Redundancy and consulting with the employee

Analysis

Redundancy and consulting with the employee

In the context of an unfair dismissal, a failure of the employer to consult affected employee(s) when redundancies are occurring could result in a successful claim.

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Modern awards contain a provision that requires the employer to consult with employees when a definite decision has been made to introduce major changes on a number of issues, including major changes to organisation or structure that are likely to have significant effects on employees. A ‘significant effect’ would include a termination of employment where the employee’s position has become redundant.
 
In the context of an unfair dismissal, a failure of the employer to consult affected employee(s) when redundancies are occurring could result in a successful claim.
 
Fair Work Act — redundancy and unfair dismissal

Employees who have had their employment terminated in circumstances of genuine redundancy do not have the right to bring an unfair dismissal claim. Under the Fair Work Act 2009 (s389), a dismissal will be a case of genuine redundancy if:
  • the employer no longer requires the employee’s job to be performed by anyone because of changes in the operational requirements of the employer’s enterprise; and
  • the employer complies with its consultation obligations under the relevant modern award or enterprise agreement; and
  • it is not reasonable to redeploy the employee in to the employer’s enterprise, or an enterprise of an associated entity of the employer.
Modern awards
 
The ‘standard’ clause in modern awards relates to consultation regarding major workplace change. This was determined by the (then) Australian Industrial Relations Commission in its Award Modernisation — Priority Awards decision in December 2008. This confirmed the existing requirement of the employer to consult employees affected by a decision to make positions within the organisation redundant. Generally, a modern award provision will require the following:
  • the employer must discuss with the employees affected and their representatives, if any, the introduction of the changes; and
  • the effects the changes are likely to have on employees; and
  • measures to avert or mitigate the adverse effects of such changes on employees; and
  • give prompt consideration to matters raised by employees and/or their representatives in relation to the changes.
The discussions must commence as early as practicable after a definite decision has been made by the employer to make the changes. For the purposes of such discussion, the employer must provide in writing to the employees concerned and their representatives, all relevant information about the changes including the nature of the changes proposed, the expected effects of the changes on employees and any other matters likely to affect employees provided that no employer is required to disclose confidential information the disclosure of which would be contrary to the employer’s interests.
 
An example of the ‘standard’ clause in modern awards regarding consultation regarding major workplace change is contained in the Clerks — Private Sector Award 2010 (cl8).
 
Enterprise agreements
 
Under the Fair Work Act (s205), a consultation term must be included in an enterprise agreement, being a term that requires the employer to consult employees about major workplace changes, in the same circumstances as under modern awards. The clause must also allow for employees to be represented for the purposes of that consultation. If an enterprise agreement does not include a consultation term (or the consultation term does not comply with the provisions of the Fair Work Act), the model consultation term is taken to be a term of the enterprise agreement.
 
The model consultation clause is prescribed in the Fair Work Regulation 2009 (Sch 2.3), as follows:
 
Model consultation term
‘(1) This term applies if:
(a) the employer has made a definite decision to introduce a major change to production, program, organisation, structure, or technology in relation to its enterprise; and
(b) the change is likely to have a significant effect on employees of the enterprise.
(2) The employer must notify the relevant employees of the decision to introduce the major change.
(3) The relevant employees may appoint a representative for the purposes of the procedures in this term.
(4) If:
(a) a relevant employee appoints, or relevant employees appoint, a representative for the purposes of consultation; and
(b) the employee or employees advise the employer of the identity of the representative;
the employer must recognise the representative.
(5) As soon as practicable after making its decision, the employer must:
(a) discuss with the relevant employees:
(i) the introduction of the change; and
(ii) the effect the change is likely to have on the employees; and
(iii) measures the employer is taking to avert or mitigate the adverse effect of the change on the employees; and
(b) for the purposes of the discussion--provide, in writing, to the relevant employees:
(i) all relevant information about the change including the nature of the change proposed; and
(ii) information about the expected effects of the change on the employees; and
(iii) any other matters likely to affect the employees.
(6) However, the employer is not required to disclose confidential or commercially sensitive information to the relevant employees.
(7) The employer must give prompt and genuine consideration to matters raised about the major change by the relevant employees.
(8) If a term in the enterprise agreement provides for a major change to production, program, organisation, structure or technology in relation to the enterprise of the employer, the requirements set out in subclauses (2), (3) and (5) are taken not to apply.
(9) In this term, a major change is likely to have a significant effect on employees if it results in:
(a) the termination of the employment of employees; or
(b) major change to the composition, operation or size of the employer's workforce or to the skills required of employees; or
(c) the elimination or diminution of job opportunities (including opportunities for promotion or tenure); or
(d) the alteration of hours of work; or
(e) the need to retrain employees; or
(f) the need to relocate employees to another workplace; or
(g) the restructuring of jobs.
(10) In this term, relevant employees means the employees who may be affected by the major change.’
Case studies
 
Failure to consult
 
The failure to notify and consult with an employee in accordance with the applicable modern award or enterprise agreement is considered by the Fair Work Commission (FWC) to be a serious defect in the procedure relating to the dismissal of an employee whose position has become redundant. This is reinforced by the Fair Work Act (s389(1)(b)), which states that a person’s dismissal was a case of ‘genuine redundancy’ if the employer has complied with any obligation in a modern award or enterprise agreement that applied to the employment to consult about the redundancy.
 
If the outcome of consultation is less predictable, the failure to consult over proposed changes could render the termination unfair. See: Gordon v Newtrain Incorporated [2011] FWA 5698. However, where consultation was highly unlikely to have negated the operational reasons for the dismissal or lead to any other substantive changes, the failure to consult prior to termination is not important if the employee had been dismissed in any event, even if timely consultation had occurred. See: Maswan v Escada Textilvertrieb t/a Escada [2011] FWA 4239.
 
Meaning of ‘consult’

The meaning of the term ‘consult’ has been considered on a number of occasions by industrial tribunals. Generally, it encompasses more than informing someone of a decision already taken. Moreover, it means more than simply talking to someone, although consultation does not necessarily entail reaching agreement. It would mean, for example, the employer engaging in a dialogue with employees (or the union) to provide input before a decision by the employer is made. See: Telstra Corporation Limited v Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia [2007] AIRCFB 374.
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