The Federal Court has warned against using “sham redundancies” to discard unwanted employees. In May 2013 the Federal Court ordered the Royal Melbourne Institute of Technology (RMIT) to pay $37,000 for dismissing an academic who fell out with the Head of the school. The academic’s dismissal was labeled a redundancy, but actually constituted unlawful adverse action.

Why the University was Wrong 

The academic, Professor of Youth studies and Sociology, claimed adverse action, in that she was dismissed because she planned to lawfully exercise her workplace right to make a complaint against bulling and intimidation by the new Head of School.

The Federal Court rejected the university’s argument that the professor was made redundant for financial reasons, primarily because the Professor’s area was running at a loss. The Youth Studies and Sociology Professor was reinstated, as ordered by the Court.

Justice Gray found that there was a lack of connection between the financial situation of the Youth Work discipline and the Professor’s redundancy, and therefore concluded that RMIT had breached section 340(1)(a)(ii) of the Fair Work Act 2009 (Cth) (FWA). The lack of connection included the absence of any criteria by reference to which the making of that choice occurred, among other factors.

RMIT was found to have breached its Enterprise Agreement with the NTEU, which required it to offer employees whose position had an “uncertain future” the option of participating in a voluntary redeployment process. Justice Gray continued that RMIT’s non-compliance was a serious contravention of its Enterprise Agreement.

Specific deterrence of this type of behavior from employers was endorsed and emphasised by Justice Gray, to ensure RMIT does not “succumb to the temptation to make  use of its redundancy processes to rid itself of an employee” again.

This highlights that non-authorised redundancy is not an option under the FWA.

The Moral of the Story 

Redundancy may be defined as a situation where an employer no longer requires work through no fault of the employee. That is, the position, not the employee, is redundant.

A defence to an unfair dismissal claim is for an employer to show the dismissal was a “genuine redundancy”. That is, the employer would have a defence to an unfair dismissal claim if they could show that they no longer required the job to be done by anyone because of changes in operational requirements of its business.

Factors relevant to showing that a “genuine redundancy” occurred include:

  • Consultation Requirements
    • complying with an Enterprise Agreement;
  • Redeployment Opportunities
    • the employer must show reasonable efforts to redeploy the employee, i.e. if there are no positions within the business or associated entity (even if the employee was over-qualified, the employer must offer the lower position and lower responsibilities to the employee); and
  • Selection Process
    • must be objective and non-discriminatory, when electing who must be made redundant.

Another Thing to Note

Where a small business has less than 15 employees, they are generally exempt from redundancy pay. Whether this exemption applies is worth investigating.

Why Genuine is Always Better

The best chance to protect yourself and your business is to:

  • avoid “sham” redundancies;
  • ensure all consultation requirements, redeployment opportunities and selection processes are well-documented; and
  • more generally, be able to show that attempts to consult and redeploy employees have been made.

Be mindful of the general protections in favour of employees under the FWA, as employees have recourse to adverse action, unfair dismissal and unlawful termination, which, by citing the above example, can become costly to defend.