Establishing a genuine redundancy?

A recent line of redundancy cases confirms that redeployment considerations are wider than previous case history suggests.

This update examines a decision of the Federal Court in Helensburgh Coal Pty Ltd v Bartley [2024] FCAFC 45, which heard an appeal from the Fair Work Commission relevantly on genuine redundancy and redeployment.  Specifically, the Fair Work Commission decisions found it would have been reasonable for the employer, in all the circumstances, to have redeployed the employees into roles which were being performed by contractors within the employer’s business.  The Federal Court has not displaced these earlier decisions of the Fair Work Commission and Full Bench of the Fair Work Commission to the effect that an employer, which dismissed a number of employees on the basis that their positions were genuinely redundant, failed to satisfy the criteria to establish a ‘genuine redundancy’ under the Act.

It leaves employers needing to examine the redeployment factor as against any contractor arrangements then in place.  It is the case that special leave to appeal to the High Court has been sought.  However, until that leave application has been decided and the High Court hears the matter (if leave is granted), employers need to add this assessment to their redeployment criteria as part of the genuine redundancy tests.

The Facts

There was a complex litigation history in this matter, as it had been heard within the Fair Work Commission in four separate hearings (two before a single Commissioner and two before the Full Bench), before a judicial review was sought in the Federal Court.  In the Federal Court, the employer sought to have the decisions of the Fair Work Commission quashed.

The employer operated a coal mine in New South Wales and had been adversely affected by a decrease in the demand for coal, which then required a reduction of the employer’s workforce.  The employer undertook a lengthy consultation process with employees and ultimately terminated a number of employees on the basis of redundancy.  At the time of the dismissals, the employer had arrangements with contractors who were engaged to undertake certain work at the mine.

The dismissed employees, represented by the CFMMEU, collectively commenced proceedings against the employer on the basis that they had been ‘unfairly dismissed’ under section 385 of the Fair Work Act 2009 (‘Act’).

The employees argued that the dismissals were not for genuine redundancy reasons because it would have been reasonable in all circumstances for at least some, if not all, of the employees to have been redeployed within the employer’s enterprise. Specifically, it was argued that the employees should have been redeployed to perform the work which had been assigned to contractors.

The employer contended that it would have been unreasonable for the employer to displace the contractors in order to redeploy the employees.

Relevant legislative background

Section 389(1) of the Act provides that a person’s dismissal is a case of ‘genuine redundancy’ if:

“(a)  the person’s employer no longer required the person’s job to be performed by anyone because of changes in the operational requirements of the employer’s enterprise; and

 (b)  the employer has complied with any obligation in a modern award or enterprise agreement that applied to the employment to consult about the redundancy.”

Section 389(2) provides an exception to section 389(1) as follows:

“(2)  A person’s dismissal was not a case of genuine redundancy if it would have been reasonable in all the circumstances for the person to be redeployed within:

 (a)  the employer’s enterprise; or

 (b)  the enterprise of an associated entity of the employer.”

The Decisions

The Federal Court ultimately did not find grounds to displace the findings made by the Fair Work Commission, being that the employer should have prioritised its employees by insourcing the work being undertaken by relevant contractors to permanent employees and terminating the relevant arrangements with the contractors.

Lessons arising from the cases (Federal Court and Fair Work Commission)

There were a number of key considerations in the decision of the Federal Court (and preceding decisions in the Fair Work Commission) about the meaning of ‘genuine redundancy’ and when it is ‘reasonable in all the circumstances’ for an employee to be redeployed.

Key points made were:

  • that the reasonableness of a redeployment option is to be considered by looking at ‘all the circumstances’ facing the employer at the time of dismissal;
  • any circumstance that presents a barrier or inconvenience to redeployment should be taken into account;
  • any circumstance that makes redeployment feasible should be taken into account.

For example, it was contemplated that it may be reasonable in ‘all the circumstances’ for an employee to be redeployed, even if a vacant position does not exist at the particular point in time when dismissal is being considered.  Specifically, the Court contemplated that it may be reasonable in ‘all the circumstances’ for an employer to retain an employee (or employees) in employment for a short period of time if that would prevent the need for dismissal.  The Court contemplated that this situation could arise where the employer knows that an employee is soon to retire (freeing up a job), or knows that a contract with a third party providing particular work or services is soon to expire (therefore freeing up that work to be performed).

The Court also did not disagree that it may be reasonable in ‘all the circumstances’ for an employer to free up work for employees by reducing reliance on contractors.

In support of this point, Commissioner Riordan in one of the Fair Work Commission decisions, commented that contractors have ‘precarious job security’ compared to employees. He expressed the view that contractors should be regarded as a supplement to a permanent workforce, unless they are a person or entity that provides specialist skills that cannot be undertaken by employees.

In the decisions, the Fair Work Commission and Full Bench outlined numerous considerations (which were not disputed by the Federal Court) that might weigh in favour of, or against, displacing contractors.  These included but were not limited to:

  • The degree of control over the work of the contractor by the employer.
  • The length of the contract period left to run.
  • Any requirements to change the employer’s business strategy (e.g. to have all maintenance work performed by a contractor).
  • The history of contracting the work in question.
  • The rights of third parties.
  • That positions cannot be created where there are none.
  • That displacing existing occupants of positions may not be appropriate.
  • Whether the contract work was ‘specialist work’.
  • The skills and training of the employees concerned and considered against the skills required to perform the work undertaken by contractors.

Whilst noting these considerations, it is also important to remember that the reasonableness of contractors being displaced is only one factor to consider in the broader question of whether redeployment is reasonable (as a whole) in all the circumstances.  Employers will need to examine other options for redeployment within their enterprise, before deciding to terminate for redundancy reasons.

Notwithstanding that the Federal Court agreed that circumstances can arise where it is reasonable to redeploy an employee despite there not being a vacant position (for example, by displacing contractors in favour of an employee), Justice Raper, who agreed with the majority of the Federal Court, stated:

It is not insignificant that the effect of the Full Bench’s reasoning is that there does not need to be a vacant position in the enterprise for redeployment to be “reasonable in all the circumstances”. A consequence is that the Commission, satisfied that there is not a “genuine redundancy” may enter the fray, as part of the unfair dismissal proceedings and, by operation of s 391, order reinstatement which will require the creation of a new position and potentially as is the case here, lead to the termination of third-party contractual arrangements and a fundamental change of the employer’s business model. It would be a rare case indeed where an applicant (seeking to avail him or herself of unfair dismissal protections) could satisfy the Commission, under this provision, that redeployment in such circumstances, was reasonable.

We consider that Justice Raper’s commentary should provide employers with some solace, and also a reference point in the redeployment assessment process, from what is otherwise a precedent case which will cause further assessment steps around redeployment options and for the process to become far more complex and detailed.  Despite this, and further by the fact the Federal Court could not determine the “rightness or wrongness of the ultimate decision in this case”, the line of thought extrapolated from the comments of Justice Raper is that it would be difficult to establish that redeployment is reasonable in circumstances where the consequences of that finding is that third party contracts would need to be terminated and/or the employers business operations would need to fundamentally change.

Watch this space

While this case is significant in endorsing that a more stringent examination of redeployment options is required as part of a redundancy process, including consideration of options to redeploy to positions not currently vacant and with contractors in place, it is worth noting again that the Federal Court decision may be examined by the High Court.

If the matter is the subject of a High Court decision, we will update you on the outcome and the ramifications for employers.

If special leave is not granted by the High Court, the matter will revert to the Fair Work Commission for decision on remedy.  Without High Court change, the Fair Work Commission decisions will not have been displaced, and employers will need to be conscious of this higher threshold in terms of considering redeployment options.  Employers should strongly consider obtaining legal advice from an experienced employment lawyer, such as those at Aitken Legal, if they are unsure as to whether a possible redeployment option (including to a position not currently vacant and with contractor arrangements in place) is reasonable.

Disclaimer: The information contained this article is general and intended as a guide only. Professional advice should be sought before applying any of the information to particular circumstances. While every reasonable care has been taken in the preparation of this update, Aitken Legal does not accept liability for any errors it may contain. Liability limited by a scheme approved under professional standards legislation.