Consultation important in genuine redundancies

Genuine redundancy arises where an employee’s employment is terminated because their position is no longer required to be performed by anyone as a result of changes in the operational requirements of a business. 

The significance of a genuine redundancy is that an employee cannot be found to have been unfairly dismissed if the employer can establish that their termination was for genuine redundancy reasons. 

When making a position redundant, one important step that employers must follow is to ensure that consultation is undertaken with the relevant employee(s) once the decision for a redundancy has been made. Employers should check any applicable industrial instrument e.g. enterprise agreement or Modern Award, to confirm the consultation requirements. 

Generally, the obligation to consult requires informing employees of the proposed restructure and opening up a process for both the employer and the employee to consider if any alternative positions or arrangements can be made to keep the employee employed. Indeed, the Fair Work Act 2009 expressly requires employers to reasonably consider if the employee(s) can be redeployed within the business (or any business of an associated entity).

In terms of the offer of alternative employment, in a recent case before Fair Work Australia, it was found that the termination of an employee was not a genuine redundancy in circumstances where the employer failed to offer the retrenched employee a lower paid role as an ‘alternative position’, out of fear the employee would be ‘insulted’. 

In that case, Fair Work Australia also commented that even where an obligation to consult is not included in an applicable industrial instrument, employers should still give consideration to consulting with an employee and ensure that alternative options are explored. 

Key Points: Employers need to ensure that once a decision to make a position redundant has been made, it is communicated to an employee as soon as possible and they comply with any applicable consultation process. Alternative options should also be explored and any other positions which are identified should be offered, even if those roles involve lower responsibilities and pay.