Pub­li­ca­tions

Unfair Dis­missal – Con­fi­den­tial­i­ty no excuse for fail­ure to con­sult on redundancy

A recent deci­sion in the Fair Work Com­mis­sion has shone a light on a dilem­ma which employ­ers face when man­ag­ing redun­dan­cies in the con­text of a con­fi­den­tial busi­ness acquisition. 

The dilem­ma is, at what point in time should the employ­er dis­close to staff the impend­ing acqui­si­tion and its like­ly impact upon their con­tin­u­ing employ­ment. This was one of the issues can­vassed in the recent deci­sion of the Fair Work Com­mis­sion in Chu­rui Hu v ACY Cap­i­tal Pty Limited [2019] FWC 1635 (19 March 2019).

In Chu­rui Hu, Com­mis­sion­er Cam­bridge con­sid­ered an appli­ca­tion by the employ­ee for unfair dis­missal’ in cir­cum­stances where the appli­cant had been made redun­dant. The redun­dan­cy had arisen in the con­text of her employ­er acquir­ing anoth­er finan­cial ser­vices busi­ness. This had result­ed in the num­ber of employ­ees grow­ing from 17 to 24

The employ­er point­ed out that as it was a small com­pa­ny which had acquired anoth­er small com­pa­ny and occu­pied a small office, it was nec­es­sary to quick­ly down­size in order to seek to accom­mo­date all the employ­ees that had been acquired. The appli­cant occu­pied the posi­tion of Accounts Offi­cer. Fol­low­ing the acqui­si­tion, the com­pa­ny had 4 staff for 2 avail­able posi­tions (rel­e­vant to the appli­can­t’s role).

The appli­cant had been on hol­i­day whilst the acqui­si­tion was pro­ceed­ing and arrived at work to find that her loca­tion in the office was occu­pied by anoth­er employ­ee and her per­son­al belong­ings had been removed and placed else­where in the office. 

A direc­tor of the employ­er met with the appli­cant around 10.00 am on her first day back, and advised the appli­cant ver­bal­ly that, as a result of an acqui­si­tion var­i­ous employ­ees from the acquired com­pa­ny had been trans­ferred into the office which was now full. He would there­fore pay the appli­cant one mon­th’s wages and she could then find a new job from that day forward. 

Rel­e­vant­ly the employ­ee had not received any pri­or con­sul­ta­tion in rela­tion to her impend­ing redundancy.

The employ­ee sub­se­quent­ly filed a claim for unfair dis­missal which was defend­ed, amongst oth­er things, on the grounds that the ter­mi­na­tion had been a gen­uine redun­dan­cy’ with­in the mean­ing of sec­tion 389 of the Fair Work Act. This pro­vi­sion enables a respon­dent to chal­lenge the juris­dic­tion­al basis for bring­ing a claim for unfair dis­missal if the fol­low­ing cri­te­ria are satisfied:

  1. the employ­er no longer requires the job to be per­formed by any­body because of changes in its oper­a­tional requirements
  2. the employ­er has com­plied with any oblig­a­tion in a mod­ern award or enter­prise agree­ment to con­sult about the redundancy
  3. it would not have been rea­son­able in all the cir­cum­stances for the per­son to be rede­ployed with­in the employ­er’s enter­prise or an asso­ci­at­ed entity.

It should be observed that rel­e­vant­ly, if an appli­cant suc­ceeds in over­com­ing a juris­dic­tion­al objec­tion to their claim made on the basis that ter­mi­na­tion was a gen­uine redun­dan­cy’, the mat­ter then pro­ceeds to a hear­ing as to whether or not the dis­missal itself was harsh, unjust or unrea­son­able’.

In Chu­rui Hu, in the alter­na­tive (in case its juris­dic­tion­al chal­lenge was unsuc­cess­ful) the employ­er made sub­mis­sions that the dis­missal itself was not unfair.

Com­mis­sion­er Cam­bridge first con­sid­ered the juris­dic­tion­al objec­tion by the employ­er by con­sid­er­ing the test set out in sec­tion 389 of the Act. 

He was sat­is­fied that the job was lost due to oper­a­tional require­ments and there­fore con­sid­ered the first ele­ment of sec­tion 389 established. 

The next limb of the test in sec­tion 389 con­cerned whether or not the employ­er had com­plied with its con­sul­ta­tion oblig­a­tions. It was uncon­tro­ver­sial that the employ­er had not con­sult­ed about the redun­dan­cy. Indeed, the first the employ­ee had heard about the fact that she was to be made redun­dant was when she returned from work on hol­i­day only to be told that the office was full, and she did not have a job. 

The employ­er sought to defend the absence of con­sul­ta­tion by rely­ing on a par­tic­u­lar pro­vi­sion in the con­sul­ta­tion pro­vi­sion in the rel­e­vant award (being the Bank­ing, Finance and Insur­ance Award 2010) which states that an employ­er is not required to dis­close con­fi­den­tial infor­ma­tion the dis­clo­sure of which would be con­trary to the employ­er’s inter­ests’.

The employ­er stat­ed that it would have been con­trary to the employ­er’s inter­ests in this case, to dis­close infor­ma­tion relat­ing to the employ­er’s acqui­si­tion of a com­peti­tor as it was high­ly con­fi­den­tial and sen­si­tive and that there was no advanced warn­ing and no time for con­sul­ta­tion. It also not­ed that the employ­ee was over­seas on annu­al leave at the rel­e­vant time and the mat­ter could not be dis­cussed until her return to work (by which time the acqui­si­tion was completed).

Com­mis­sion­er Cam­bridge con­sid­ered that respect to the con­fi­den­tial­i­ty pro­vi­sion in the con­sul­ta­tion provision:

This term does not relieve the employ­er of the oblig­a­tion to dis­cuss the change, it only allows that as part of those dis­cus­sions it may not be required to pro­vide con­fi­den­tial infor­ma­tion that would be con­trary to the employ­er’s interests”.

Com­mis­sion­er Cam­bridge stressed that there was sim­ply no dis­cus­sion at any time pri­or to the appli­cant receiv­ing advice that she was dis­missed on the basis of redun­dan­cy. He con­sid­ered once the acqui­si­tion had occurred there was an oblig­a­tion on the part of the employ­er to dis­cuss with the employ­ee the effects of the acqui­si­tion on her employ­ment and any mea­sures to mit­i­gate such adverse effects, so it could give prompt con­sid­er­a­tion to any mat­ters raised by the appli­cant. At the very least the employ­er should have engaged in some dis­cus­sion with the employ­ee upon her return from leave before telling her she was redundant. 

In the cir­cum­stances, Com­mis­sion­er Cam­bridge held that the employ­er had not com­plied with the oblig­a­tion to con­sult under the rel­e­vant award. On this ground alone there­fore, the employ­er had failed to sat­is­fy one of the key ele­ments of sec­tion 389 and its juris­dic­tion­al objec­tion could there­fore not succeed.

Com­mis­sion Cam­bridge also dealt with the third ele­ment name­ly that it would not be a case of gen­uine redun­dan­cy ’ if rede­ploy­ment was rea­son­able in all the cir­cum­stances. He con­clud­ed that the evi­dence estab­lished that the employ­er had tak­en no steps to prop­er­ly con­sid­er rede­ploy­ment, par­tic­u­lar­ly as it may have applied to asso­ci­at­ed enti­ties of the employ­er. There­fore, the third ele­ment in respect of sec­tion 389 was not sat­is­fied either.

As the employ­er had not been suc­cess­ful in chal­leng­ing the employ­ee’s unfair dis­missal appli­ca­tion on the grounds of a gen­uine redun­dan­cy’ the Com­mis­sion­er went on to con­sid­er whether or not the ter­mi­na­tion was harsh, unjust or unrea­son­able’.

In look­ing at this ques­tion, the Com­mis­sion­er not­ed that the employ­er had failed to pay the employ­ee all due enti­tle­ments with respect to the redun­dan­cy, which fail­ure would like­ly ren­der the dis­missal to have been unlaw­ful. The Com­mis­sion­er stated:

The fail­ure to pay all due enti­tle­ments aris­ing in respect to the ter­mi­na­tion of employ­ment would like­ly ren­der the dis­missal to have been unlaw­ful. Although these enti­tle­ments are mat­ters that may be pur­sued in oth­er forms of lit­i­ga­tion, a dis­missal that includ­ed unlaw­ful ele­ments such as the fail­ure to make pay­ment of recog­nised enti­tle­ments, would estab­lish that the dis­missal was unjust and unreasonable.”

The Com­mis­sion­er also con­sid­ered the selec­tion of the employ­ee for redun­dan­cy. He con­sid­ered that selec­tion of the appli­cant as a per­son to be made redun­dant appeared some­what arbi­trary and relat­ed more to the fact she was on leave at the time the employ­er iden­ti­fied it had 2 account­ing employ­ees who were sur­plus to require­ments. In his view there­fore, the rea­son for the dis­missal of the appli­cant was not sound, defen­si­ble or well founded’.

Com­mis­sion­er Cam­bridge also con­sid­ered that the employ­er had adopt­ed an unnec­es­sar­i­ly abrupt and per­func­to­ry pro­ce­dure to advise and imple­ment the dis­missal’. The appli­cant had been enti­tled to some lev­el of dis­cus­sion pri­or to imple­ment­ing the deci­sion to dis­miss. He con­sid­ered the dis­missal a cal­lous act exac­er­bat­ed by the fail­ure to pay all due enti­tle­ments to the appli­cant. As such it was unjust, unrea­son­able and unnec­es­sar­i­ly harsh.

Hav­ing regard to the above fac­tors the claim for unfair dis­missal was successful. 

What lessons arise from Chu­rui Hu regard­ing con­sul­ta­tion and redundancy? 

A les­son which aris­es from this deci­sion is the fact that employ­ers will need to be mind­ful that the pro­vi­sions in the con­sul­ta­tion require­ments under rel­e­vant awards that con­cern con­fi­den­tial­i­ty do not relieve an employ­er of the oblig­a­tion to con­sult about the redun­dan­cy. Each case will need to be looked at on its own mer­its, and employ­ers whilst being able to pro­tect com­mer­cial in con­fi­dence mate­r­i­al, will need at some point pri­or to ter­mi­na­tion to dis­close the exis­tence of the pro­posed changes and oth­er­wise com­ply with the con­sul­ta­tion obligations.

Whether a fail­ure to con­sult or to ade­quate­ly con­sult about an impend­ing redun­dan­cy will make a dis­missal unfair’, has been the sub­ject of a num­ber of deci­sions of the Fair Work Com­mis­sion, where the deci­sions are nuanced accord­ing to the facts of each case. 

In an oft-quot­ed deci­sion in Maswan vs Esca­da Tex­til­ver­trieb t/​a Esca­da [2011] FWA4239 Vice Pres­i­dent Wat­son stated:

[39] In my view a deci­sion to dis­miss on account of redun­dan­cy will only be harsh, unjust or unrea­son­able if the ratio­nale for the deci­sion is seri­ous­ly under­mined or if there is a seri­ous error in pro­ce­dure such that ren­ders the ter­mi­na­tion unfair in the cir­cum­stances. Here the deci­sion appears open to the employ­er to make. The fail­ure to con­sult is not a triv­ial mat­ter. But as it is clear that con­sul­ta­tion was high­ly unlike­ly to have negat­ed the oper­a­tional rea­sons for the dis­missal or lead to any oth­er sub­stan­tive change, I do not believe that the fail­ure to con­sult pri­or to the date of ter­mi­na­tion ren­dered the dis­missal unfair. Giv­en the evi­dence in rela­tion to the oper­a­tional need to restruc­ture, I am of the view that it is like­ly that Mr Maswan would have been dis­missed in any event, even if time­ly con­sid­er­a­tion had occurred”.

A Full Bench deci­sion of UES (Int’l) Pty Lim­it­ed vs Har­vey [2011] 215 IR 263 not­ed on the issue of consultation:

[49] Tak­ing into account the mat­ters referred to above, we are sat­is­fied Mr Har­vey’s dis­missal by UES was harsh, unjust or unrea­son­able. A fail­ure to con­sult does not nec­es­sar­i­ly mean a dis­missal was harsh unjust or unrea­son­able. How­ev­er, in this case we con­sid­er the fail­ure to con­sult was unrea­son­able and is suf­fi­cient to lead us to con­clude that Mr Har­vey’s dis­missal was harsh, unjust or unrea­son­able, notwith­stand­ing the valid rea­sons for his dis­missal and the due weight we have giv­en to those valid reasons”.

In a deci­sion of Deputy Pres­i­dent Lawrence in Joyce Rego vs Fir­ma For­eign Exchange Cor­po­ra­tion [2014] FWC 8225, the approach in Maswan was applied:

[46] Apply­ing the approach in Maswan, I have tak­en into account the fail­ure to con­sult under sec­tion 387(h). Once the Respon­dent had decid­ed that there was only enough work for one admin­is­tra­tive staff, it was rea­son­able to select the most suit­able for the job. I have found that this deci­sion was for bona fide rea­sons. I do not think the fail­ure to con­sult ren­ders the deci­sion unfair. The cir­cum­stances were dif­fer­ent in UES where the appli­cant had been treat­ed dif­fer­ent­ly to oth­er employ­ees in rela­tion to the con­sul­ta­tion. As in Maswan con­sul­ta­tion would not have like­ly lead to a dif­fer­ent result. The appli­cant would have been dis­missed in any event, even if time­ly con­sul­ta­tion had occurred”.

Per­haps all that can be said with some cer­tain­ty is, that whether a fail­ure to con­sult will cause an appli­cant to suc­ceed in an unfair dis­missal claim, will be deter­mined on its own facts. Some­times a fail­ure to con­sult will not make a ter­mi­na­tion on the grounds of redun­dan­cy, unfair’. On oth­er occa­sions it will. In the case of Chu­rui Hu it was a fac­tor which did play a sig­nif­i­cant role. 

As not­ed in the deci­sion in Joyce Rego, where a par­tic­u­lar employ­ee is treat­ed dif­fer­ent­ly in rela­tion to con­sul­ta­tion than anoth­er employ­ee, this may be a fac­tor which enhances the prospect of a find­ing of unfairness. 

Con­clu­sion

In sum­ma­ry, employ­ers should seek to enhance their prospects of suc­cess­ful­ly chal­leng­ing an unfair dis­missal appli­ca­tion on the juris­dic­tion­al grounds of a gen­uine redun­dan­cy’, by, among oth­er things, seek­ing to ensure con­sul­ta­tion occurs as required under any award or enter­prise agree­ment. In par­tic­u­lar, they should seek to pro­vide con­sul­ta­tion at the ear­li­est pos­si­ble opportunity. 

A bal­anc­ing act will be required in rela­tion to what infor­ma­tion can be released hav­ing regard to the com­mer­cial inter­ests of a com­pa­ny and the require­ment to consult. 

Employ­ers should also go through the exer­cise of con­sid­er­ing whether alter­na­tive employ­ment could be offered to the employ­ee with­in their organ­i­sa­tion or any asso­ci­at­ed enti­ty and hav­ing dis­cus­sions with employ­ees regard­ing such mat­ters pri­or to termination.

Employ­ers should endeav­our to treat all employ­ees fair­ly and equal­ly in the con­sul­ta­tion process and be in a posi­tion to explain their deci­sion in rela­tion to mak­ing par­tic­u­lar employ­ees redundant. 

As not­ed in Chu­rui Hu, it is impor­tant to pay the employ­ee the cor­rect enti­tle­ments upon redun­dan­cy. As not­ed above, in this case the employ­er did not pay the employ­ee their full enti­tle­ments and this was a fac­tor which weighed against it in the deter­mi­na­tion of whether the dis­missal of the appli­cant was unfair. 

If you have any ques­tions, please do not hes­i­tate to con­tact Richard Ottley.