Redun­dan­cies: New case sheds some light on con­sul­ta­tion and rede­ploy­ment obligations

Depend­ing on how an employ­er goes about things, ter­mi­nat­ing staff who are sur­plus to require­ments, can have very dif­fer­ent legal con­se­quences. This arti­cle looks at the lessons for employ­ers in this sit­u­a­tion as appar­ent from deci­sions by the Fair Work Com­mis­sion (FWC) and the Aus­tralian Indus­tri­al Rela­tions Commission.

The Fair Work Act 2009 (​‘the Act’) is draft­ed in a way that pro­vides a shield to unfair dis­missal claims brought by employ­ees where there is a ​“gen­uine redun­dan­cy” with­in the mean­ing of sec­tion 389 of the Act.

If an employ­er can demon­strate that ter­mi­na­tion was due to a gen­uine redun­dan­cy then the mat­ter can go no fur­ther; the Fair Work Com­mis­sion (​‘FWC’) does not have to (and indeed does not have pow­er to) con­sid­er whether the dis­missal was oth­er­wise ​“harsh, unjust or unrea­son­able”.

This means that the cri­te­ria referred to in sec­tion 387 of the Act which the FWC con­sid­ers in unfair dis­missal appli­ca­tions – some of which go to whether pro­ce­dur­al fair­ness was afford­ed to the employ­ee – do not apply. For exam­ple, the ques­tion of whether an employ­ee was unrea­son­ably refused a sup­port per­son in dis­cus­sions relat­ing to the dis­missal (sec­tion 387(d)) will be irrel­e­vant if ter­mi­na­tion was due to a gen­uine redundancy. 

In the recent deci­sion of Mr Muham­mad But­tar v PFD Food Ser­vices Pty Ltd T/A PFD Food Ser­vices [2017] FWC 4409 (​‘PFD’) the FWC has pro­vid­ed guid­ance on what an employ­er must do (or rather, must not do!) in order to avail itself of the ​“gen­uine redun­dan­cy” pro­tec­tion. In par­tic­u­lar, the FWC dis­cussed the oblig­a­tions on employ­ers relat­ing to con­sul­ta­tion and redeployment.

To briefly recap the gen­uine redun­dan­cy pro­vi­sions (sec­tion 389 of the Act), a dis­missal is a case of ​“gen­uine redun­dan­cy” if (and only if):

1. The per­son­’s employ­er no longer requires the per­son­’s job to be per­formed by any­one because of changes in the oper­a­tional require­ments of the employ­er’s enterprise;

2. The employ­er com­plied with any oblig­a­tion in a mod­ern award or enter­prise agree­ment that applied to the employ­ment to con­sult about the redun­dan­cy; and

3. It would not have been rea­son­able in all the cir­cum­stances for the per­son to be rede­ployed with­in the employ­er’s enter­prise or the enter­prise of an asso­ci­at­ed enti­ty of the employer.

In PFD the FWC had no trou­ble in deter­min­ing that PFD no longer required Mr But­tar’s job to be per­formed by anyone.
As to con­sul­ta­tion, it was com­mon ground that the Seafood Pro­cess­ing Award 2010 applied to Mr But­tar’s employ­ment and that the award con­tained an oblig­a­tion to con­sult regard­ing redundancies.

The FWC not­ed that the fol­low­ing con­sul­ta­tion process took place:

• In the week pre­ced­ing 29 May 2017, Mr But­tar’s man­ag­er (Mr DeCas­to) had formed the view that Mr But­tar – togeth­er with two of his col­leagues – were like­ly to be made redundant;

• Mr DeCas­to met with Mr But­tar on 29 May 2017. The FWC not­ed that “… in the con­clud­ing part of the meet­ing Mr DeCas­to told Mr But­tar that there was a restruc­ture like­ly to occur and that Mr But­tar may be affect­ed. No details of the restruc­ture were pro­vid­ed nor of how it may affect Mr But­tar. Mr But­tar told Mr DeCas­to that he would be pre­pared to work in many dif­fer­ent roles if need be. The top­ic of the restruc­ture was a short con­ver­sa­tion last­ing no more than 2 or 3 minutes.

• A fur­ther meet­ing occurred on 2 June 2017 at which all three employ­ees were present and each of whom was hand­ed a let­ter advis­ing they were being made redun­dant with imme­di­ate effect.

• In this final meet­ing the FWC not­ed that ​“Mr But­tar… ques­tioned Mr DeCas­to and expressed neg­a­tive views. Mr But­tar told Mr DeCas­to that he thought the dis­missal unfair and that he could per­form oth­er roles.”

In assess­ing whether Mr But­tar had been con­sult­ed, the FWC had this to say:

“[42] I find that Mr DeCas­to did not con­sult in any mean­ing­ful way with Mr But­tar about his deci­sion to make him redun­dant, either on 29 May or on 2 June. There was noth­ing to pre­vent Mr DeCas­to doing so on either of these days, or at any time in that week.

[43] Clause 8 of the Seafood Pro­cess­ing Award 2010 impos­es a require­ment on an employ­er to con­sult with an employ­ee con­cern­ing major change that is like­ly to have sig­nif­i­cant effects on their employ­ment. It com­pels an employ­er to dis­cuss with the employ­ees the intro­duc­tion of the changes and take efforts to mit­i­gate adverse impacts. The dis­cus­sions must be as ear­ly as prac­ti­ca­ble after a def­i­nite deci­sion is made. Clause 8.1(b)(ii) requires the employ­er to pro­vide in writ­ing to the employ­ees all rel­e­vant infor­ma­tion about the changes and their effects.

[44] I find that Mr DeCas­to failed to con­sult Mr But­tar at all, let alone con­sult with­in the mean­ing of clause 8 of the Award. I reject PFD’s sub­mis­sion that the 29 May meet­ing was a con­sul­ta­tion. At its high­est, that dis­cus­sion sim­ply put Mr But­tar on notice that there may be a restruc­ture in the near term and that it may affect him. The non-spe­cif­ic nature of the infor­ma­tion con­veyed by Mr DeCas­to meant that Mr But­tar was enti­tled to form the view that the unspec­i­fied restruc­ture may affect him pos­i­tive­ly or equal­ly not affect him at all. He believed on rea­son­able grounds that he could just get on with his job with­out con­cern for his job secu­ri­ty, which he did. In no sense did PFD pro­vide Mr But­tar ​“a real oppor­tu­ni­ty to influ­ence the deci­sion mak­er”.”

A foot­note to the phrase ​“a real oppor­tu­ni­ty to influ­ence the deci­sion mak­er” in the judg­ment ref­er­enced para­graph 25 of the case of CEPU v Voda­phone Net­work Pty Ltd (2001) PR911257 which con­cerned a con­sul­ta­tion oblig­a­tion con­tained with­in the Work­place Rela­tions Act 1996 (the fore­run­ner to the Fair Work Act 2009). In that case the Aus­tralian Indus­tri­al Rela­tions Com­mis­sion said:

“In decid­ing whether or not to make the orders sought I have con­sid­ered the impor­tance of con­sul­ta­tion. Con­sul­ta­tion is not per­func­to­ry advice on what is about to hap­pen. This is com­mon mis­con­cep­tion. Con­sul­ta­tion is pro­vid­ing the indi­vid­ual, or oth­er rel­e­vant per­sons, with a bona fide oppor­tu­ni­ty to influ­ence the deci­sion mak­er. Sec­tion 170GA(1)(b) of the [the Work­place Rela­tions Act] speaks of mea­sures to avert or min­imise ter­mi­na­tions or to mit­i­gate the adverse effects of the ter­mi­na­tions. Con­sul­ta­tion is not joint deci­sion mak­ing or even a neg­a­tive or frus­trat­ing bar­ri­er to the pre­rog­a­tive of man­age­ment to make deci­sions. Con­sul­ta­tion allows the deci­sion mak­ing process to be informed, par­tic­u­lar­ly as it may effect the employ­ment prospects of indi­vid­u­als. The oppor­tu­ni­ty to seek to avoid or mit­i­gate the effects of a ter­mi­na­tion can­not be under­es­ti­mat­ed by those who wield pow­er over those and their fam­i­lies who will the sub­ject of the exer­cise of that power.”

What appears from the FWC’s rea­son­ing in PFD is, that in order to sat­is­fy the con­sul­ta­tion oblig­a­tions, the employ­er should have done more than meet­ing with Mr But­tar and giv­ing him notice of the restruc­ture and the fact that it might affect him.

First­ly, it should have giv­en him full details of how the restruc­ture might affect him. Sec­ond­ly it should have giv­en Mr But­tar an oppor­tu­ni­ty to influ­ence the employ­er’s deci­sions in respect of the redun­dan­cy. The case implies that Mr But­tar could not have had a chance to influ­ence the deci­sion unless he was giv­en spe­cif­ic infor­ma­tion about how the restruc­ture might affect him.

It also appears that the FWC was of the view that allow­ing an employ­ee an oppor­tu­ni­ty to make com­ments con­cern­ing their redun­dan­cy after they had been told they are to be made redun­dant does not amount con­sul­ta­tion (as the deci­sion had already been made).

Hav­ing found that Mr But­tar had not been ​“con­sult­ed” in respect of the redun­dan­cy, it fol­lowed that his ter­mi­na­tion was not a gen­uine­ly redun­dan­cy with­in the mean­ing of the Act (on this ground alone).

How­ev­er, the FWC also con­sid­ered that the employ­er had not ful­filled sep­a­rate require­ments under the Act con­cern­ing rede­ploy­ment. It had this to say:

“[50] I accept that Mr DeCas­to com­plet­ed a ​‘Skills Matrix’ on 1 June 2017 to assess Mr Buttar’s capa­bil­i­ty for alter­nate roles. In the cir­cum­stances of this mat­ter, I do not find that com­plet­ing this matrix was an ade­quate or suf­fi­cient mech­a­nism to dis­charge the statu­to­ry oblig­a­tion to take rea­son­able steps to explore rede­ploy­ment. It was a rushed job and Mr DeCas­to did not seri­ous­ly want to rede­ploy Mr But­tar. He want­ed to save labour costs by hav­ing him out of the busi­ness. The Matrix only assessed capa­bil­i­ties, not alter­nate roles. It was uni­lat­er­al­ly com­plet­ed by Mr DeCas­to. Mr But­tar was giv­en no oppor­tu­ni­ty to pro­vide input into what he con­sid­ered to be his adapt­able skill set.

[51] The Matrix was com­plet­ed by Mr DeCas­to on 1 June (the day before the redun­dan­cy let­ters were giv­en to the three employ­ees on 2 June) and the day after the let­ters were pre­pared for sig­na­ture by the human resources depart­ment (31 May). Mr DeCas­to had already decid­ed to make Mr But­tar redun­dant, con­sid­ered that he had no future in the busi­ness, and had unrea­son­ably formed a neg­a­tive atti­tude towards him by con­clud­ing that he had act­ed in a ​“men­ac­ing” man­ner on 29 May. I find that Mr DeCas­to only gave fleet­ing thought to oth­er roles, and dis­missed them in his mind quick­ly. No oth­er per­sons in the busi­ness in South Aus­tralia or else­where were spo­ken to about whether they had actu­al roles on offer that Mr But­tar could fill, or whether they were inter­est­ed in employ­ing him.”

Hav­ing lost the shield of a ​“gen­uine redun­dan­cy” the Fair Work Com­mis­sion had then to con­sid­er whether the dis­missal was ​“harsh, unjust or unrea­son­able”.

In doing so the FWC referred to mat­ters such as the unrea­son­able refusal of a sup­port per­son for Mr But­tar and the fact that Mr But­tar was giv­en no oppor­tu­ni­ty to respond to the rea­sons inform­ing the deci­sion to make him redun­dant. It was also crit­i­cal of the fact that at the final redun­dan­cy meet­ing, Mr But­tar was not dealt with on an indi­vid­ual basis.

In all of the cir­cum­stances the FWC found Mr But­tar to have been unfair­ly dis­missed. The FWC sub­se­quent­ly ordered (in a sep­a­rate hear­ing on rem­e­dy) that Mr But­tar’s employ­ment be rein­stat­ed and that PFD must find him an alter­na­tive posi­tion on no less favourable terms than his pre­vi­ous role. PFD was also ordered to com­pen­sate Mr But­tar for his loss of earn­ings as a result of the dismissal. 

This real­ly brings into focus the con­se­quences of busi­ness­es – espe­cial­ly large busi­ness­es — get­ting redun­dan­cies wrong. Often employ­ers only con­sid­er the risk of unfair dis­missal claims in finan­cial terms, ie ​“what will the award of dam­ages be?”. This case reminds us that the FWC can, and some­times does, order employ­ers to rein­state dis­missed employ­ees in alter­na­tive roles, even if their pre­vi­ous role is no longer avail­able. This may well not be some­thing the busi­ness is pre­pared for. 

It is impor­tant to note, that where an employ­ee is held not to be ​“gen­uine­ly redun­dant” it does not auto­mat­i­cal­ly fol­low that they have been unfair­ly dis­missed. Indeed, there are a num­ber of cas­es where it has been held that where con­sul­ta­tion would not have had any prospect of chang­ing the out­come, fail­ure to con­sult will not mean the dis­missal was unfair[1], see: Maw­son v Esca­da Tex­til­ver­trieb [2011] FWA 4339. Pre­sum­ably the same approach would be fol­lowed if an employ­er did not turn its mind to rede­ploy­ment options, if it tran­spired that no oppor­tu­ni­ties for rede­ploy­ment had existed. 

That said, if an employ­er has not com­plied with con­sul­ta­tion require­ments (under an award / enter­prise agree­ment) or the require­ment to con­sid­er rede­ploy­ment in a mean­ing­ful way, then the shield of ​“gen­uine redun­dan­cy” will not be avail­able. The employ­er will there­fore face the risk of a find­ing of unfair dis­missal, per­haps on a mere­ly pro­ce­dur­al ground.

We con­sid­er the lessons to take from the PFD deci­sion are that it is not suf­fi­cient to pay lip-ser­vice to con­sul­ta­tion and rede­ploy­ment. On the face of it, PFD had two meet­ings with the employ­ee con­cern­ing the redun­dan­cy and had writ­ten evi­dence it had con­sid­ered rede­ploy­ment options (the skills matrix com­plet­ed by the employ­er). This was found not to be enough in the circumstances.

In par­tic­u­lar, we would advise employ­ers to con­sid­er the fol­low­ing points when prepar­ing for redundancies:

• When con­sult­ing with employ­ees in respect of restruc­tures, employ­ees should be giv­en ade­quate infor­ma­tion as to how the restruc­ture may affect them (eg the poten­tial for them to be made redundant);

• Affect­ed employ­ees should – as far as pos­si­ble — be giv­en an oppor­tu­ni­ty to influ­ence the deci­sion on redun­dan­cies and to sug­gest alternatives;

• Con­sul­ta­tion should occur before the employ­ee is told they are to be made redundant.

• Redun­dan­cy meet­ings should be con­duct­ed with employ­ees indi­vid­u­al­ly (wher­ev­er practicable);

• Rede­ploy­ment should be dis­cussed with the employ­ee and they should be asked to par­tic­i­pate in a process of explor­ing alter­na­tive roles wher­ev­er practicable.

• Con­sid­er­a­tion of rede­ploy­ment options may require the mak­ing of mean­ing­ful enquiries in all parts of the busi­ness of the employ­er (and any of its asso­ci­at­ed enti­ties) and should not occur in iso­la­tion to the facts;

• The safest approach when deal­ing with redun­dan­cies is to assume that the FWC may hold that there has not been a ​“gen­uine redun­dan­cy”. Employ­ers are there­fore well-advised to afford employ­ees steps to ensure pro­ce­dur­al fair­ness as it would with oth­er dis­missals, such as invit­ing them to have a sup­port per­son in meet­ings and ensur­ing that the rea­son for ter­mi­na­tion is clear­ly spelt out as due to redundancy.