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Genuine redundancy

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The global economic conditions make it likely that mamy employers, particularly in retail, will be considering making positions redundant. It is vital that the provisions of the Fair Work Act are considered to ensure compliance with the new substantive and procedural requirements of the legislation, which are significantly different to the WorkChoices requirements during the 2008-09 financial crisis.

The Fair Work Act provides that a dismissal is not considered unfair if it is for reasons of genuine redundancy. To be compliant, the redundancy of a position an employer must:

  • ensure that the reason for the redundancy is that the job is no longer required to be performed by anyone because of changes in the operational requirements of the employer’s enterprise;
  • comply with any obligation in a Modern Award or Enterprise Agreement to consult about redundancy as soon as a definite decision is made; and
  • show that it was not reasonable to redeploy the employee within the employer’s enterprise or within an enterprise of an associated entity of the employer.

Recent FWA decisions have clarified that distribution of the duties amongst existing employees and outsourcing duties can be legitimate provided they result in overall efficiencies.

When considering redeployment, employers have to take into account the qualifications and experience of the employee in relation to other roles available. Employers must not assume that an employee would not accept a lesser or lesser paid position. The consultation process should be used to discuss any such options with an employee whose position is likely to be made redundant.

The following should be taken into account prior to implementing a redundancy programme, if it is to be compliant with the Fair Work Act:

  • prepare a statement as to the reasons for the need to consider redundancies, including accounting advice if necessary;
  • ensure compliance with any notification and consultation procedures in any applicable Modern Awards or Enterprise Agreements;
  • consider whether redeployment is an option before making redundancies. Offer redeployment if available. Don’t assume the employee will not be interested – give them the option to decline the offer;
  • discuss potential redundancies with relevant supervisors and managers and keep written notes of redeployment considerations. Keep an open mind as to the final decision to make a position redundant until the consultation process;
  • plan consultations and offers in advance of the meting with an employee, as these may prove beneficial should an unfair dismissal or adverse action claim be brought by terminated employees;
  • ensure selection is not based on any discriminatory grounds;
  • ensure that employees are provided with the right benefits where Modern Awards or Enterprise Agreements provide for paid leave to seek other employment; and
  • be aware of the minimum severance entitlements contained in the National Employment Standards which apply to all employees but may be exceeded by an individual contractual entitlement.

If you need assistance with redundancy issues, please contact our Workplace Relations team.

Author: Charles Cody