The Full Bench of Fair Work Australia (FWA) has clarified the principles involved in assessing whether or not a redundancy is ‘genuine’ under the Fair Work Act 2009 (Cth) (FW Act). The Full Bench considered, in the context of an unfair dismissal claim, the relevance of the selection process where one of three employees who occupied the same role was to be made redundant. The Full Bench found the process used by an employer in choosing which employee is selected for redundancy is not relevant when determining whether a dismissal was a case of genuine redundancy.

Background

The employee was a warehouse picker who brought an unfair dismissal claim against his employer after being made redundant due to a slow-down in business. Prior to making its decision, the employer had consulted with two other employees, letting them know that one of the three would lose their jobs. The two other employees then made representations to the employer and provided evidence that, they claimed, proved the third employee was the least efficient. Following this, the employee decided to make the third employee redundant.

The dismissed employee applied to FWA claiming unfair dismissal. At first instance the Commissioner held that the redundancy was not genuine because the employer had failed to consult with the employee as required under the relevant modern award.

The Commissioner then considered the factors under s387 of the FW Act in determining whether the dismissal was unfair, and in particular whether there was a valid reason for dismissal relating to the employee’s capacity or conduct under s387(a) of the FW Act. In finding the employee had been unfairly dismissed, the Commissioner decided the reasons for the employee’s dismissal did relate to the employee’s capacity, and were not valid reasons as they were not ‘sound, defensible or well-founded’.

Selection process is not relevant, but consultations are

The employer appealed the decision to the Full Bench of FWA. The majority of the Full Bench agreed that the redundancy was not genuine because of a failure by the employer to consult as required by the modern award. However, while also finding the employee had been unfairly dismissed, the Full Bench found the Commissioner had erred in his reasoning.

The Full Bench confirmed that that the process in which an individual is selected for redundancy is irrelevant in determining whether the redundancy is genuine (save for where a person is dismissed for a prohibited reason under the general protections provisions found in Part 3-1 of the FW Act, for example a discriminatory reason).

The Full Bench found the reason for the employee’s dismissal did not relate to the employee’s ‘capacity’ as determined by the Commissioner. This Is because the evidence established the only reason for the dismissal was that the employer no longer required the employee’s job to be performed by anyone because of a change in the operational requirements of its enterprise and it was not reasonable in all the circumstances to redeploy him.

However, it was found if any of the criteria for a genuine redundancy in s389 of the FW Act had not been met this (such as failure to consult) could be taken into account by FWA under s387(h) of the FW Act being, ‘any other matters that FWA considers relevant’. The Full Bench found the failure to consult was, in the circumstances of this case, a matter relevant to its consideration as to whether the employee’s dismissal was harsh, unjust or unreasonable, notwithstanding the valid reasons for the employee’s dismissal and the due weight given to those valid reasons.

Reduction in compensation

As the redundancy was not genuine the Full Bench had to consider the amount of compensation that the employee should be awarded. In the initial decision the employee was awarded compensation on the basis that the employee would have remained employed at a reduced capacity for a further year.

The majority rejected this approach. The Full Bench found the Commissioner had erred in making this award. In weighing up all factors, they ultimately considered that the employee would have remained in his job for a maximum of two further weeks as this is how long the consultation process would have taken if the employer had complied with the modern award. Accordingly, the amount of compensation payable was reduced to two weeks’ wages.

Implications for employers

This decision is good news for employers. It means that when a position becomes genuinely redundant, employers will not be constrained in their selection of employees for that redundancy, provided the reason an employer makes that selection is not prohibited under the general protection provisions of the FW Act. FWA will not otherwise investigate the selection process when assessing whether or not the redundancy is genuine.

The case also highlights the importance of being aware of the consultation provisions in any awards which cover your employees. If an employer does not comply with these provisions, an otherwise genuine redundancy may become subject to unfair dismissal proceedings, in which the circumstances of the failure to consult are considered, potentially exposing employers to reinstatement of the employee or a compensation claim.