Employment Law experts are advising business owners ensure they understand redundancy requirements under the Fair Work Act, given the new wave of economic uncertainty gripping much of the world.
According to Kemp Strang Employment Law Specialist Lisa Berton, businesses looking to cut staff in the wake of fresh economic uncertainty need to be aware of new processes introduced by the Fair Work Act in 2009.
The majority of redundancies made the last time economic difficulties gripped the world were made under the old WorkChoices legislations – and if businesses follow the same processes this time around they could face trouble.
“Not only do companies need to grapple with the pressures of cutting staff when making redundancies, they’ve also now got to ensure they aren’t relying on redundant legislation and out-dated practices to do it,” Berton said.
Berton said the Fair Work Act was introduced in mid-2009, long after the wave of redundancies triggered by the beginning of last financial crisis.
“Redundancy under Workchoices was significantly easier, and employers had far fewer hurdles to jump. Fair Work, on the other hand, has introduced several new requirements and expanded employer obligations. To prevent unfair dismissal claims, employers will need to be careful in how they go about making their workers redundant this time around.”
Under Fair Work requirements, a dismissal isn’t considered unfair if for reasons of “genuine redundancy.” For a redundancy to be considered “genuine”, an employer must:
- No longer require the person’s job to be performed by anyone because of changes in the operational requirements of the employer’s enterprise;
- Comply with any obligation in a Modern Award or Enterprise Agreement to consult about redundancy; and
- Show that it would have not been reasonable to redeploy the employee within the employer’s enterprise or within an enterprise of an associated entity of the employer.
“Fair Work Australia has clarified that genuine redundancy can be offered where the employee’s duties under the previous job still exist, but are merely redistributed to other existing employees – a common occurrence when redundancies are made due to economic uncertainty,” Berton added.
It’s likely the requirement to consider redeployment may also cause headaches for employers, as a redeployment must be “reasonable in all the circumstances”, with factors including the employee’s qualifications and experience in relation to other roles available within the employer’s broader structure to be considered.
“Meeting the redeployment requirements is particularly pertinent in the context of uncertain economic times, with numerous studies showing employees are often willing to accept fewer hours and potential pay cuts in order to keep a job during such times.”
Dos & Don’ts of Redundancy under the Fair Work Act
- Be cognisant of the minimum severance entitlements contained in the new National Employment Standards and remember these minimum standards apply to all employees;
- Understand and comply with any notification and consultation procedures in applicable Modern Awards or Enterprise Agreements and the Fair Work Act;
- Consider whether redeployment is an option before making redundancies. Offer redeployment if available. Don’t assume the employee will not be interested – give them the option to decline the offer;
- Keep written documentation of redeployment considerations, consultations and offers as these may prove beneficial should an unfair dismissal or adverse action claim be brought by terminated employees;
- Ensure selection is not based on any discriminatory grounds. This includes indirect discrimination;
- Ensure that employees are provided with the right benefits where Modern Awards or Enterprise Agreements provide for paid leave to seek other employment; and
- When it comes to determining severance pay entitlements ensure you have the correct source of the entitlement. Make sure you have regard to any contractual, statutory or award entitlement and don’t forget any relevant transitional provisions that may apply.
