Is financial hardship a valid excuse to skip consultation requirements?
The Fair Work Commission (FWC) recently dealt with an unfair dismissal case where a worker questioned whether proper procedures were followed when his position became redundant. The worker argued that he should have been consulted about the changes and potential alternatives before losing his job.
The case raised questions about employer obligations during business restructures, particularly when facing financial difficulties:
Was financial hardship a valid excuse to skip consultation requirements? Did the business's eventual liquidation justify the lack of proper procedure?
The head chef started working for the cafe group in July 2022, managing kitchens across their Castle Hill and Rouse Hill venues. He earned $80,000 plus superannuation and was responsible for supervising kitchen staff, designing menus, and managing stock.
Throughout his employment, the head chef's work schedule changed. He initially spent four days at Castle Hill and one day at Rouse Hill, but this later shifted to three days and two days respectively.
In mid-2023, the cafe group planned to open a third venue at Macquarie University. They hired another chef at $75,000 plus superannuation to eventually lead this new location, and the head chef helped prepare the kitchen plans and menus for the expansion.
The expansion plans ended in January 2024, but the newly hired chef stayed on. The head chef learned about this change from a co-worker rather than management.
On March 15, 2024, the cafe director sent a text message to the head chef stating: "Due to the unexpected financial situation, I had to made this difficult decision to giving you the termination notice and thank you for everything you had down with us."
The only face-to-face discussion about the termination was brief, with the director simply asking "[the worker] how many weeks of notice do you need?"
The Restaurant Industry Award 2020 required the cafe group to consult with employees about major workplace changes. This meant discussing potential impacts and ways to reduce negative effects on staff.
The head chef acknowledged that after the Macquarie University plans fell through, the business had more chefs than needed. In his evidence, he stated: "[the employer] had an excessive number of chefs employed following [the employer] abandoning its plans to open the third café."
However, he argued it was unfair that he lost his job simply because he earned a higher salary than the more recently hired chef. He also said the cafe director should have informed him directly about cancelling the university cafe plans.
The Commission found that while there was a genuine need to reduce staff, the process was inadequate. The decision noted: "[the employer] did not discuss the effect of the change or any measures that might mitigate the adverse effect of the change, and did not provide relevant information in writing."
The lack of proper consultation proved crucial to the outcome. As stated in the decision: "[the worker] was deprived of the opportunity to consult about measures that might have mitigated the adverse impact of [the employer's] decision to make [the worker's] position redundant."
The Commission ruled the dismissal unfair due to the cafe group's failure to meet its consultation obligations under the Award.
The decision emphasised: "Having considered each of the matters specified in section 387, I am satisfied that [the worker] was unfairly dismissed within the meaning of s.385 of the FW Act."
At the time of the dismissal, the cafe group employed about 10 staff at Castle Hill and 7-8 at Rouse Hill. Shortly after the head chef's dismissal, the business entered court-ordered liquidation in September 2023.
While reinstatement wasn't possible due to the liquidation, the Commission decided compensation was appropriate, though the amount needed further consideration.
The case served as a reminder that even when businesses face financial difficulties, they must still follow proper consultation procedures as outlined in relevant awards and enterprise agreements. The decision showed that valid reasons for redundancy don't excuse bypassing consultation requirements.
