed it was open to the FWC to find that the redundancies were not “genuine”, as required by s 385(d) of the Fair Work Act. 

It should be noted that the High Court did not rule on whether the employees were unfairly dismissed, as this was for the FWC to decide. The case will now go back to the FWC, where each employee can lodge an unfair dismissal claim.  

The High Court held that it may not have been “reasonable in all the circumstances” for the employer to have made the employees’ roles redundant, given the employer had not considered restructuring the workforce. 

The Court defined “all the circumstances” as “unmistakeably broad”, stating that they might include the employees’ skills, experience, training and competencies, as well as many aspects of the employers’ workforce, including: 

• Organisational policies, including the organisation’s tolerance for risk
  
• Strategic plans, operational processes and governance procedures
  
• Workforce design decisions, such as whether to continue using contractors, terminate existing contracts, or alter the mix between permanent employees and external labour
  
• Existing contracts for outsourced services
  
• Anticipated organisational or operational changes
  
• Practical considerations, including the feasibility, scope and training requirements associated with redeployment.

What does the decision mean for HR and businesses? 

The decision provides clear guidance on how to deal with redundancies of employees who could qualify for unfair dismissal. 

“HR is now going to have to take a more expansive and strategic approach when managing redundancies,” says Aaron Goonrey, Partner and Asia Pacific Head of Employment and Reward at Pinsent Masons.

Once the business has decided that a redundancy is necessary, the next step is to ask: can we redeploy this person into another role? 

However, in determining the answer, HR should think more broadly than before. 

“Previously, employers only looked at redeployment by considering the employee workforce. Now, you have to think about whether relevant jobs are being outsourced to contractors or labour hire, and are capable of being returned and insourced back to employees.”

In addition, this broad thinking might require consideration of the potential for a new role, says Goonrey.   

“HR is now going to have to take a more expansive and strategic approach when managing redundancies.” – Aaron Goonrey, Partner and Asia Pacific Head of Employment and Reward, Pinsent Masons.

“HR will also need to look more closely at whether there are opportunities within the enterprise.”

Factors to consider include whether the employee was consulted about the new role; the employee’s skills, qualifications and experience; and whether the employee can perform the role straight away or with reasonable training. In addition, the role’s location, and the terms and conditions, including pay and entitlements, might be relevant. 

However, given the legislation calls for “reasonableness”, the potential for redeployment would likely only arise where another role would fit the employee’s current experience, without requiring extensive retraining.  

“For an employee who worked in a completely different area and completely lacked the skills for the new position, HR [would need to] assess [their potential for redeployment]  on that basis. 

“You’re not obliged to redeploy someone in such a case, but you do have to make an assessment and be able to explain it.” 

Read HRM’s article on what to do before, during and after a redundancy.

Practical tips for HR practitioners

The first step is to create an internal protocol for assessing redundancies across the enterprise, says Goonrey. 

“[This begins] with mapping the composition of your workforce, and identifying overlaps between the roles of employees and contractors.” 

In addition, the protocol should explain how the organisation assesses redundancies and redeployment opportunities. 

This explanation should answer questions such as, “When a role is made redundant, are similar roles being outsourced to contractors or labour hire? Could internal restructuring create redeployment opportunities, such as insourcing work that has been outsourced previously?”       

Clear guidelines for communicating with affected employees are also essential.                    

“Ensure that consultation obligations under the relevant award or enterprise agreement are being met. To add a layer of transparency, tell impacted employees why you’re make redundancies – give them a rationale. 

“If you’re not redeploying them, give them a thorough explanation, particularly if there are contractors or labour hire workers within the enterprise doing roles that they could also be doing.”

Every step of a redundancy process requires thorough documentation. That way, if an employee makes a complaint, the organisation will be in a position to explain why redeployment wasn’t possible. 

On top of an internal protocol, HR practitioners should deliver training to line managers. This is particularly important in organisations without dedicated HR or Industrial Relations (IR) employees, says Goonrey. 

Such training should focus on understanding redeployment in the context of the unfair dismissal regime, including:

• The necessity of considering not only existing roles but also the potential to adjust other roles or create new ones
• Assessing an employee’s suitability for another role, including those that might involve lower status or pay
• How to consult an employee, by providing all relevant information and considering all feedback to that information 
• Documenting all interactions, meetings and processes 
• Appreciating the significant legal risks of failing to consider redeployment in a comprehensive and strategic manner. 

Read HRM’s article on ‘partial redundancies’.

Last but not least, it could be wise to review contracts for outsourced work, says Goonrey.     

“Make sure they don’t limit your ability as an employer to redeploy employees to perform work being done by the contractors or labour hire.”

Examples might include clauses that state that the contractor is the exclusive provider of specified services, or that the employer agrees not to allow anyone beside the contractor to perform services reliant on the contractor’s confidential processes, methodologies and proprietary systems. 

This isn’t a decision to put on the backburner, says Goonrey. HR practitioners should bring it to the attention of their executive team immediately and advise on changes required to redundancy processes, as outlined above.

“A tick-and-flick model isn’t enough. If organisations fail to take the High Court’s guidance seriously, they risk reputational damage, which could be enduring. Employees who witness poor handling of redundancies lose trust in leadership. Employee morale declines, and the organisation’s workplace culture may suffer. 

“In the broader community, including industry peers and potential recruits, the perception of unfairness or disregard for employee rights may damage the employer’s brand for a significant period of time. 

“Employers must actively consider redeployment in cases of redundancies, even if it means reshaping how work is done. Otherwise, they also expose themselves to unfair dismissal claims, reinstatement orders and costly compensation payouts. 

“Add to that the time and legal costs of defending proceedings before the Fair Work Commission or courts [and] the price of non-compliance may become exorbitant.”

All information, content and materials available on this site are for general informational purposes only. The contents of this article do not constitute legal advice and should not be relied upon as such.

Want to take your employment law skills to the next level? AHRI’s Advanced HR Law short course is grounded in practical, expert insights to help you navigate Australia’s complex employment law landscape.