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What is this thing they call Redundancy?

At SIBLEY LAWYERS we provide timely and accurate advice for both Employers and Employees as to the redundancy process.

Redundancy is when a business no longer needs an employee’s role to be done by anyone. This is very important as it is not the actual employee that is no longer required but the role, the job, the position or classification within the business. Many employers make the mistake of making the employee redundant and then are subjected to claims that it was not a ‘genuine redundancy’ and the employee may seek a remedy imposed by tribunal such as the Fair Work Commission.

Redundancy happens in the following circumstances:

An when an employer either:

  • Does not need an employee’s job to be done by anyone, or
  • becomes insolvent or bankrupt.

Also when the business:

  • introduces new technology (Automation)
  • restructures or takeover happens or reorganises because a merger.
  • needs to make reductions to staff due to lower sales or production
  • relocates interstate

What are the steps prior to making a job redundant?

A consultation process is mandatory in all Awards and Enterprise Agreements for when there are major changes to the workplace, such as redundancies.

The consultation process sets out the things the employer needs to do when they decide to make changes to the business that are likely to result in redundancies. This must be done as soon as possible after the decision has been made to make these changes.

Consultation steps requirements:

  1. notifying the employees who may be affected by the proposed changes.
  2. providing the employees with information about these changes and their expected effects, employees are allowed to be represented during the process.
  3. discussing steps taken to avoid and minimise negative effects on the employees.
  4. considering employees ideas or suggestions about the changes.

Does a redundancy need to be ‘Genuine’?

The short answer is YES, a genuine redundancy is when:

  • the person’s job does not need to be done by anyone; and
  • the employer followed any consultation requirements in the award, enterprise agreement.

When an employee’s dismissal is a genuine redundancy, the employee is not protected from unfair dismissal, the Fair Work Commission has no jurisdiction to deal with a genuine redundancy.

What’s not a genuine redundancy?

When the employer:

  • still needs the employee’s job to be done by someone.
  • has not followed relevant requirements to consult with the employees about the redundancy under an award or registered agreement; or
  • could have reasonably, in the circumstances, given the employee another job within the employer’s business or an associated entity.

McIlwraith v Toowong Mistubishi Pty Ltd [2012] FWA 9662 (Cribb C, 22 November 2012).

Rosenfeld v United Petroleum Pty Ltd T/A United Petroleum [2012] FWA 2445 (Ryan C, 22 March 2012)

Miller v Central Gippsland Water Authority [1997] FCA 1081 (2 October 1997), [(1997) 76 IR 186].

Amcor Limited v Construction, Forestry, Mining and Energy Union [2005] HCA 10 (9 March 2005), [(2005) 222 CLR 241].

All these cases were determined to ‘ not be genuine redundancy’ for various reasoning but principally that ‘job was performed by someone’ after the employees were made redundant.

Other matters to be considered by EMPLOYERS in redundancy

Reducing redundancy pay

An employer can apply to the Commission to have the amount of redundancy pay reduced if the employer:

  • finds other acceptable employment for the employee, or
  • can’t afford the full redundancy amount.

Employers can only apply to the Commission if the requirement to make a redundancy payment stems from the NES. An employer can’t apply to the Commission if the redundancy entitlements derive from an award or a registered agreement.

Small Business Employer

A small business is one that employs less than 15 employees at a particular time. If an employer has 15 or more employees at a particular time, they are no longer a small business employer. When counting the number of employees, employees of associated entities of the employer are included. Casual employees are not included unless engaged on a regular and systematic basis. Most small businesses do not have to pay redundancy pay under the NES when making an employee redundant. Although an example of the exceptions to those small businesses rules are the ones that operate in the building and construction industry.

Redundancy of 15 or more employees

If a business is considering redundancy of 15 or more staff, the employer must give written notification to Centrelink of the proposed dismissals as practicable and before the employee is made redundant.

The notice must set out the:

  • reason for the dismissals
  • number and categories of the employees likely to be affected
  • timing of the dismissals’

Things EMPLOYEES need to know

The National Employment Standard (NES) provides for the redundancy payment amounts if an employee is not covered by an Award or Enterprise Agreement which delivers higher payments. Generally, the amount of weeks redundancy payment will be dependent on the employee’s length of service.

If Employees who lose their job because their employer went bankrupt or into liquidation may be able to get financial help from the Government. The Fair Entitlements Guarantee (FEG) is safety net scheme employer is unable to meet their obligations. If the employer has not entered bankruptcy or liquidation and just refuses to pay redundancy, then FEG does not cover that situation.

Finally, redundancy is taxed differently to other termination payments.

CALL SIBLEY LAWYERS IF YOU ARE AN EMPLOYEE BEING MADE REDUNDANT OR EMPLOYER THAT IS CONSIDERING MAKING A JOB REDUNDANT TODAY.