Fair Work Australia has provided a clear indication to employers of their obligations to consider redeployment of employees before making them redundant. The decision in Ho v A.P. Eagers Limited (U2009/13208) outlined several deficiencies in the approach taken by the employer.

Section 385 of the Fair Work Act 2009 provides that a person has been unfairly dismissed if the dismissal was harsh, unjust or unreasonable and was not a case of genuine redundancy. Section 389 states with respect to genuine redundancies that:

  •  a person’s dismissal is a genuine redundancy if the person’s employer no longer requires the person’s job to be performed by anyone due to operational changes in their enterprise, and the employer has complied with any obligation in an award or enterprise agreement to consult about the redundancy
  •  a person’s dismissal is not a genuine redundancy if it would have been reasonable in all the circumstances for the person to be redeployed within the employer’s enterprise or the enterprise of an associated entity of the employer.

The Facts

Mr Ho, 62, had worked in various accounting roles for A.P. Eagers for 24 years.

In September 2009 the Chief Financial Officer decided to restructure the corporate finance division. The effect of the restructure was that Mr Ho’s position would become redundant, and some of the functions of his role would be taken over by a new junior role of Assistant Accountant. The new Assistant Accountant would be entitled to considerably less remuneration than Mr Ho had been receiving. The employer did not offer to redeploy Mr Ho to the Assistant Accountant role. Mr Ho was dismissed on the basis that the company was unable to provide a position matching his experience, skills and employment package.

Mr Ho claimed that he was unfairly dismissed. He argued that his case was not one of a genuine redundancy, because he could have been redeployed to the Assistant Accountant role.

Members of A.P. Eagers’ management offered several explanations as to why redeployment was not offered. They said that redeployment would have been inappropriate due to problems with Mr Ho’s communication and interpersonal skills, his limited ability to use Microsoft Excel, his reluctance to take on new roles, the different duties required by the new role and the difference in remuneration.

The Decision

Commissioner Simpson of FWA accepted that Mr Ho’s position had genuinely become redundant as a result of changes to the operational requirements of A.P. Eagers. He did not, however, accept that Mr Ho could not reasonably have been redeployed into the position of Assistant Accountant.

The employer’s arguments relating to Mr Ho’s skills and interpersonal relationships were supported only by anecdotal claims and were contradicted by oral evidence from current and former colleagues of Mr Ho.

Crucially, A.P. Eagers could not produce any evidence to prove that:

  •  Mr Ho had been counselled or disciplined in relation to his computer or interpersonal skills at any time during his 24 years of employment
  •  they had conferred with Mr Ho’s immediate superior about his suitability for redeployment
  •  they had consulted with Mr Ho about the possibility of redeployment.  

Commissioner Simpson indicated that if A.P. Eagers had been able to produce evidence of valid concerns with Mr Ho’s performance, or an objective assessment of his unsuitability for redeployment, his decision may have been different.

Commissioner Simpson concluded that the dismissal was therefore not a case of genuine redundancy. He then determined, using the criteria laid down by section 387 of the Act, that Mr Ho’s dismissal was harsh, unjust and unreasonable because there was not a valid reason for his dismissal; he was not provided with the opportunity to respond to the reasons for his dismissal, and he had not been warned about any issues relating to unsatisfactory performance.

Mr Ho sought reinstatement. However, due to the loss of trust between him and the management, this was not deemed appropriate. A.P. Eagers was ordered to pay compensation to Mr Ho, which was mitigated by his proximity to retirement. He was awarded compensation of one year’s salary of the role of Assistant Accountant, less what had already been paid to him as redundancy entitlements.

Lessons for Employers

The decision demonstrates that where employers are seeking to make employees redundant and wish to avoid unfair dismissal claims, they must be able to produce convincing evidence that the redundancy is genuine as defined in section 389 of the Fair Work Act. A redundancy will be genuine where it can be objectively determined that operational changes to an enterprise have rendered an employee’s role obsolete and, in all the circumstances, that they cannot reasonably fulfil another role within the enterprise.

Employers should therefore ensure that they give genuine consideration not only to redeployment to positions at the same level, but also to lower‑level positions if they are available. Employers should be prepared to give a cogent explanation if they elect not to offer redeployment.