Can you announce a restructure and redundancies on the same day?

HC talks to Joe Murphy, Director at Australian Business Lawyers & Advisors, about the legalities surrounding restructures and redundancies.

Can you announce a restructure and implement redundancies on the same day?

There are a number of very good reasons as to why businesses like to announce restructures and implement the resulting redundancies as soon as they can. Some of those reasons include the desire to minimise the negative impact on culture, avoiding other legal liabilities (eg workers’ compensation claims) and to eliminate the risk of industrial sabotage.

While one can sympathise with an employer’s desire to move quickly (and in fact some employee’s welcome a speedy exit), an employer’s legal obligations will vary depending on whether an enterprise agreement or a Modern Award covers the affected employee(s).  

Those legal obligations require employers to ‘consult’ with the affected employees as provided for in a relevant enterprise agreement or Modern Award.  

In some cases employers take the view that, as they believe they pay their employees ‘over award’ then a Modern Award is not relevant. This is not so. For the purposes of redundancies, an employee’s rate of pay will not be relevant to the question of award coverage, which is determined according to the classifications and coverage provisions of the relevant Modern Award. Examples are: people in jobs that substantially involve duties that are contemplated in the Clerks-Private Sector Award 2010; professional engineers, professional scientists and information technology professionals who meet the relevant definitions of the Professional Employees Award 2010.

What process should businesses follow?

First consider whether affected employees could be covered by an Enterprise Agreement or a Modern Award. Seek advice from workplace professionals if you are unsure.  

The first requirement is to inform affected employees ‘as soon as a definite decision’ is made to implement a restructure.

The next requirement is usually to:

1.    discuss the likely effects on affected employees
2.    discuss measures to avert or mitigate adverse effects
3.    give prompt consideration to matters raised during consultation

The discussion:

1.    must commence as soon as practicable after a definite decision has been made
2.    must include representatives of affected employees, e.g. unions
3.    all relevant information about the changes must be provided to the employee(s) and their representatives

The above requirements may vary from instrument to instrument, particularly in an Enterprise Agreement, and accordingly an employer should always refer to and comply with the consultation terms of the relevant instrument.

What are the ramifications of failing to comply?

The first legal risk that comes to mind is that a failure to consult means an employer cannot rely on the unfair dismissal exemption relating to cases where an employee is dismissed for reasons of ‘genuine redundancy’ given the relevant requirements place an obligation on the employer to have consulted with the affected employee in order to rely on the exemption. The second, and perhaps more problematic issue, is the risk of being prosecuted for civil penalties of up to $54,000 for companies and $10,800 for individual employers (or persons involved in a contravention).

Contact Joe Murphy for any questions or matters raised in this article on 1300 565 846 or at [email protected]