Australia: Clarification of requirements for ‘genuine redundancy’

The Full Bench of the Fair Work Commission has ruled on the requirements for a ‘genuine redundancy’ and the modern award consultation obligation to give prompt consideration to issues raised by an employee during redundancy discussions, finding that employers must consider all issues raised by an employee before the redundancy takes effect.

In Australia, an employee cannot pursue an unfair dismissal claim under the Fair Work Act 2009 - ie, alleging that their dismissal was 'harsh, unjust or unreasonable' - where they are 'genuinely redundant'.  There will not be a 'genuine redundancy' if the employer has failed to comply with consultation obligations in an applicable modern award or enterprise agreement or if it would have been reasonable to redeploy the employee.

In Ventyx Pty Ltd v Murray the employee had expressed an interest in, and sought information about, a number of vacant positions during redundancy discussions.  These were not investigated by Ventyx until after the redundancy had occurred.

In determining that there was no 'genuine redundancy', the Full Bench noted that employers must give ‘prompt consideration’ to any matters raised by the employee during consultation (‘regardless of whether or not the matter as raised had merit or would have changed the outcome in any substantive way’) as those matters may avert or mitigate the effects of the changes. This requirement cannot be satisfied by considering matters raised after the redundancy has taken effect. 

The Full Bench noted that it may not be practicable for consultation to occur immediately following the decision where there are concerns regarding security (eg in relation to company and client systems) or a common approach is being taken to implement redundancies globally. These factors may justify a shorter period between consultation and the implementation of the redundancies. However, where employers choose to delay the communication of the decision to implement change, they may struggle to give the required consideration to issues raised by employees before the redundancies take effect

Actions for employers

Employers should ensure managers are aware of their legal obligations when implementing and communicating redundancies. Processes should be planned in advance to ensure that appropriate time is allocated to the consultation process to ensure the employer’s (and clients’) interests are protected and that all matters raised by employees have been considered before the redundancy takes effect.