Size matters: FWC considers employee count in unfair redundancy claim

The Fair Work Commission (FWC) recently dealt with a case involving a worker's dismissal from a small hair salon business. The dispute centered around whether the termination was a genuine redundancy or an unfair dismissal.

This case highlighted the complexities that can arise when small businesses face financial pressures and must make difficult staffing decisions. It also underscored the importance of proper consultation processes, even in challenging circumstances.

The FWC's ruling provided insights into how redundancy and unfair dismissal claims are evaluated, especially for small enterprises.

Background of the case

The worker, a senior hairdresser, began employment with the small hair salon in November 2020. On March 28, 2024, she received a termination letter citing redundancy as the reason for dismissal.

However, prior to this, the employer had been investigating allegations of serious misconduct against the worker related to disparaging social media posts.

The worker filed an unfair dismissal application with the FWC on April 3, 2024, seeking compensation as a remedy. The employer maintained that the dismissal was due to redundancy, stemming from financial difficulties the business was experiencing.

Key issues and arguments

The case revolved around several key issues:

1. Whether the dismissal constituted a genuine redundancy
2. The employer's failure to consult about the redundancy
3. The impact of the business's small size on dismissal procedures
4. The validity of the redundancy given the concurrent misconduct investigation

The worker argued that the redundancy was not genuine, pointing to the ongoing misconduct investigation. The employer countered that they had chosen redundancy over dismissal for misconduct as it resulted in a better outcome for the worker.

The parties’ dispute

On March 15, 2024, the worker received a letter from the employer requesting her attendance at a meeting to address allegations of serious misconduct.

These allegations included making disparaging social media posts about the company and a client, as well as exhibiting rude behaviour towards a client over the phone.

The meeting to discuss these allegations took place on March 19, 2024. However, on March 28, 2024, instead of addressing the misconduct issues, the employer issued a termination letter citing redundancy due to economic downturn.

The employer's accountant had advised in November 2023 that the business needed to make the position of a second hairdresser redundant due to financial difficulties. The employer initially resisted this advice, hoping the business situation would improve.

FWC's analysis of redundancy claims

The FWC examined whether the dismissal met the criteria for a genuine redundancy under the Fair Work Act. This included assessing if the job no longer existed, if proper consultation occurred, and if redeployment was possible.

The Commission accepted the employer's unchallenged evidence of financial difficulties, noting:

"I accept the [employer’s] unchallenged evidence that the business was going through an 'economic downturn' as the Letter from their tax agent stipulates."

However, the FWC found that the employer failed to meet its consultation obligations under the Hair and Beauty Industry Award 2020.

Despite this, the Commission noted that consultation was unlikely to have changed the outcome given the business's financial situation.

The FWC further considered the impact of the salon's small size on the dismissal process. The decision stated:

"The [employer] was the smallest size employer possible, with only one employee being the Applicant. In my view, the small size of the [employer] had an impact on the procedures adopted for termination and should be accommodated."

Ultimately, the FWC determined that while the dismissal did not meet the technical definition of a genuine redundancy due to lack of consultation, it was not harsh, unjust, or unreasonable.

The Commission explained:

"While I have found a failure to consult pursuant to the Hair and Beauty Award, with such failures not being trivial matters, it is clear that any consultation would not have affected the [employer’s] decision due to [their] size."

Furthermore, the FWC emphasised:

"A decision to dismiss on the ground of redundancy will only be harsh, unjust or unreasonable if the rationale for the decision is seriously undermined or if there is a serious error in procedure such that renders the termination unfair in the circumstances."

In dismissing the application, the Commission concluded:

"The termination of his employment was not, however, harsh, unjust or unreasonable, as the decision was the result of a soundly based business decision. The failure to consult did not lead to a different result to that which occurred. Therefore, the failure to consult did not render the dismissal unfair."

This case serves as a reminder for small businesses to follow proper consultation procedures when making redundancies, while also illustrating how the FWC may consider the practical realities faced by very small enterprises when evaluating unfair dismissal claims.