Is consultation required for manager’s redundancy?


Is consultation required for manager’s redundancy?

If you make a manager redundant, is consultation required? Paul Munro explains.


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Are we required to consult with a manager before making his role redundant?

This question was recently sent to our Ask an Expert service.

Q Due to an organisational restructure, a management position will become redundant at the end of the year. Due to the sensitivity of the manager’s position (he is in daily contact with company clients and suppliers) it is our intention to terminate his employment without notice and pay the appropriate redundancy pay.

The company has been advised it should consult with the manager before the redundancy occurs, otherwise there could be grounds for an unfair dismissal claim. The employee is considered to be award/agreement-free and has an annual salary in excess of $150,000. However, he claims there may be award coverage.

Are we required to consult with the manager in this circumstance?

A Under the Fair Work Act (s389(1)(b)), the obligation on an employer to consult about redundancy only arises when a modern award or enterprise agreement applies to an employee and that award or agreement contains requirements to consult about redundancy.

This means there is no statutory requirement on an employer to consult in regard to a redundancy although it would be considered good practice to do so. In this case, the company could argue the nature of the employee’s work made it difficult to consult on the redundancy.

However, if the employee is covered by a modern award or an enterprise agreement the employer may be required to consult with the employee about the redundancy.

High income employee

A modern award does not apply to a high income employee, which is defined as an employee whose annual salary equals or exceeds the “high income threshold”, which is $142,000 from 1 July 2017 (indexed on 1 July each year).

“High income employees” who are covered by a modern award can agree to avoiding or modifying the award. An employer must provide a written undertaking guaranteeing annual earnings at least equal to the high income threshold. This means the terms of a modern award (including consultation requirements relating to redundancy) would not apply.

However, these employees remain “covered” by an award and may access unfair dismissal provisions.

Award/agreement-covered employees

Failing to notify and consult with an employee regarding redundancy, in accordance with an applicable modern award or enterprise agreement, is considered by the Fair Work Commission to be a serious defect in procedure.

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 an employer has complied with any obligation in a modern award or enterprise agreement to consult about the redundancy.

If an employer is required to consult and fails to do so, there cannot be a case of genuine redundancy.

Modern awards contain a ‘standard’ provision that places an obligation on an employer to consult with employees regarding major workplace change. The provision requires an employer to notify affected employees when a definite decision has been made to introduce major changes that are likely to have significant effects on employees.

‘Significant effects’ include termination of employment. The obligation on an employer to consult with employees would arise in most redundancy situations. Failure to implement a proper consultation procedure may result in a claim of unfair dismissal because, for example, the selection criteria used to identify which employee(s) were to be made redundant was subjective and discriminatory.

Meaning of ‘consult’

The meaning of the word “consult” was considered by a full bench of the (then) Australian Industrial Relations Commission.

It clearly encompasses more than informing someone of a decision already taken. Moreover, it means more than simply talking to someone, and doesn't necessarily entail reaching agreement. It would mean, for example, an employer engaging in a dialogue with employees (or the union) to provide input before a decision by the employer is made. See s.120 appeals against a decision (PR975016) by Telstra Corporation Limited and Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia - re Appeal - Full Bench [2007] AIRCFB 374 (11 May 2007).

Modern awards – standard clause

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 an employer to consult employees affected by a decision to make positions within the organisation redundant.

Generally, a modern award provision will require the following:
  • an 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 bottom line: There is no statutory obligation on an employer to consult about a redundancy if an employee is award/agreement-free. Conversely, an employer's obligation to consult about a redundancy will arise when a modern award or enterprise agreement applies to an employee and it contains terms requiring consultation in that circumstance.

See also: Redundancy overview

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