Redeployment and redundancy: what are the issues?

Analysis

Redeployment and redundancy: what are the issues?

A new provision introduced by the Fair Work Act 2009 is that an employer cannot rely on the ‘genuine redundancy’ provisions in order to avoid a claim of unfair dismissal, unless it would have been unreasonable in all the circumstances for the employee to be redeployed either elsewhere in the employer’s business or in an associated business entity. This provision has raised some questions about what ‘redeployment’ actually means.

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[Revised 26/11/2010]
 
A new provision introduced by the Fair Work Act 2009 is that an employer cannot rely on the ‘genuine redundancy’ provisions in order to avoid a claim of unfair dismissal, unless it would have been unreasonable in all the circumstances for the employee to be redeployed either elsewhere in the employer’s business or in an associated business entity. This provision has raised some questions about what ‘redeployment’ actually means.
 
This article examines the concept of redeployment in detail.
 
What the Act says
 
There are two relevant provisions in the Fair Work Act.
 
1. Part 2-2 Div 11 Subdiv B covers entitlement to redundancy pay under the National Employment Standards (NES).
An eligible employee is entitled to receive redundancy pay in the event of a genuine redundancy. ‘Genuine redundancy’ is defined as the employer no longer requiring the job to be performed by anyone. Exclusions from this requirement apply for small businesses, employees with less than 12 months service and award/agreement provisions that specify other exclusions (see s121).
 
Transfer of business situations where the employee is employed by the new business and past service entitlements are carried over are also exempt (s122).
 
So, too, are transfer situations where the employee rejects an offer of employment with the new business that is substantially the same as his/her previous employment conditions, which leaves the employee no worse off overall than before, and which carries over previous accrued entitlements.
 
Note: s311 provides that the employee must be employed by the new business within 3 months of ending employment with the old one for a transfer to take effect.
2. Part 3-2 Div 3 (s389) states that an employee will not be able to lodge a claim of unfair dismissal in the event of genuine redundancy for operational reasons (ie changes to the operational requirements of the business that mean that the employer no longer requires the job to be performed by anyone). This is conditional on the employer having met any legal obligations to consult with the employee about proposed redundancy.
Importantly, s389(2) adds that it will not be a genuine redundancy (and therefore the employee will be able to make a claim) if ‘it would have been reasonable in all the circumstances for the person to be redeployed within the employer’s enterprise or the enterprise of an associated entity of the employer’. Note: this is a new provision that did not appear in the former WorkChoices legislation.
Therefore, it is necessary to consider carefully the meanings of ‘redeployment’ and ‘associated entity’.
 
Job protection provisions in state awards usually allow employers to apply to their State Industrial Relations Commission to vary the general severance pay prescription if the employer has obtained acceptable alternative employment for the employee.
 
Associated entity
 
‘Associated entity’ is defined by s50AAA of the Corporations Act 2001.
 
The section is linked to above — basically a business is ‘associated’ if it is legally related to the principal business, if the principal controls it, has a qualifying investment, significant influence or material interest in it; or, alternatively, if the associate is in a similar position in relation to the principal entity.
 
What actually is redeployment?
 
Redeployment can be broadly defined as the transfer of an employee to another job within the same organisation or an ‘associated entity’. However, the term is not formally defined in the Fair Work Act, so it is necessary to look at case law, most of which was determined under earlier legislation.
 
It is not sufficient to find any other job (eg a lower-level or lower-paid one) in the organisation for an employee in danger of retrenchment, unless the employee willingly agrees to accept it. Otherwise, a demotion or employment conditions that are substantially less favourable to the employee will amount to a breach of the employment contract, and therefore either an unfair dismissal or a genuine redundancy (the latter meaning that redundancy entitlements will be payable).
 
Past decisions show that courts and tribunals will take the following factors into account to determine whether the redeployment was legitimate:
  • whether the work performed is similar to previously (eg uses similar skills, knowledge and abilities)
  • whether terms and conditions of employment are similar to previously, and no less favourable overall
  • whether the new work location does not significantly inconvenience the employee, compared to the old one
  • as per the legislation, whether the employee’s previous service is taken into account when calculating service-based benefits
  • whether the employee willingly consented to any changes that were less favourable, and whether any duress was applied by the employer. Note: courts/tribunals have tended to look for positive evidence that the change disadvantaged the employee, an absence of evidence one way or the other tends to be interpreted that the change was acceptable.
 
What employees take into account
 
When offered redeployment, employees will take the following factors of the new job into account:
  • job title and job status
  • pay rate
  • job location (in general, the further the employee has to travel to/from work, the less likely he/she is to accept the offer)
  • working environment
  • hours of work (eg changes of shift, availability of flexible work arrangements, actual hours to be worked, overtime requirements/opportunities)
  • job content (eg whether the work and skills required is similar to before)
  • job security
  • chances of gaining work from other employers (eg to avoid relocation or extra travel)
  • outside-work responsibilities (eg family or carer’s)
  • the employer’s reputation and history (eg whether it has kept promises, offered suitable redeployment jobs in the past)
  • perception of job security, and whether new job is a permanent one
  • employee’s age
  • health level
  • relationships with co-workers
 
If an employee initially refuses an offer of redeployment, it is wise to discuss the refusal before making any final decision. If the reason for refusal is understood, it may be possible to modify the job or conditions to make them more attractive.
 
Employee’s obligations
 
An employee is entitled to make the final decision of whether to accept a redeployment offer (unless an employment contract, award or agreement provision says otherwise), but cannot simply ignore an offer. Case law has held that employees have a duty to:
  • participate in the consultation processes and generally evaluate alternative options
  • not unreasonably refuse any training or retraining that will be provided.
 
The employer cannot use duress, or force the employee to accept a transfer, as noted above this may become a breach of contract or unfair dismissal.
 
What courts and tribunals take into account
 
Courts and tribunals tend to look at both the overall position of each case and its individual circumstances. No one of the various factors listed above, unless very blatantly unsatisfactory, is likely to dominate the decision.
 
What is the impact of relocation?
 
Of all the factors that affect redeployment, moving to another work location is probably the most controversial. The most obvious issues are the extra distance, time and cost of travel between home and the new work location, and their impact on outside-work activities (eg family or carer’s responsibilities). Other relevant factors may include:
  • number of employees affected
  • custom and practice in the organisation and the industry
  • other terms and conditions of the redeployment offer (eg remuneration may be increased to compensate for extra travel, or a travel allowance is offered)
  • assistance offered by the employer to assist with relocation
  • relocation provisions in an award, agreement or individual contract
  • employee’s age and ‘marketability’ on job market
  • job security at new location
 
Cases
 
The following are some examples of what courts and tribunals have decided: 
  1. Where the employment contract/agreement contained no provisions regarding relocation, the existing work location was an implied term of employment in the sense that there was no term that permitted relocation. Requiring employees to relocate was considered to be a repudiation of the contracts, even though the existing workplace was being closed down, therefore the employees had been retrenched.
  2. When a work location was moved 28 kilometres, requiring a 55-minute drive to work, an employee who was a carer for two children and an elderly parent successfully argued that the relocation disadvantaged him because of his family/carer’s responsibilities.
  3. The reasonableness of a relocation requirement overrode the contractual provisions that covered relocation. All relevant circumstances affecting the employees (as listed above) should be taken into account to determine reasonableness.
  4. A company in a capital city employing 30 employees closed one of its factories and offered employees similar positions in factories in outer suburbs, plus 3 ‘assistance payments’ amounting to $5000 to cover extra travel costs and a promise that employees would be given preference for any suitable vacancies that arose in workplaces closer to the old one. The company claimed that employees’ extra travel distance would range from about 30 to 75 kilometres per week and increased travel cost would be from $75 to $150 per week. The offers it made were sufficient to defend itself against a claim that the employees had been retrenched.
Note: employees with family or carer’s responsibilities, who believe they are disadvantaged by a redeployment, may have the option of lodging a claim of discrimination on the ground of their responsibilities. Depending on circumstances, such a claim could succeed even if the redeployment was found to comply with the Fair Work Act.
 
The bottom line is that the redeployment should be a genuine job offer, not a sham, there should be genuine consultation with the employee about options, and that the employee should be no worse off overall.
 
Offer must be definite, not just an opportunity to apply for a vacancy
 
A Full Bench of Fair Work Australia (FWA) has recently ruled that giving employees the opportunity to apply for other jobs by competing with other job applicants does not amount to ‘redeployment’, because it is not a guarantee of another job. In this case, some mine employees were advised of vacancies at another mine (located some distance away) and invited to apply for vacant positions there, but told they would have to compete openly with other job applicants. FWA said that this was merely assistance with finding other employment, not redeployment by the employer. Redeployment involved transferring the employee, even if it meant that a new employment contract was required. It did not matter that some applicants had shown little interest in applying for the vacancies; lack of interest would only be significant if the vacancies were only open to the retrenched employees. FWA concluded that the employer could not claim that ‘genuine redundancies’ had occurred when it was reasonable to redeploy the employees, as in this particular case.
 
Other relevant comments by the Full Bench included:
  • ‘It is an essential part of the concept of redeployment under sec 389(2)(a) that a redundant employee be placed in another job in the employer’s enterprise as an alternative to termination of employment. Of course the job must be suitable, in the sense that the employee should have the skills and competence required to perform it to the required standard either immediately or with a reasonable period of retraining. Other considerations may be relevant such as the location of the job and the remuneration attaching to it.’
  • ‘Where an employer decides that, rather than fill a vacancy by redeploying an employee into a suitable job in its own enterprise, it will advertise the vacancy and require the employee to compete with other applicants, it might subsequently be found that the resulting dismissal is not a case of genuine redundancy [depending on the circumstances of the case] … Subjecting a redundant employee to a competitive process for an advertised vacancy in an associated entity may lead to the conclusion that the employee was not genuinely redundant.’
Job with lower pay or duties
 
If an employee is redeployed in a job with lower pay, status, conditions and benefits than the previous one, this will normally be regarded as a redundancy, and redundancy entitlements will be payable if the employee rejects the offer.
 
If the employee commences in the new job, then the employer can reasonably argue that the employee has agreed to the offer and, so, either the requirement to pay redundancy benefits does not arise or, after negotiation with the employee, a lower level of redundancy entitlements is payable.
 
Where an employee who is about to be made redundant says that he/she is willing to work in any other position available in the organisation, the employer will be required to consider redeployment to possible lower-level positions as well as equivalent or higher-level ones.
 
This is part of the employer’s overall duty to minimise the adverse effects of redundancy on employees. However, where an equivalent-level and lower-level job are both available, the equivalent-level one should be considered first, unless the employee indicates a clear preference for the lower-level position (eg because it is located closer to home, hours are more suitable).
 
Again, this underlines the importance of consultation with employees before making decisions.
 
Source: Mike Toten, HR writer.
 
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