Redundancy due to business closure: Worker claims unfair dismissal

The Fair Work Commission (FWC) recently dealt with a case involving a construction worker's claim of unfair dismissal against his former employer, a small construction business that had ended operations.

The worker argued he was dismissed without notice when the business suddenly closed, and that proper redundancy procedures weren't followed.

He also claimed he was owed unpaid entitlements. The case raised questions about the obligations of small businesses during closure and the rights of employees in such situations.

Sudden business closure

The case centered on a general labourer who had worked for the construction company for about 14 months. On May 17, 2024, the worker was dismissed along with all other employees when the business suddenly closed. He filed an unfair dismissal application with the FWC on May 20, 2024.

The employer initially responded to the claim, arguing that the dismissal was consistent with the Small Business Fair Dismissal Code and that it was a case of genuine redundancy due to the business closure. However, the employer did not participate further in the proceedings, stating that the company had been put into administration.

This left the FWC to consider the case primarily based on the worker's evidence and the limited information provided in the employer's initial response. The worker argued that he was dismissed without notice and that proper redundancy procedures were not followed.

Compliance with rules amid closure

The FWC first looked at whether the employer had followed the Small Business Fair Dismissal Code. The evidence showed that the employer likely qualified as a small business, with about eight staff at the time of the dismissal. However, the FWC found no proof that the employer had met the Code's requirements for dismissal.

The decision said:

"While having found that [the employer] is a small business, there is no evidence on which I can be satisfied that [the employer] believed on reasonable grounds that [the worker's] conduct was sufficiently serious as to justify immediate dismissal. Nor is there any evidence before me that [the worker] was warned prior to his dismissal that he was at risk of being dismissed due to his conduct or capacity."

Genuine redundancy due to shut down

The FWC then looked at whether the dismissal was a genuine redundancy. While it was clear that the worker's job was no longer needed due to the business closure, the FWC found that the employer had not met its consultation obligations under the relevant award.

The decision noted:

"[The worker's] unchallenged evidence, which I accept, is that employees were advised on 17 May 2024 of their immediate dismissal. Contentions to the contrary in [the employer's] Form F3 were unsupported by any evidence and as such I am satisfied that none of the consultation steps set out at clause 37 of the Award were undertaken by [the employer]."

Is it unfair dismissal?

In deciding whether the dismissal was harsh, unjust, or unreasonable, the FWC considered various factors. While the lack of consultation was noted, the FWC also thought about whether consultation would have changed the outcome, given the business closure.

The decision explained:

"Consultation would not in my view have altered the outcome of [the worker's] dismissal. Therefore, I conclude that the absence of consultation did not render the dismissal unfair. The fact that there was a sound reason for the dismissal weighs in favour of a finding that the dismissal was not harsh, unjust or unreasonable."

The FWC also looked at the issue of unpaid entitlements, which suggested the dismissal might have been harsh. The decision said:

"The fact that [the worker] may have not received his full entitlements on dismissal is a matter that weighs in favour of a finding of harshness. However, as I explained to [the worker] during proceedings in this matter, an unfair dismissal application is not the means by which he is able to pursue and obtain payment of any outstanding entitlements."

Ultimately, the FWC decided that the dismissal was not unfair, stating:

"Not being satisfied that the dismissal was harsh, unjust, or unreasonable, I am not satisfied that [the worker] was unfairly dismissed within the meaning of s.385 of the Act."

This case shows the challenges of unfair dismissal claims when a business closes. It highlights that employers should follow proper procedures, even in difficult situations.