Two recent cases are good reminders for employers to always engage in consultation before carrying out redundancies and to ensure the concept of ‘suitable alternative employment’ is well understood.

In the case of Smith v Onesteel Limited and Commonwealth Steel Company Pty Ltd [2013] NSWDC 18, Mr Smith had been working as a furnace operator for 20 years when, due to lack of work, he was moved to a role painting wheels on a finishing line. Humiliated and stressed by the perceived demotion, and physically unable to do the role, he tendered his resignation and claimed termination payments, including redundancy pay. The court was critical of the way the employer had directed him to perform the painting role rather than consulting with him about its suitability, and awarded him just over AU$150,000 in redundancy entitlements.

In the Jenny Craig Weight Loss Centres Case [2011] FWA 5218, Ms Margolina’s managerial role was made redundant when a new role was created combining the elements of two senior roles. There was no consultation with Ms Margolina at all. She was simply called into a meeting, advised her job was redundant and dismissed.

FWA, on hearing Ms Margolina’s claim for unfair dismissal on grounds there was no genuine redundancy, was critical of the Jenny Craig’s failure to offer alternative employment. Jenny Craig’s evidence was that there were alternative positions available, but they were for lower pay and of lower status. Accordingly, the positions had not been offered to Ms Margolina even though she had the necessary skills to perform the roles. Jenny Craig had not wanted to insult her. Ms Margolina gave evidence that she would have accepted a lower paid position including an entry level position or a part-time job.

FWA found that it would have been reasonable in all the circumstances for Ms Margolina to be redeployed. It was noted that in many cases involving a demotion, an employer’s presumption that the employee will not want to accept redeployment may be found by a court to be correct, but the employer proceeds at its own risk if it does not even ask the employee’s opinion.

Lessons for employers

  • Discuss all alternative roles which the employee is capable of performing with the employee, even if the roles might appear to be a demotion.
  • Do not make assumptions about which roles an employee may or may not accept.
  • Ensure proper consultation and active dialogue with an employee during a redundancy situation and meaningfully consider any proposals suggested by the employee.