Clarity and planning essential to avoid claims, says Baker McKenzie partner
If a company is shrinking to the point that some workers are no longer needed, a round of redundancies can buy it time.
But when redundancies are badly managed or used to disguise targeted dismissals, employers can get into deep trouble.
Recently, the Fair Work Commission (FWC) dealt with an unfair dismissal case where a worker challenged his employer's claim of business closure after discovering that operations had continued and other employees remained employed after his dismissal.
Ultimately, the commission found no valid reason for the dismissal as the worker would have stayed employed until the company actually ended operations.
So, how can employers get this right? The first step is to be honest about what constitutes a redundancy.
“Employers go wrong when they focus on the person and not the position,” Baker McKenzie partner Brigid Maher told HRD. “That is the first fundamental threshold question.”
A position may be eliminated altogether or the duties changed so substantially that it effectively becomes a different role, she said. “You really have to establish whether the role is no longer required by the business.”
Employers are obligated to consult with workers and to redeploy them or to consider redeployment. But these simple processes are bungled time and again, Maher said.
“Employers might have a genuine business case to make a role redundant, but they either fail to consult or they don’t do so as required under, for example, a modern award or their own enterprise agreement.”
Maher reminds HR teams that the obligation to consult includes an obligation to put information about a restructure in writing, in accordance with the requirements in their own enterprise agreement or a modern award.
When a position is identified as being redundant, an employer must consider where that worker can be redeployed, rather than terminate their employment. Sadly, Maher said redeployment is often not considered at all.
“There is no consideration for any other alternative roles, or they don’t cast a wide enough net for redeployment,” she said.
Employers may have more leeway than they realise, she said, as the redeployment obligation extends to roles in associated organisations or to other companies outside Australia, in certain circumstances.
Another common mistake in HR departments is to not document the steps along the way. If there is no paper trail, the employer will be woefully unprepared if an unfair dismissal claim is launched against it, Maher said.
“It’s the employer that has to establish those three things: that there is a business case for a redundancy; that they’ve complied with the consultation obligations as required; and that they’ve considered redeployment and made a decision it’s not suitable.”
It’s not unknown for a ruling to find that if an employee could be retrained within a reasonable period, that it might be suitable to put them into a vacant role, she said.
Rushing a redundancy is also asking for trouble.
“Assuming that you can just settle any claim is a big problem,” she said. “Sometimes employers think, ‘We’ll just make this person redundant and the problem will go away.’ But you can’t assume someone will accept some type of exit package or arrangement.”
The biggest issues Maher has noticed in recent unfair dismissal claims is demonstrating redeployment options were not reasonable and in minimising stress claims arising out of a redundancy exercise or a restructure.
“Even if an employee isn’t covered by a modern award or an enterprise agreement, [HR needs to] think about consultation as sound practice on the basis that being transparent and communicating with your employees is useful to eliminate the risk of psychosocial hazards and to minimise the risk of stress claims,” she said.
The effects of redundancy rounds and restructures are also felt by employees who are left behind to continue in an organisation.
“Employers sometimes are so focused on their minimum legal obligations rather than thinking about how they communicate with the workforce that’s leaving and the workforce that’s staying on, and maybe taking on extra duties,” she said.
“It’s very good HR practice, particularly when we now have an obligation to minimise psychosocial risks and hazards – and one of the biggest hazards can be a restructure.”
Employers often are terrified of talking to their workforce and being transparent because they’re afraid of repercussions or legal action, Maher said.
“[But] sometimes when you are upfront and answer questions, people accept it – they understand the rationale and they move on. They might not like it or agree with it, but they’ve had a forum and they feel like they’ve been consulted with and listened to.”
Lastly, HR must remember to identify entitlements on termination, she said, which includes statutory redundancy entitlements and notice pay, but also any other contractual entitlements, such as entitlement to a bonus.
