FWC looks into employer's decision to outsource finance department
The Fair Work Commission (FWC) recently dealt with a case involving a senior accountant who challenged her redundancy.
The worker argued that her dismissal was not a genuine redundancy and was harsh, unjust, and unreasonable.
She claimed that her role was still necessary due to its statutory compliance aspects and that her duties had not disappeared.
The worker also questioned the consultation process and the business factors used to justify the decision.
Employer’s cost-cutting measures
The worker was employed as a senior accountant from October 2023 to May 2024. The employer, a materials handling business, specialized in pneumatic tubing for cash handling in various sectors including retail, healthcare, aged care, hospitality, commercial, and government.
The company had been facing significant financial difficulties. Sales order intake had decreased by almost 28% over two years, from $11.8 million to $8.45 million. Simultaneously, salaries and wages expenses had increased by more than 25%, from $5.8 million to $7.3 million.
The company was also grappling with increased competition and a societal shift towards digital and cashless transactions, which directly affected their core business.
In response to these challenges, the employer had already implemented various cost-cutting measures. They had downsized their head office and other premises, reduced telephone costs, and reviewed major operating expenses such as rent, car running costs, information technology, and insurance premiums. They had also hired an additional sales team member to look for upselling opportunities in the healthcare market.
The redundancy process and outsourcing options
After considering several options, the company decided to outsource its entire finance department as a cost reduction strategy. On 17 May 2024, the employer sent an email to the worker and other finance department members, inviting them to a team meeting scheduled for 20 May 2024.
During this meeting, the workers were informed about the potential restructure and that their positions were at risk of redundancy. The employer scheduled individual meetings with affected employees to discuss the situation further. However, the senior accountant did not attend these meetings for various reasons, including illness and scheduling conflicts.
On 24 May 2024, after a brief consultation period, the worker was informed that her position had been made redundant. The entire finance department was outsourced to an Australian company with employees engaged in the Philippines.
‘Role still necessary’ despite redundancy decision
The worker argued that her role was still necessary due to the statutory compliance aspects of her duties. She said that her duties had not disappeared and that the managing director must be performing some of them.
The worker also claimed that the business factors used to justify the outsourcing decision were flawed and that other cost-saving measures could have been identified if she had been consulted earlier.
The employer maintained that the decision to outsource the Finance Department was based on legitimate business and economic factors. They argued that the worker's job was no longer required to be performed by anyone within the company due to changes in operational requirements.
The managing director gave evidence that "the tasks of [the worker's] role, including the statutory compliance tasks, bank reconciliations and forecasts can and are being performed by the outsourced provider, and that [the managing director] is not performing the duties or role of Senior Accountant."
The managing director also stated that "the outsourcing decision has decreased the costs of the Finance/Accounting function of [the employer] by approximately 50%."
Is it a genuine redundancy?
The FWC found in favour of the employer, concluding that the worker's dismissal was a case of genuine redundancy within the meaning of section 389 of the Fair Work Act. The Commission was satisfied that the job was no longer required to be performed by anyone because of changes in the operational requirements of the employer's enterprise.
In reaching this decision, the FWC considered several factors. First, the employer no longer required the job to be performed by anyone due to changes in operational requirements.
Second, there were no consultation obligations under a modern award or enterprise agreement that applied to the dismissal. Third, it would not have been reasonable to redeploy the worker within the employer's enterprise or an associated entity.
The FWC emphasised the importance of considering the specific circumstances of each case when assessing genuine redundancy claims:
"It is important, however, to appreciate that, because there is a requirement to assess the reasonableness of redeployment 'in all the circumstances', it is not possible to establish binding or decision rules concerning the application of section 389(2) of the Act in all cases; the circumstances of each particular case must be considered."
While the FWC found the redundancy to be genuine, it did note some concerns about the consultation process:
"At most, the consultation process spread across one week - from the late Friday afternoon communication that there was going to be a discussion about redundancies the following Monday, to the time that [the worker] was informed that she was dismissed due to her role being made redundant. The timing of the initial communication was unfortunate and, I accept, left [the worker] feeling anxious."
In conclusion, the FWC stated:
"I have found that [the worker's] job was no longer required to be performed by anyone because of changes to the operational requirements of the business, that no consultation obligations in an applicable modern award or enterprise agreement applied to the dismissal, and that it would not have been reasonable to redeploy [the worker] in all the circumstances. Accordingly, I am satisfied that [the worker's] dismissal was a case of genuine redundancy within the meaning of s 389 of the Act."
This decision provides insight into how the FWC assesses genuine redundancy claims and the factors considered in such cases. It highlights the importance of employers carefully considering and documenting the reasons for redundancies, as well as ensuring fair consultation processes, even when not strictly required by law.
