Redundancy: The risks of getting it wrong

To this end, it cannot be stressed enough that businesses who are considering making a role or some roles redundant engage in a thorough and considered consultation process with impacted employees (and their representatives, if he/she has one) in line with the consultation requirements contained a modern Award or Enterprise Agreement.

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Strict compliance with consultation obligations are required irrespective of whether key decision makers think no alternate options are available but termination by way of redundancy.

A case which illustrates the importance of consultation is Freebairn v TJL Business Advisors & Accountants [2020].

The facts
TJL is a financial and accountancy services provider.

Ms Freebairn was a long-standing part-time Administration Assistant.

As a result of the COVID-19 pandemic, TJL suffered a significant reduction in revenue and needed to cut costs swiftly in order to survive. The team that would be impacted most was Administration; work had dried up and office hours needed to be reduced.

As a result, TJL decided that Ms Freebairn’s administrative duties could be distributed amongst the rest of the administration team, making her role no longer required.

On 18 March 2020, an all staff meeting was held to inform employees that TJL was considering ways to ensure its viability into the future, which meant that immediate changes were required. TJL assured staff that they would continue to be kept abreast of intended changes with a further meeting held a week later.

On 25 March 2020, the partners of TJL had a meeting where it was decided that hours had to be reduced for all administration staff. Later that afternoon, a meeting was held with Ms Freebairn and a colleague to discuss the impacts the pandemic was having on the business.

During this meeting, the partner indicated that Ms Freebairn would be better off financially if she did not remain employed by TJL and seek the JobSeeker payment. Ms Freebairn was then asked if she had any questions which she didn’t and her employment was terminated.

The Commission found that TJL did not engage in a proper consultation under the Clerks – Private Sector Award 2020. The Commission stated:

“The trigger for an employer to give notice of changes to employees who may be affected by the changes and to hold discussions with the employees is the making of a “definite decision”.

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The only “definite decision” made by TJL in this case was the decision it made on the morning of 25 March 2020 to reduce the work hours of administrative staff in response to the COVID-19 pandemic.

Accordingly, the discussions TJL had with all staff on 18 March 2020 did not satisfy, or contribute in the satisfaction of, its consultation obligations under clause 38.1 of the Clerks Award because the trigger for the discussions had not occurred, and did not occur until the morning of 25 March 2020.”

Conclusion
Had TJL genuinely consulted with Ms Freebairn (for more than the 15 minute meeting on 25 March 2020), an entirely different result would have yielded. TJL did not properly explore the option of reducing Ms Freebairn’s part-time hours further (which she was open to).

Accordingly, the Commission found that the redundancy was not genuine and awarded Ms Freebairn compensation of $3,189.01 (equivalent to what she would have received by way of JobKeeper payments had TJL properly consulted with Ms Freebairn).

Please note that if a business needs to make 15 or more employees redundant, employers have an obligation under the Fair Work Act 2009 (Cth) to advise Services Australia (formerly Centrelink) of this, before it embarks upon any redundancy process. Notification is done by completing and submitting a form, with accompanying documentation.