When does a redundancy become an unfair dismissal?

This article is originally published by the HRM.

Failure to understand “genuine redundancy” could see employers facing an unfair dismissal claim.

It’s a common misconception that employees dismissed on redundancy grounds cannot claim unfair dismissal. While it’s not typical for these employees to do so, there are some cases that show employers may risk a claim if they fail to understand the “genuine redundancy” concept.

Any legitimate redundancy must comply with the “genuine redundancy” terms under section 389 of the Fair Work Act 2009 . The essential ingredients for a genuine redundancy are:

  •    no longer requiring the job the person has been doing to be performed by anyone due to operational changes;
  •    complying with any consultation obligations; and
  •    making reasonable attempts to redeploy redundant employees.

If just one ingredient is missing, an employer may find itself defending an unfair dismissal claim made by the redundant employee it has terminated. This means all aspects of the redundancy process followed by the employer, including any selection decisions made, will be scrutinised by the Fair Work Commission (FWC).

No longer required

Explaining why a position is no longer required should generally be straightforward. However, demonstrating that a job is no longer required shouldn’t be taken for granted. It’s important relevant evidence is collected before the dismissal decision is made and that the evidence is used to inform the dismissal decision rather than justify it after the event.

Failure to consult

In the Kumar v Fuji Xerox Australia Pty Ltd case, the employer took steps to reduce its headcount due to a downturn in business. A selection matrix was used to determine who was to be made redundant in the first tranche of redundancies. The selection matrix included highly subjective criteria such as “values and behaviour”.

Mr Kumar, who was selected for redundancy based on the score he achieved, challenged his dismissal. He argued it was not a genuine redundancy due to the failure to consult with him and his trade union in accordance with the applicable enterprise agreement.

The FWC agreed that it was not a genuine redundancy due to a lack of consultation (which included the failure to consult about the selection matrix) and found the scoring system for the matrix was flawed. It also criticised the employer for not giving Mr Kumar an opportunity to challenge the selection criteria or the score he was given under it, particularly given the subjectivity of the matrix.

Failure to fully consider redeployment options

Employers have come unstuck by failing to fully consider all redeployment options. Redeployment means more than just reviewing positions the same as, or similar to, the one an employee has been performing. It includes considering:

  • Positions where some retraining may be required
  • Moving the employee to another business location
  • Lower level roles or other roles within the employee’s skills and competency level

Subjecting a redundant employee to a competitive selection process, rather than simply redeploying them will also call into question the genuineness of any redundancy that follows.

This occurred in the case of Dr Petranel Ferrao v Peter MacCallum Cancer Institute, where the FWC found that the redeployment of Dr Ferrao should have been possible given her experience and high skill level.

Dr Ferrao had been employed in various roles and projects over a ten year period and when dismissed, she was leading a three year grant-funded research project. During the redeployment period, Dr Ferrao had applied for two lower level positions but was unsuccessful due to her seniority. The FWC regarded the failure to redeploy her demonstrated a “lack of real efforts to achieve redeployment”.

As a matter of best practice, employers in redundancy situations should ensure they have all of the ingredients for a “genuine redundancy” even though the obligations imposed by the Fair Work Act may only apply to some of their employees.

Career Money Life offers services to support HR teams. This includes redundancy day of counselling support, employee relations and legal advice, career transition and management programs, employee health and safety and more. Contact us or book a demo to learn more about our offerings.

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