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An employee is precluded from bringing an unfair dismissal claim if their employment is terminated on the grounds of “genuine redundancy”.  However, in order to effect a genuine redundancy, an employer must ensure that the dismissal satisfies the requirements set out in the Fair Work Act 2009 (Cth) (FW Act). 

The requirements for a genuine redundancy, as set out in the FW Act, are as follows:

1. The employer no longer requires the employee’s job to be performed by anyone because of changes in the operation or requirements of the employer’s enterprise;
2. The employer has complied with any obligation in a modern award or enterprise agreement that applied to the employment to consult about redundancy; and
3. It would not have been reasonable in all the circumstances for the employee to be redeployed within the employer’s enterprise or the enterprise of an associated entity of the employer. 

Recent decisions of Fair Work Australia (FWA) assist in the understanding of these requirements.

1.  The employer no longer requires the employee’s job to be performed by anyone – Ulan Coal Mines Limited v Henry Jon Howarth & Ors[2010] FWAFB 3488 (Ulan Coal Case No. 1)

A key requirement for a genuine redundancy is that the employment of the employee is terminated because the employer no longer requires anyone to do the employee’s job due to changes in the employer’s operational requirements.  Accordingly, if a dismissed employee makes an unfair dismissal claim, FWA will scrutinise the evidence on which the employer relies to make out redundancy to ensure that it is not using it as an excuse to mask the real reason for dismissal.

This issue was recently considered in Ulan Coal Case No. 1, which involved the dismissal of a number of employees after the mining company reviewed operations at an underground coal mine and decided to reduce its workforce, outsource certain functions and increase the proportion of employees with trade qualifications. The company decided that 38 mineworkers were no longer required, yet at the same time the company increased the number of trade-qualified mineworkers by 11.

FWA decided that the retrenchments were cases of genuine redundancy, despite the fact that the company had increased its trade qualified workforce.  FWA distinguished between the “jobs” of the retrenched mineworkers – which had become redundant – and the functions performed by those mineworkers, which continued.  FWA ruled that the jobs of the mine workers had become redundant, even though the company still wanted the functions or duties previously performed by the retrenched mineworkers to be performed.

2.  Obligation in a modern award or enterprise agreement to consult about the redundancy – Campbell Australasia Pty Ltd v Mr Greg McNay and Mr Patrick Humphreys [2010] FWAFB 6048 (Campbells Case)

Many enterprise agreements and modern awards contain clauses setting out a detailed process for selecting employees for retrenchment in a downsizing situation, part of which can often be an obligation to consult.  However, although the employer’s consultation obligation may be a discrete part of such a clause, FWA has held that the employer needs to comply with the clause in its entirety in order to meet the requirement for genuine redundancy.

The Campbells Case dealt with the clause outlining the procedure to select employees for redundancy in the Campbells Soup Union Collective Agreement 2006.  In summary, the clause provided that the following steps needed to be followed:

• Ask for voluntary redundancies in the work team where the surplus position exists.
• If the number of volunteers exceeds the number of jobs to be lost, select from those volunteers according to their demonstrated skills and past performance.
•  Where there are insufficient volunteers, ask for voluntary redundancies in the department where the surplus positions exist and adopt the same process as above.
• If there are still insufficient volunteers, ask for voluntary redundancies plant wide and adopt the same process as above.
• If there are still insufficient volunteers from across the plant, employees shall be terminated on the basis of the “last on-first off” principle, except where an employee selected has acquired skills/experience which the Company requires and no other employee is available for the designated work.

Campbells used this process to dismiss a number of employees following the closure of the Kettle Chips production line in June 2009.  Two employees who were retrenched involuntarily based on the “last on-first off principle in Step 5 above claimed that their dismissal was unfair.  The applicants argued that they fell within the exception in Step 5, namely that they had skills/experience that Campbells required and no other employee was available for the designated work. Therefore, Campbells had not complied with the procedure and their retrenchment was not a genuine redundancy.

This required FWA to work out the meaning of the phrase “no other employee is available for the designated work”.  FWA ruled that if Campbells involuntarily retrenched an employee who had the skills or experience to fill a vacancy left by an employee elsewhere in the plant who had volunteered for redundancy, then the enterprise agreement procedure was not complied with and the retrenchment was not a genuine redundancy.

3.    Whether redeployment is reasonable in all the circumstances – Henry Jon Howarth & Ors v The Ulan Coal Mines Limited [2010] FWA 4817 (Ulan Coal Case No. 2)

This case, also relating to the dismissals at the Ulan Coal mine, examines the breadth of an employer’s obligation to consider redeployment opportunities for those employees who would otherwise be dismissed. 

In this case, the company argued that although there may have been opportunities available at the mines operated by associated entities in the Xstrata group, the fact that those associated entities had independent operations and management meant that it was reasonable for those entities determine who they are to engage and the terms of such engagements and the company could not dictate who the other entities should employ.

However, Commissioner Raffaelli was not persuaded by the company’s argument.  He noted “Apart from it being a policy, and the entities being separate employers, there is no evidence that such reticence to have a more activist redeployment process somehow impacts on operational needs. The fact that some of the ex-Ulan miners in fact secured employment at these associated entities or were told or encouraged to apply for vacant positions at these other mines tells against any persuasive impact of Ulan or Xstrata’s policy.”

Commissioner Raffaelli also noted the difference between “redeployment”, which he held requires a transfer of the employee, and “merely assisting in the gaining of employment”, which may include taking steps to have associated entities delay the closing date for employment opportunities and notifying dismissed employees of vacancies in other entities. 

Lessons for employers

These cases highlight the need for employers to undertake the following when dismissing employees on the grounds of redundancy:

• Consider the job performed by the employees, not the tasks that they perform in their current position;
• Carefully follow any consultation clause set out in an applicable enterprise agreement or modern award; and
• Consider redeployment opportunities for the employees, even in associated entities that may have independent operations and management. 

 

 

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