Have you been dismissed from your job? If you were made redundant, was the redundancy genuine?
The recent economic downturn has had a major effect on the workforce. We have all seen images of people lined up at Centrelink offices to register for an unemployment benefit. Although many have lost their jobs due to businesses (or entire industries) failing, a good majority of the workforce remains employed. Some sectors are even thriving.
For those who have become unemployed, it is vital to understand principles of employment law regarding the termination of employment. This article will look at two key aspects of ceasing employment – unfair dismissal and genuine redundancies – and their inter-relationship under the Fair Work Act (“the Act”).
The Fair Work Commission (“FWC”) manages applications for unfair dismissal. Most employees are protected from unfair dismissal where:
- The person has completed the minimum period of employment (six months, or one year if the employer is a “small business”); and
- The person earns less than the high income threshold (currently $153,600).
Criteria Of Protection
The minimum period of employment (6 months) will be extended if the employer is a “small business.” Under the Small Business Fair Dismissal Code (“the Code”), a small business is defined as a business that employs 15 employees or less (including all full-time and part-time employees).
The high income threshold is adjusted annually on 1 July. This is not exclusive to wages and may include non-monetary benefits or amounts directed to a third party by the employee.
Most employees are covered by an enterprise agreement or “modern award” under the Act. Modern awards provide minimal standards for employment which include leave entitlements, breaks, and pay rates. Modern awards apply even if there is no employment contract between the employee and the employer.
Once an application for unfair dismissal has been filed, the FWC will determine whether the dismissal was harsh, unjust or unreasonable. Only one of these elements needs to be proven to find that the dismissal was unfair.
There are a variety of issues that the FWC will consider when deciding whether the termination was unfair. These include:
- The reason for the dismissal.
- The alleged misconduct by the employee.
- A failure to provide an opportunity to respond to allegations of misconduct.
- The steps taken by the employer leading to termination (e.g., holding meetings with the employee and involving a support person).
- The size of the employer business.
- Whether the employer has a dedicated human resource manager.
Each of the above issues (plus any other relevant issues) will need to be considered on the facts of each case.
A person will not have protection against unfair dismissal where the employment has been terminated as a result of a genuine redundancy. A genuine redundancy occurs when:
- The employer no longer requires the person’s job to be performed by anyone because of changes in the operational requirements of the employer’s enterprise; and
- The employer has complied with any obligations imposed by an applicable modern award or enterprise agreement to consult about the redundancy.
By contrast, a person’s dismissal will not be a genuine redundancy “if it would have been reasonable in the circumstances for the person to be redeployed within:
- the employer’s enterprise, or
- the enterprise of an associated entity of the employer.”
So the key indicia of a genuine redundancy are a discontinuance of the person’s job, compliance with obligations under the enterprise agreement or modern award, and the inability to have the employee redeployed to another position. Modern awards and enterprise agreements include clauses requiring consultation with employees regarding changes that will significantly affect their employment. This would obviously include being made redundant.
Dismissal vs Redundancy
If the above requirements of a genuine redundancy are met, then the FWC will not have jurisdiction to hear a claim of unfair dismissal. Alternatively, if an employer has not met the requirements of a genuine redundancy, then the termination of employment may be treated as an unfair dismissal and the FWC will consider the factors listed in section 387 of the Act.
The Bourdon Case
In the case of Bourdon v AR-Rahmann Investments Pty Ltd T/A The Cheesecake Shop (“Bourdon”) the FWC needed to determine if a genuine redundancy had occurred or if the employee was unfairly dismissed. In reaching his decision in Bourdon, Commissioner Wilson applied the usual test for a genuine redundancy. The issue that required greater consideration was whether the employer had complied with the obligation to consult with the employee before implementing the redundancy. On the facts in Bourdon, it was found that the employer had not adequately consulted with the employee. In fact, the employer had already made up their mind to make the employee redundant, and informed the employee of that fact, during the alleged consultation. Commissioner Wilson found that the termination of employment was not a genuine redundancy.
Commissioner Wilson then considered whether the termination of employment was an unfair dismissal. Commissioner Wilson referred to sections 387(c) and 396 of the Act when reaching his decision, noting that that the employee was not provided with an opportunity to respond to the reasons for termination of their employment. Consequently, it was decided that the dismissal of the employee was unjust and unreasonable.
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This article is for your information and interest only. It is not intended to be comprehensive, and it does not constitute and must not be relied on as legal advice. You must seek specific advice tailored to your circumstances.