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Legitimate Redundancies -v- Genuine Redundancies


Case Review

Key Point: A non-genuine redundancy may still constitute a “reasonable, defensible and well-founded” reason for dismissal.

Small business employers and redundancies

It is commonly understood that in order to constitute a “genuine redundancy” an employer must, in part, comply with any obligation in a Modern Award or Enterprise Agreement that applied to the employment to consult about redundancy (see section 389 of the Fair Work Act 2009) (the Act).

The position is no different for small business employers. Despite this, small business employers are seldom aware of the onerous Modern Award consultation obligations and they can thereby find themselves defending seemingly vexatious unfair dismissal claims in circumstances where the redundancy was ultimately found to be legitimate (but not genuine).

Recent case – not genuine (but still legitimate)

In the recent case of Tew v Viemist Pty Ltd T/A Headon Financial Planning [2013] FWC 2970 the Respondent experienced just that. The Applicant was dismissed from her employment in a small financial planning practice on the basis of redundancy.

The Respondent no longer required the Applicant’s job to be performed by anyone and its operational circumstances required a business restructure. The Respondent consulted the Applicant about the redundancy but failed to do so in strict adherence with the relevant consultation provisions of the Award. The Applicant subsequently brought an unfair dismissal application pursuant to section 394 of the Act and the Respondent objected to it on the basis of redundancy pursuant to section 385(a) of the Act.

The finding

It is perhaps unsurprising that the Respondent lost its jurisdictional objection to the Application on account of the fact that it had not satisfied the consultative provisions in the Modern Award. Despite this, Senior Deputy President Richards ultimately found in the Respondent’s favor on the grounds that strict compliance with the consultation provisions in the Award would not have made any material difference to its decision to action redundancies.

The Applicant’s position could not be sustained by the business moving forward, there were no redeployment opportunities available and in the circumstances the dismissal was not harsh, unjust or unreasonable.

Consideration of legitimate reasons (even if not genuine)

In hearing the jurisdictional objection Senior Deputy President Richards made the interesting comment [at 60] that

“it would surprise me if many small businesses of the Respondent’s very small size, experiencing its financial circumstances and with no scope for redeployment would ever meet the Modern Award’s requirements to reduce “all relevant information about the changes” (bar confidential information) to writing for the purposes of holding a “discussion” with an employee about a (proposed) redundancy. The detailed, written process requirement which serves as a basis for a discussion (and not a dismissal) is likely to be overlooked in many instances (as was the case here), or else construed as being itself redundant process.”

While the Respondent’s objection on the basis of “genuine” redundancy could not be upheld, Senior Deputy President was prepared to concede, as a section 387(h) consideration, that the reason for the Applicant’s dismissal was redundancy. The reason was found to be sound, defensible and reasonable; the deficiency in the due quantum of consultation would not have yielded a different outcome.

Point to consider

The decision raises the question as to whether the Modern Award consultation provisions are too onerous for small business employers who must spend excessive funds in defending an unfair dismissal application only to be told that while not “genuine” the redundancy was still legitimate (and therefore not harsh, unjust or unreasonable).

Lessons for Small Business Employers

  1. Be familiar with the Modern Award that covers your employees.
  2. Comply with the consultation provisions of the Modern Award before making any employees redundant.
  3. Obtain appropriate legal advice to ensure you have satisfied the strict requirements of the consultation provisions.
  4. Understand that even though a redundancy may be for “legitimate reasons” and ultimately lead to your success before the Fair Work Commission, the costs of defending the point are excessive. Lower your risk by obtaining legal advice to prevent this reality.