Three recent cases provide guidance on employers’ redundancy obligations during restructures.1 Two of these relate to a 2014 restructure at Clermont Coal Operations in Queensland, which resulted in the roles of a number of employees being made redundant. In the first Clermont case, a group of redundant employees brought claims to the Fair Work Commission (Commission) asserting that they should have been redeployed into positions held by labour hire workers instead of being made redundant.

This argument was rejected by the Commission, which refused to disturb what it said was Clermont’s “legitimate business model” of using labour hire workers to ensure flexibility. The Commission noted that “[i]t would cause major operational difficulties…  if [Clermont] were not able to have the flexibility to cover employees on leave in a work environment where symbiotic processes mean that the absence of personnel can bring production to a standstill.”

Under the Fair Work Act, employers have an obligation to redeploy redundant employees if it is reasonable to do so. According to the Commission, this means that there are circumstances where it is appropriate for the Commission to consider work undertaken by contractors at the point of redundancy.

In other words, an employer may not be excused from considering roles performed by labour hire workers for the purposes of redeployment, unless it can provide clear evidence of a legitimate business reason for those roles to be held by labour hire workers instead of permanent employees.

In the second Clermont case, employee and union official, Alan Scott, was made redundant from Clermont as a result of a ranking process (which used a spreadsheet matrix prepared by Human Resources) to determine which employees should be retrenched.

Mr Scott was the President of the CFMEU’s Clermont lodge and the evidence showed that he was extensively involved in industrial activity on site. Together with the CFMEU, he brought an adverse  action claim alleging that he had been selected for redundancy because of his participation in industrial activities, which is a ‘workplace right’ under the Fair Work Act 2009 (Cth) (FW Act).

The Federal Court considered the reasons of each person involved in the decision-making and determined that the views of two people in particular had affected Mr Scott’s ranking.

Their assessments were used to rank Mr Scott in the spreadsheet matrix, with the final decision to retrench him made further up the decision making chain. The matrix involved scoring each employee on skills, performance, abilities and, importantly, attitude.

One of the two assessors had a difficult relationship with Mr Scott and scored him low for “attitude”, leading to a low ranking in the spreadsheet.

According to the Court, this assessor’s view of Mr Scott had arisen from “terse dealings” with him in his role as CFMEU member. As a result, the Court found that the assessor had not discharged the reverse onus to demonstrate that his low scoring of Mr Scott for “attitude” was unaffected by Mr Scott’s role as a union official. While the others involved in the decision- making process had not been affected by prohibited reasons, the dismissal of Mr Scott was therefore adverse action in breach of the FW Act. The Court has not yet made a decision about an appropriate remedy.

The third case involved an employee who was employed as an administrative assistant in the Family Day Care area of the Monash City Council.

As part of a restructure, the Council advised the employee that the total administrative hours in the Family Day Care Area would be reduced and that this meant redundancies were possible. However, in accordance with the relevant enterprise agreement, the Council advised that its primary objective was to find a suitable redeployment position for any adversely affected employee.

The relevant enterprise agreement describes a suitable position as “one which is consistent with the Employee’s classification level and previous employment profile”.

The Council offered several redeployment positions to the employee which it said were consistent with her previous employment profile. The positions were administrative roles in the Home and Community Services division of the Council but, unlike the employee’s previous role, they did not involve working with children.

The employee rejected the positions, citing that they were not consistent with her previous employment profile, primarily because they did not involve working  with children. She said that her skill set, qualification and experience were all inherently linked to the provision of services to children.

After refusing the redeployment positions, the employee sought dispute resolution from the Fair Work Commission seeking access to redundancy benefits.

The Commission found that the redeployment positions offered to Ms Belcher by the Council were suitable positions and as a result, she was not entitled to redundancy benefits.

It noted that, “[i]t has never been suggested that, for a position to be suitable for redeployment, a person must be able to meet every single requirement of the position.” The fact that she required additional training in order to be able to perform the new role did not mean that it was not a suitable position or that it was not consistent with her previous employment profile.

The Commission said that the assessment of a position’s suitability does require consideration of the skills and attributes of the employee, but the assessment must be balanced and objective. While the views of the affected employee must be given due consideration, the process must be objective. Further, the Commission noted that a role will not fail to qualify as ‘reasonable alternative employment’ merely because it does not replicate the job the employee previously performed.

Bottom line for employers

  •  Where multiple people have input into a decision to make a role redundant/ retrench an employee, each decision maker will need to have impartial, “non-prohibited” reasons for doing so. An employer otherwise runs the risk of being found to have taken adverse action in breach of the FW Act.
  •  Redundant employees do not have an automatic right to be redeployed into positions held by labour hire workers. However, where an employer is engaging labour hire employees in similar roles to those performed by an employee who has been made redundant, the employer will need to be able to satisfy a court or tribunal that there were legitimate business reasons for doing so.
  • Redundant employees do not have the right to choose whether they consider themselves suitable for a particular redeployment role. The decision about whether the role is suitable alternate employment should be objective. It does not include an employee’s preference to work in a particular area if they are capable of performing the redeployment role with relevant training.