Redundancy – is consultation necessary?

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Redundancy – is consultation necessary?

While it is not mandatory to consult with award/agreement-free employees about redundancy, failure to do so may be taken into account when determining if a dismissal was unfair.

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Are we required to consult with award/agreement-free employees who are being made redundant?

This question was recently sent to our Ask an Expert service.
 
Q Due to a reorganisation of the business, a number of positions will be made redundant at the end of the year. This will include some members of management. While our enterprise agreement contains the model clause with respect to consultation for employees covered by the agreement, there is nothing in our company policies and procedures regarding consultation with management staff. Is there a requirement for the employer to consult with employees who have been selected for redundancy if they are not covered by the agreement?
 
A 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. However, while it is not mandatory for an employer to consult with an award/agreement-free employee, failure to implement a proper consultation procedure for all employees may still be taken into account by the FWC when considering the fairness, or otherwise, of a dismissal. Failure to consult may trigger a general protections application if, for example, an employee claims the selection criteria used to identify which employee(s) to be made redundant was subjective or discriminatory.
 
Subjective criteria are open to abuse and could be used to target particular workers. Referring to factors such as “teamwork”, “know how”, “initiative”, “integrity”, “trust”, “credibility”, etc. should be avoided. It seems the problem about subjective criteria is not so much the fact of their adoption, but the burden they impose on those that have to apply them.
 
In the case of discriminatory issues, an employer who, for example, uses an employee’s workers compensation status as a factor in determining whether he or she should be selected for redundancy, has been determined by the FWC as unfair against the employee.  
 
It should be noted that while there is a salary threshold in relation to unfair dismissal claims (currently $133,000 pa), under general protections provisions there is no salary threshold which would prevent a dismissed award/agreement free employee from making an application under the Fair Work Act (FWAct).
 
In the absence of a specific requirement to consult with award/agreement-free employees, it is advisable for an employer to include the following consultation requirements:
 
•           notifying the employees who may be affected by the proposed changes
•           providing the employees with information about these changes and their expected effects
•           discussing steps taken to avoid and minimise negative effects on the employees
•           considering employees ideas or suggestions about the changes.
 
Award and agreement covered employees
 
In the case of employees covered by a modern award or an enterprise agreement, the failure to notify and consult with an employee in accordance with the applicable industrial instrument 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 FWAct (s.389(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.
 
Under the FWAct (s389), a dismissal will be 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;
  • 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. 
Exception
 
In a matter before the FWC, it determined that 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.
 

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