When is redun­dan­cy genuine?

In Brief

Employ­ers who fail to observe the Fair Work Act 2009 (Cth) (the Act) require­ments relat­ing to redun­dan­cies can find them­selves exposed to unfair dis­missal claims in cir­cum­stances in which they may have had good busi­ness rea­sons for termination.

A recent deci­sion before Fair Work Aus­tralia (now Fair Work Com­mis­sion) high­lights the legal require­ments under the Act that employ­ers will need to con­sid­er, when propos­ing to ter­mi­nate due to redundancy.

Horn v Mas­termyne Engi­neer­ing Pty Ltd [2012] FWA 10846

What Happened?

Mr Horn was employed by Mas­termyne as a Mechan­i­cal Fit­ter until his employ­ment was ter­mi­nat­ed. Mr Horn sub­se­quent­ly lodged an unfair dis­missal claim with Fair Work Aus­tralia which was unable to be set­tled by con­cil­i­a­tion. The mat­ter was then heard by Senior Deputy Pres­i­dent Richards.

Mas­termyne claimed that the ter­mi­na­tion could not con­sti­tute unfair dis­missal under the Act, as the ter­mi­na­tion and steps tak­en by the employ­er in rela­tion to it, meant that it had sat­is­fied the test of gen­uine redun­dan­cy” under the Act. Fair Work Aus­tralia there­fore did not have juris­dic­tion to deal with the claim brought by Mr Horn.

Mr Horn refut­ed the asser­tion by the employ­er that there was a gen­uine redun­dan­cy”, amongst oth­er things, on the fol­low­ing basis:

  • aside from being informed that the com­pa­ny was down­siz­ing and that employ­ees would be told who stays and who goes, there was no con­sul­ta­tion or any demon­strat­ed effort to iden­ti­fy alter­na­tive posi­tions in Mas­termyne’s busi­ness for Mr Horn;
  • fol­low­ing his ter­mi­na­tion his duties were allo­cat­ed to oth­er employ­ees not qual­i­fied to under­take the work; and
  • Mas­termyne sub­se­quent­ly adver­tised posi­tions he was qual­i­fied for.

Mas­termyne sub­mit­ted that Mr Horn’s role was no longer required to be under­tak­en by any­one due to changed oper­a­tional require­ments, in response to a down­turn in the coal industry.

The Decision

Richards SDP con­sid­ered that it did not mat­ter whether Mas­termyne redis­trib­uted Mr Horn’s for­mer duties to oth­er employ­ees, who were not qual­i­fied, as that was a mat­ter for Mas­termyne. He recon­sid­ered that had it not been for the finan­cial cir­cum­stances that led to the siz­ing review, Mr Horn would in all like­li­hood have remained an employ­ee of the com­pa­ny. Fur­ther he not­ed that Mas­termyne let go of 10 engi­neer­ing employ­ees and 200 employ­ees across the Mas­termyne Group.

Mas­termyne pro­vid­ed evi­dence that they had inves­ti­gat­ed the avail­abil­i­ty of alter­na­tive posi­tions in the Mas­termyne Group, how­ev­er, those inves­ti­ga­tions were unsuc­cess­ful. The posi­tions adver­tised after Mr Horn was ter­mi­nat­ed, were for fit­ters under­tak­ing under­ground work – some­thing Mr Horn did not meet the reg­u­la­to­ry require­ments for. Mr Horn had only under­tak­en above ground work. Richards SDP accept­ed evi­dence that there was a very appre­cia­ble gap in skills and expe­ri­ence between these two types of work in the coal indus­try, and deter­mined that there was no oblig­a­tion on the com­pa­ny to over­come this gap by retraining.

Richards SDP’s com­ments are illu­mi­nat­ing on the issue of whether (to sat­is­fy the rel­e­vant oblig­a­tions under the Act) an employ­er may be required to retrain a redun­dant employ­ee for an alter­na­tive posi­tion for which they are not imme­di­ate­ly qual­i­fied or expe­ri­enced. He stated:

[32] I do not take the s.389(2) of Act as indi­cat­ing that an employ­er should retrain a redun­dant employ­ee to any alter­na­tive posi­tion for which they are not imme­di­ate­ly qual­i­fied or expe­ri­enced. The Explana­to­ry Mem­o­ran­dum to the Act does not indi­cate that any such broad oblig­a­tion falls upon an employ­er (though an employ­er may do so as a mat­ter of dis­cre­tion or agree­ment).

[33] How­ev­er, in some cas­es, the rede­ploy­ment of an employ­ee into a new field of work may only require a mod­est retrain­ing require­ment to reori­ent or sup­ple­ment the employee’s skill set to a new posi­tion. Such mea­sures would ordi­nar­i­ly, in my view, fall with the notion of rede­ploy­ment. This is because rede­ploy­ment is not always in respect of like for like posi­tions as such, but between posi­tions where the under­ly­ing skills set are large­ly com­pa­ra­ble or transferrable.

Richards SDP next con­sid­ered the alle­ga­tion by Mr Horn that as there had been a fail­ure by the com­pa­ny to prop­er­ly com­ply with the con­sul­ta­tion pro­vi­sions in the rel­e­vant indus­tri­al award, the ter­mi­na­tion did not sat­is­fy the test of gen­uine redun­dan­cy” under the Act.

Richards SDP not­ed that Mas­termyne had held a pre-start meet­ing” with employ­ees at which the organ­i­sa­tion review was explained, the mem­o­ran­dum of that meet­ing was pub­licly avail­able and employ­ees had been invit­ed to prof­fer sug­ges­tions to off­set, avert or mit­i­gate the pro­posed changes. In this con­text Richards SDP found that the con­sul­ta­tion pro­vi­sions of the Man­u­fac­tur­ing and Asso­ci­at­ed Indus­tries and Occu­pa­tions Mod­ern Award had been com­plied with by Mastermyne.

Richards SDP con­clud­ed that Mr Horn had been made gen­uine­ly redun­dant for the pur­pos­es of s 389 of the Act and Mr Horn’s appli­ca­tion was dismissed.

What should we take away from this case?

This case illus­trates that for a redun­dan­cy to fall with­in the gen­uine redun­dan­cy” defence to an action for unfair dis­missal under the Act:

  • a per­son­’s job is no longer required due to changes in the oper­a­tional require­ments of the employ­er’s enterprise;
  • the employ­er has com­plied with any oblig­a­tion in a mod­ern award or enter­prise agree­ment to con­sult about the redun­dan­cy (this is like­ly to involve inform­ing employ­ees (both ver­bal­ly and in writ­ing) of: the process of reor­gan­i­sa­tion, of the expect­ed effects of the changes, mea­sures to mit­i­gate the changes, any oth­er mat­ters like­ly to affect employ­ees, who to con­tact if they have any queries or ideas, and then con­sid­er­ing any employee/​employee rep­re­sen­ta­tive’s suggestions);
  • it would not have been rea­son­able for the per­son to be rede­ployed by the employ­er or with­in any group of asso­ci­at­ed enti­ties of the employ­er (the employ­er needs there­fore to care­ful­ly con­sid­er redeployment);
  • employ­ers will need to give con­sid­er­a­tion to the issue of retrain­ing in the con­text of pos­si­ble rede­ploy­ment (if only mod­est retrain­ing is required for rede­ploy­ment then rede­ploy­ment may be required to be offered).

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