The ‘genuine redundancy’ provisions of s 389(2) of the Fair Work Act 2009 allow an employer to avoid a claim of unfair dismissal following a job elimination, where it would have been unreasonable in all the circumstances to redeploy the employee. Redeployment opportunities may be within the employer's business or the business of an associated entity. Increasingly, the Fair Work Commission (FWC) has also been asked to consider the extent to which an employer should consider displacing labour hire personnel in order to "redeploy" redundant employees.

No reasonable redeployment where flexible labour hire workforce a genuine business need

Last week the FWC considered the availability of redeployment opportunities for six retrenched coal mine workers at Clermont Open Cut mine in Queensland. The workers argued that that labour hire employees could have been displaced to accommodate redeployment of the retrenched workers. However, VP Catanzariti accepted the employer's argument that the use of labour hire permitted necessary flexibility - particularly in relation to covering employee absences on leave and peak requirement:See: Brown and Ors v Clermont Coal Operations Pty Ltd T/A Clermont Open Cut[2015] FWC 3862.

The FWC considered a similar application earlier this year, in which it was ultimately found that retraining costs associated with redeployment through labour hire displacement would have rendered any such redeployment unreasonable, see: Pettet and Ors v Mr Arthur Coal Pty Ltd [2015] FWC 2851. In that instance, VP Hatcher found that redeployment to roles being performed by labour hire workers was possible with retraining. However, VP Hatcher considered detailed costing evidence proposed by the employer to find that the cost of retraining would have surpassed the cost of redundancy, making the possibility of redeployment to displaced labour contract roles unreasonable.

Available "job or position or other work"

A full bench of the FWC has previously considered the operation of s.389(2) in the context of whether employers should have displaced labour hire employees in order to redeploy redundant employees: see: Ulan Coal Mines Limited v Honeysett & Ors[2010] FWAFB 7578 and Technical and Further Education Commission t/a TAFE NSW v Pykett [2014] FWCFB 714. In these cases it was accepted that the FWC must find, on the balance of probabilities, that there was a job or a position or other work (our emphasis) within the employer's enterprise (or that of an associated entity) to which it would have been reasonable in all the circumstances to redeploy the dismissed employee.

The FWC has affirmed that it is appropriate to review labour hire arrangements (and work patterns, for example overtime reliance) when considering redeployment opportunities. As it stands, the onus is on the employer to demonstrate that redeployment was not reasonable in a particular redundancy scenario. The reasonableness of redeployment is to be assessed "in all the circumstances", meaning that it is not possible to establish binding rules concerning the application of s.389(2) in all cases irrespective of the circumstances of each particular case.

Factors to be considered when assessing labour hire workers and redeployment

Generally, employers have been able to argue against the suggestion that redeployment by labour hire displacement was feasible. This is where the employers in question have been able to demonstrate that the work undertaken by contract labour was best suited to such continuing arrangements because of factors such as available skills and expertise, flexibility, and cost. In other words, employers have been able to successfully show that work being undertaken by contractors should stay being undertaken by contractors for flexibility in a legitimate business strategy, underlying financial reasons, or due to the particular skillset of contractors being used.

Employers seeking to implement redundancies should review labour hire arrangements in the context of ongoing need and redeployment opportunities before proceeding to retrenchment. Where labour hire employees are not to be displaced, employers should be confident of demonstrating a continuing need for labour hire arrangements due to workforce organisation factors such as specialised skill requirements, flexibility and cost.