In the recent case of Stickley v Kestrel Coal Pty Ltd [2015] FWC 2884, the Fair Work Commission has clarified employers’ redeployment obligations in relation to associated entities.

Mr Stickley was employed by Kestrel Coal Pty Ltd (Kestrel), a subsidiary company of Rio Tinto Coal Australia Pty Ltd (RTCA).  In addition to Kestrel, RTCA had three subsidiary companies.  All four RTCA subsidiary companies operated coal mines in Australia.  RTCA itself was a member of the Rio Tinto Ltd (Rio Tinto) group.  

Mr Stickley was dismissed from his employment with Kestrel and lodged an unfair dismissal application.  Kestrel responded that Mr Stickley’s employment had been terminated due to genuine redundancy and therefore he could not have been unfairly dismissed. The Fair Work Act 2009 provides that a person’s dismissal is not a case of genuine redundancy if it would have been reasonable in all the circumstances for the person to be redeployed within the enterprise of an associated entity of the employer. The onus was on Kestrel to establish that Mr Stickley’s dismissal was a genuine redundancy because it would not have been reasonable for Mr Stickley to have been redeployed within Kestrel or one of its associated entities.

Mr Stickley submitted that it was reasonable for Kestrel to redeploy him into an entity of Rio Tinto or RTCA.  The Fair Work Commission determined that at the time of the dismissal, there were no positions open in RTCA to which Mr Stickley could have been redeployed. This left open the question of whether it would have been reasonable for Mr Stickley to have been redeployed into another entity of Rio Tinto.

The Fair Work Commission confirmed that whether redeployment to an associated entity is reasonable will depend on the circumstances and one relevant consideration will be the level of managerial integration between the entities.  As Commissioner Spencer put it, for redeployment into an associated entity to be reasonable:

“There simply has to be overall managerial control by one member of the group and the level of managerial integration between the entities will be relevant.”

In the case of Kestrel, RTCA and Rio Tinto, there was evidence that there were shared support services, and in particular shared recruitment services, between the entities.  Recruitment functions and some human resource functions were provided by employees of Rio Tinto for Rio Tinto itself, RTCA and Kestrel.   In addition, there was some managerial integration, particularly at the executive level.  Significantly however, each entity operated as a distinct business unit with respect to recruitment decision making.  The evidence showed that recruitment decisions were made by the separate entities themselves and that Rio Tinto entities structured their companies as autonomous business units.  Despite some shared services, the presence of autonomous decision making demonstrated that the requisite level of managerial control was not present.

The Fair Work Commission determined that given the independent decision making capacities of the entities, Kestrel had no capacity to redeploy Mr Stickley to another Rio Tinto company and it was therefore not reasonable in all the circumstances for him to have been redeployed to Rio Tinto.  Therefore, Mr Stickley’s termination was a genuine redundancy and could not be the subject of an unfair dismissal application. 

The Fair Work Commission also confirmed the approach taken in  Ulan Coal Mines Limited v Honeysett and others [2010] FWCAFB 7578 which provides that whether redeployment to an associated entity is reasonable requires consideration of the:

  • nature of any available positions;
  • qualifications required to perform the job; 
  • employee’s skills, qualifications and experience; 
  • location of the job in relation to the employee’s residence; and
  • remuneration which is offered.

These factors must be assessed as at the time of the dismissal. 

Redeployment will still need to be considered on a case-by-case basis with particular attention to how obligations apply with respect to associated entities. This case indicates that the Fair Work Commission will look closely at integration between entities before imposing that obligation across all entities within corporate structures. We note that this is a first instance decision open to appeal and this is an area that we will continue to follow.