In the previous era under the Workchoices legislation, if an employer could point to ‘genuine operational reasons’ for dismissing an employee (which covered most redundancy scenarios), they were not at risk of an unfair dismissal claim.
To avoid the cost and hassle of an unfair dismissal claim under the new Fair Work regime, an employer will need to be able to show that the dismissal was a ‘genuine redundancy’. A dismissal will be a ‘genuine redundancy’ if the employer can show 3 things:
1. that they no longer needed the employee’s job to be performed by anyone because of changes in the operational requirements of your business; and
2. that they have complied with any consultation obligations for redundancy contained in any modern award or enterprise agreement that applies to the relevant employees. These obligations usually require employers to consult with employees and their representatives regarding major workplace changes; and
3. that it was not reasonable in all the circumstances to redeploy the employee within the employer’s business
or the business of an associated entity.
With regard to attempts to redeploy staff, cases decided by Fair Work Australia to date tell us that an employer must take “appropriate steps” to satisfy itself that it has fairly considered the possibility of redeployment, including by considering:
1. lower skilled or lower paid positions;
2. the age and length of service of the employee and the effect this may have on his or her ability to find alternative employment; and
3. the possibility of redeployment to an associated entity (including those with separate management structures) even where the alternative position is a substantial geographic distance away from the employee’s current location.
Employers may also have additional redundancy obligations under applicable awards or enterprise agreements, so for employers covered by these instruments, check for any extra requirements applying to redundancy situations. For example, awards and enterprise agreement may contain requirements for selection criteria, access to counselling or paid time off to attend interviews.
Redundancy pay
Unless an employer qualifies as a ‘small business employer’ (i.e., employing fewer than 15 employees), employers now need to factor in the cost of statutory redundancy payments for employees who have at least 12 months’ continuous service.
With some exceptions, an employee with the requisite minimum service will be entitled to redundancy pay if dismissed because:
(a) the employer no longer requires the employee’s job to be done by anyone, except where this is due to the ordinary and customary turnover of labour; or
(b) the employer is insolvent or bankrupt.
The NES sets out the minimum amount of redundancy pay to which an employee is entitled. The amount of pay depends on the employee’s period of continuous service and ranges from 4 weeks for an employee with at least a year’s service, up to a maximum of 16 weeks payment for employees with 9 years’ service. For employees with service of 10 years or more, redundancy pay drops back to 12 weeks.
Under the transitional legislation, when calculating length of service for most employees, service with an employer before 1 January 2010 (when the NES came into operation) will only count for the purposes of redundancy pay if, immediately before that date, the employee’s terms and conditions of employment provided for redundancy pay.
Redundancy pay is calculated on the employee’s base rate of pay for his or her ordinary hours of work.
Redundancy pay is in addition to any payments in lieu of notice or for accrued annual leave or long service leave.
Some types of employees are excluded from the entitlement to redundancy pay under the NES, including:
1. those employed for a specified period of time, specified task, or for the duration of a specified season;
2. an employee dismissed for serious misconduct;
3. casual employees;
4. some trainee employees;
5. employees with entitlements under a redundancy scheme in a modern award or enterprise agreement;
6. employees of small business employers; and
7. employees with fewer than 12 months’ continuous service.
If an employer obtains other acceptable employment for the employee (for example, with another company) or the employer cannot pay the amount due to the company’s financial difficulties, it can apply to Fair Work Australia for an order reducing the amount of redundancy pay that must be paid.
Modern awards and enterprise agreements may provide for more favourable redundancy pay entitlements than the NES minimum requirements. Employers should check any applicable modern awards or enterprise agreements to determine the redundancy pay entitlements for their employees.
Notifying Centrelink
If an employer decides to terminate the employment of 15 or more employees on grounds of redundancy, written notice of the terminations must be given to Centrelink. Penalties can be imposed on an employer who fails to comply with this notice requirement.
The notice must be given as soon as practicable, and before terminating the employment of any of the employees. The notice should set out the reasons for the terminations, the number and categories of employees likely to be
affected and the intended timing of the terminations.
The decision to make employees redundant is never an easy one. Employers should take care to comply with their legal responsibilities when implementing job cuts to avoid the extra angst of legal claims by employees seeking to enforce their rights.
The next article in this series will look at alternatives to redundancy.
