Genuine redundancies: Steps to ensure it's not an unfair dismissal

Terminating someone's employment is never an easy decision, but there are circumstances in which it's the only path that makes sense. An excellent employee may no longer fit your organisation's needs if their position has become redundant. But how do you protect yourself and your company against charges of unfair dismissal?

Genuine redundancies

Redundancies can happen for many reasons. For example, your company:

May not need the employee's job to be done by anyone anymore
Could have closed down, become insolvent or bankrupt, or relocated interstate or overseas
May be introducing new technology that makes the job redundant (machinery, or software automation)
Can have restructured or reorganised because of a merger or takeover
Might be slowing down due to lower sales or production needs

Any of these cases might lead to a case of genuine redundancy and the unfortunate but perfectly valid reason to sever an employee.

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An unfair dismissal application cannot be made if the dismissal was a case of genuine
redundancy. Cases of genuine redundancy exist when you, as the employer meet BOTH of the following:

No longer require the person's job to be performed by anyone, due to changes in the operational requirements of your enterprise
Have complied with any obligation to consult about the redundancy that has been imposed by an applicable modern award or enterprise agreement

A case of genuine redundancy does NOT exist if you still need the job done by someone, OR if it would have been reasonable in all of the circumstances to retain and redeploy the person as follows:

In another position within your enterprise
In a position within the enterprise of an associated entity you control.

If you believe that the dismissal of one of your employees was due to a genuine redundancy, but your former employee has made an application for an unfair dismissal remedy, you are permitted to make a jurisdictional objection to their application.

If you can prove that the requirements of s.389 of the Fair Work Act have been met, then the Fair Work Commission will have no jurisdiction to hear the unfair dismissal claim and the matter is closed. However, if you cannot prove that the requirements of s.389 of the Fair Work Act have been met, the Commission will be in charge of determining if your employee's dismissal was, in fact, unfair.

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Your responsibilities to your employees

You may be required to consult with employees about major workplace changes. If their employment is subject to an award or registered agreement, there will be a mandated consultation process if there are major changes to the workplace, such as redundancies. As soon as a decision has been made to change the business, consultation must begin. The following required steps can be anticipated:

Notify any and all employees who may be affected by the proposed changes
Provide said employees with information about these changes, and their expected effects on employment status
Discuss steps that can and should be taken to avoid and minimise negative effects on said employees
Consider your employees ideas or suggestions about the changes, and ways they can possibly remain employed

If your business is considering redundancy of 15 or more staff, you must also provide a written notification to the Department of Human Services of the proposed dismissals.

Avoiding unfair dismissal applications

Employees who think they were sacked unfairly due to a protected right, discrimination, any reason that is harsh or unreasonable, or who believe that there was no genuine redundancy will be able to contact the Fair Work Commission. They have 21 days starting from the day after they were dismissed to lodge an application and try to recover any wages or final pay they believe they may be owed.

You can help avoid such applications by being transparent and compassionate with any employees affected by a genuine redundancy, by faithfully exploring all options to retain them, and by ensuring all mandated consulting, notifications, and final pay settlements are properly taken care of.

Redundancy pay

When an employee's job is made redundant, you may be required to give them redundancy pay, also known as severance pay. This is based on the employee's continuous service with your organisation. If your relationship with the affected employee was covered by a registered agreement, check the terms for information about redundancy pay and any other entitlements.

If you are a small business with less than 15 employees, or employ casual, temporary, or seasonal employees, you may be exempt from the redundancy pay requirement. You may also qualify to pay a lesser amount if you cannot afford the whole redundancy amount or if you find other acceptable employment for the employee.

By doing everything you can to ensure termination of an employee cannot be viewed as an unfair dismissal, and following all mandated actions for genuine redundancy terminations, you can help protect yourself against the lodging of an unfair dismissal complaint. For assistance with this and other HR related tasks, contact Ulton and speak to a member of our Human Resources Consulting team.

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Written by Christine Guy

21 Mar 2024

Advisory & Consulting

Technical Article