A recent decision of the Fair Work Commission (Commission) in Hansjorg Mikl v Cape Australia Onshore Pty Ltd  FWC 8503 has highlighted the importance of ensuring the steps taken in a dismissal for redundancy meet the genuine redundancy provisions of the Fair Work Act 2009 (Cth), (FW Act) failing which the termination may be found to be unfair.
The applicant, Mr Hansjorg Mikl, brought a claim for unfair dismissal under the FW Act in respect of the termination of his employment with Cape Australia Onshore Pty Ltd (Cape). Mr Mikl commenced employment in February 2015 and worked as a full-time employee as an Advanced Scaffolder. Mr Mikl was permanently placed at a worksite of a client of Cape.
On 11 January 2019 Mr Mikl and his fellow workers at the worksite were called to a meeting with a manager of Cape where they were informed that the team would be downsized from 14 employees to six. Mr Mikl was also handed a letter which was drafted on the basis that he was a fixed-term employee, setting out that his work was ‘completed’ with Cape and his final shift would be on 18 January 2019.
On 16 January 2019, Mr Mikl was informally approached by another manager of Cape who informed him that he “didn’t make the final six”. At this stage he was given a form titled “Employee Redundancy Consultation” which contained a number of questions about alternative employment preferences.
Deputy President Asbury accepted that Cape needed to reduce the number of employees at the site from 14 to six. Deputy President Asbury found:
“It is well established that a decision to reduce the number of employees performing the same or similar work does not on its own, lead to the termination of employment of any individual. It is only after a second step of identifying which members of the group will be dismissed that by the application of selection criteria or some other process, it is possible to identify an individual person whose employment will be terminated.”
Cape originally objected to the jurisdiction of the Commission to hear the matter on the basis that Mr Mikl was either a fixed-term employee whose contract expired or that the termination was a “genuine redundancy” under the FW Act. Both defences were abandoned. To be able to demonstrate that an employee’s termination was a genuine redundancy under the FW Act an employer must be able to demonstrate that:
- the person's employer no longer required the person's job to be performed by anyone because of changes in the operational requirements of the employer's enterprise
- the employer has complied with any obligation in a modern award or enterprise agreement that applied to the employment to consult about the redundancy.
A redundancy is also not genuine for the purposes of the FW Act if it would have been reasonable in all the circumstances for the person to be redeployed. As Cape failed in their consulation obligations under section 389(1)(b) they were unable to rely on the defence of genuine redundancy to the unfair dismissal and withdrew that objection during the hearing.
Because Cape could not demonstrate the “genuine redundancy” exemption or the fixed-term contract position, Cape had to demonstrate that there was a valid reason for the termination, other than redundancy. Cape gave evidence that they underwent an internal process where they measured the performance of each of the 14 employees as per a number of selection critera, including “quality of work”, “productivity” and “team work”. However, Cape did not provide any evidence at trial of why Mr Mikl did not satisfy this criteria in comparison to the six employees who were not terminated, for example, his performance or conduct. In the absence of this evidence, Deputy President Asbury found there was no valid reason to dismiss Mr Mikl. Cape was also found to have terminated Mr Mikl in a procedurally unfair manner for the following reasons:
- Cape did not communicate or in any way make known the existence of the selection criteria to Mr Mikl
- as there was no communication, Cape did not give Mr Mikl a chance to respond to that selection critera
- Cape did not communicate a valid reason to Mr Mikl for the termination of his employment
- as there was no communication, Cape did not provide Mr Mikl with an opportunity to respond to a valid reason for the termination of his employment.
Given the finding by Deputy President Asbury that there was no valid reason to dismiss Mr Mikl, and the procedurally unfair manner in which the dismissal took place as outlined above, Cape was found to have dismissed Mr Mikl in a way that was “both substantively and procedurally unfair”. Deputy President Asbury awarded Mr Mikl with a compensation of $41,390.66.
Lessons for employers
This case is a reminder to all employers that having a need to downsize and make employees redundant is not, in and of itself, a full defence to the unfair dismissal jurisdiction under the FW Act. Employers have a number of obligations under Part 3-2 of the FW Act to avoid incurring liability for the unfair dismissal of an employee.
When seeking to rely on the genuine redundancy defence to an unfair dismissal an employer must be acutely aware of the statutory meaning of genuine redundancy under section 389 of the FW Act and, as with all dismissals, employers must effect any termination with procedural fairness.