Summary 

 It is well known that employers have obligations under modern awards and enterprise agreements, which require them to consult with affected employees when implementing a major workplace place change. However, employers' consultation obligations under the Fair Work Act 2009 (Cth) are not as commonly understood.

In this eBulletin, we dissect the key messages from a recent decision which considers employers' consultation obligations under the Act, and the importance of senior human resource practitioners being are aware of, comprehending and complying with these obligations.

Standard expected of senior human resource personnel

In the decision of Aitken v Virgin Blue Airlines (Decision), the Federal Circuit Court of Australia (Court) held that Virgin Blue Airlines (Virgin) contravened its obligations under section 83 of the Act when it made Ms Aitken's position redundant. Ms Aitken was on unpaid parental leave at the time her position was made redundant.

In the Decision, the Court was critical of Virgin's senior human resources managers for failing to be aware of, or comprehend, the organisation's obligations to consult with an employee on unpaid parental leave. The Court noted that at the time of the contravention, Virgin was undergoing a major organisational restructure, which meant that redundancies were foreseeable. Despite this, the error leading to the contravention had occurred at a relatively senior level within Virgin's human resources team. While the Court recognised that the contravention by Virgin's human resource personnel was a careless omission rather than a deliberate act, it stressed that this omission was still unacceptable. Virgin was also criticised for failing to have adequate compliance systems in place, despite possessing the personnel and financial resources to do so.

The Court's criticisms send a clear message to organisations (particularly senior human resource managers within these organisations) that they are expected to meet a high standard of compliance with their employment obligations. Senior personnel must have appropriate compliance mechanisms in place, or risk being penalised.

Obligation to consult under section 83 of the Act

Section 83 of the Act provides that where an employee is on unpaid parental leave, and his or her employer makes a decision that will have a significant effect on his or her pre-parental leave position, the employer must take all reasonable steps to give the employee information about, and an opportunity to discuss, the effect of that decision on the employee's position. As section 83 of the Act is part of the National Employment Standards, an employer's contravention of this section can attract a maximum civil penalty of $33,000 per breach.

The Court held that Virgin had not complied with its obligations under section 83 of the Act. Although Virgin had engaged in discussions with Ms Aitken prior to the termination of her employment, these discussions were entirely hypothetical, and minimal thought was given to what possible alternative arrangements would entail from the perspective of either Ms Aitken or Virgin.

In order to comply with its obligations, Virgin needed to have given Ms Aitken notice about the proposed redundancy and provided her with the opportunity to express her views before a final decision was made regarding her position. The Court noted that Virgin was expected to comply with this requirement, even if the consultation would have had no practical impact on the outcome (i.e that Ms Aitken's role would be made redundant regardless). The Court ultimately ordered Virgin to pay 15% of the maximum penalty for its contravention.

The Decision demonstrates that compliance with an employer's obligation to provide information and hold discussions with employees regarding changes to an employees' pre-parental leave position under section 83 of the Act requires consultation to the same standard imposed under consultation terms of modern awards and enterprise agreements.

By implication, the standard of consultation adopted in the Decision may extend to employers' consultation with unions about proposed dismissals of 15 employees or more, which is required under section 531 of the Act. The standard of consultation outlined in the Decision may also extend to employees who are on authorised extended absences from their employment.

Bottom line for employers

  • It is important for organisations to comply with applicable consultation obligations, as a failure to properly consult can leave a decision made solely for operational reasons exposed to challenge, and may result in expensive and time consuming litigation.
  • For an employer to comply with its consultation obligations concerning employees on unpaid parental leave under the Act, employers must meet the same standards as under the consultation term of modern awards and enterprise agreements. This may extend to employees on extended absences from their employment, so long as the absence is authorised by the employer. Furthermore, this standard may be applied to employers' other consultation obligations under the Act.
  • Employers should review applicable industrial instruments and internal policy documents to ensure there is understanding about the types of workplace changes that may trigger consultation obligations, including the time for, and method of, consultation. Employers should ensure that senior human resources personnel understand the organisation's obligations, and implement a compliance system containing adequate checks and balances to ensure that these obligations are met.
  • Where possible, internal consultation obligations should be rationalised to be consistent with consultation obligations contained in the Act and any applicable industrial instrument.