Lack of consultation lands law firm in hot water

Analysis

Lack of consultation lands law firm in hot water

A legal firm that failed to consult with an employee about a redundancy has been ordered to pay her compensation.

WantToReadMore

Get unlimited access to all of our content.

A woman whose job was legitimately redundant has received compensation for unfair dismissal because her employer failed to consult with her before terminating her employment.

The Fair Work Commission (FWC) also decided that the employer was not a “small business employer” because it could not isolate a regional office from the rest of its business.

Facts of case


PW was employed by a solicitors’ firm for just over six months. The latter is significant because the exclusion period for making claims of unfair dismissal is 12 months for small businesses (less than 15 employees) and six months for larger ones. Therefore, the employer claimed that it was a small business as defined by the Fair Work Act 2009, and further that this was a case of genuine redundancy.

The employer was based in Brisbane but decided to open a regional office in Bundaberg, because an employee had moved there and had been working from home. She relocated to the new office and PW was employed full-time to do conveyancing work there.

After six months and nine days her employment was terminated with pay in lieu of notice. The employer claimed that a decline in conveyancing work and some logistical problems with running the Bundaberg office from Brisbane had made her position redundant.

The arguments


The employer claimed that it only employed two people at Bundaberg and therefore was a “small business employer”. If so, PW could not make a claim of unfair dismissal.

The employer had a total of 24 employees in its entire business and had mentioned that when advertising vacancies. However, it claimed that the Bundaberg office was a separate entity and the manager who ran it had no influence on other parts of the employer’s operations. It claimed to have 10 employees as at the date PW ceased employment.

The employer claimed that its business comprised separate entities that did not control or influence each other. Sometimes, one referred clients to another, but neither influenced who actually did the work. The Bundaberg office manager was not a majority shareholder so could not control the whole business, although he could influence decisions. It claimed that this lack of control meant that the parts of the business were not associated entities under sec 50AAA of the Corporations Act.

PW claimed that a vacancy at Bundaberg was advertised one week after she left, and that she would have been willing to continue working there, even in a more junior role.

The employer presented evidence to claim that work volume at the office had fallen. It further claimed that there were problems due to the manager of the office being located in Brisbane. This made the position at Bundaberg unsustainable.

The award covering PW’s employment required the employer to notify and consult with her before making a decision about redundancy.

PW claimed that there was no discussion until her employment was being terminated. The employer argued that the workload reduction had occurred very quickly and any consultation would not have changed the situation or the decision.

The employer claimed that no other suitable positions were available for PW. At the time of her termination, it only intended to retain one employee at Bundaberg, and the position it later advertised was a much more junior role that would not have suited PW.

PW responded that she would have been willing to take the role. The FWC accepted that the junior role did not exist when PW was terminated, and was only created as a solution to customer complaints received after she left.

In issue


The main issues in this case were:
  • Whether the employer was a “small business employer” with less than 15 employees – that would not be the case if the number of employees was the total employed in both the employer’s offices. The question was whether the other parts of the business were “associated entities” – if yes, their employees must be counted in the total. This turned on what degree of control or influence one entity had over the other
  • whether termination of employment was a genuine redundancy
  • whether the method of termination was unfair due to lack of consultation with PW

Decision


The Bundaberg office manager was one of two directors and had a 50% share in the overall business.

The FWC found that although he had not in practice exerted control over other parts of the business, his position gave him the capacity to do so. His legal obligation to act in the best interests of the Bundaberg office entity did not constrain him from controlling or influencing other entities. The different entities were all part of the business, which therefore had more than 15 employees.

The logistical problems and reduced work volume cited by the employer meant that PW’s position was actually redundant. However, the employer’s failure to consult with her as required by her award meant that it was not a genuine redundancy.

While dismissal was for a valid reason, failure to consult with PW about possible alternatives or mitigation made it unfair.

PW had moved overseas and obtained other employment about three weeks after her dismissal. Therefore, reinstatement was inappropriate and the FWC awarded compensation equivalent to one week’s pay, reasoning that a consultation period would have been that long.

The bottom line: Where a business comprises more than one entity (e.g. subsidiary companies), it is wise to seek advice as to whether the entities are “related” for the purposes of the Corporations Act, and therefore also the Fair Work Act. If an award or employment contract has provisions requiring consultation with an employee prior to redundancy, the employer must comply with them, even if it appears obvious that the employer has no suitable alternative work available.

Read the judgment


W v Jaktomat Pty Ltd t/a Hains Solicitors [2018] FWC 3499, 17 July 2018
 
Post details