the three rs of workplace change: restructure, redeployment & redundancy

THE THREE R’S OF WORKPLACE CHANGE: RESTRUCTURE, REDEPLOYMENT AND REDUNDANCY

March 2015

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The three R’s of workplace change: restructure, redeployment and redundancy

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TODAY’S OUTLINE


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1.Introduction

2.Challenging a redundancy as an unfair dismissal claim

3.NES obligations regarding redundancy including pay, exceptions and variations

4.Redundancy and transfer of business

5.Redundancy and adverse action

6.The interaction between redundancy and notice

7.The interaction between redundancy and enterprise agreements

8.Redundancy and policies

Introduction

5The three R’s of workplace change: restructure, redeployment and redundancy

HISTORY OF REDUNDANCY IN AUSTRALIA

• The concept of redundancy was brought about as a result of increasing

unemployment due to economic and industry downturns, company

amalgamations and takeovers, technological change and restructuring or re-

organisations of employment.

• As a result the Australian Conciliation and Arbitration Commission held a number

of hearings which resulted in the 1984 Termination, Change and Redundancy

Case which set standards for redundancy.

• In 2004 the Full Bench of the AIRC set the federal award standard in its 2004

Redundancy Case ((2004) 54 AILR.

• On 1 January 2010 the first national legislative right to redundancy pay came into

force with commencement of the National Employment Standards (NES).


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MEANING OF REDUNDANCY

• There is no definition of ‘redundancy’ under the Fair Work Act 2009 (FW Act).

• The meaning of redundancy is rather taken from the common law. The leading

case defining redundancy is The Queen v Industrial Relations Commission of

South Australia, ex parte Adelaide Milk Supply Co-Operative Limited (1977) 16

SASR 6 in which Bray CH states:

“the concept of redundancy... is that a job becomes redundant when the

employer no longer desires to have it performed by anyone. A dismissal for

redundancy seems to be a dismissal, not on account of any personal act or

default of the employee dismissed... but because the employer no longer

wishes the job the employee has been doing to be done by anyone.”


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• In a recent case of CFMEU, CEPU and AMWU v Spotless Facility Services

Pty Ltd T/A Spotless [2015] FWCFB 1162 the Full Bench held:

“The meaning of the word ‘redundancy’ is not fixed and the term will take

colour from its context. However, in any relevant context it is the abolition of

a position which leads to that position being redundant.”


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• In a recent case from the NSW Court of Appeal in UGL Rail Services Pty Ltd v

Janik [2014] NSWCA 436:

“…Ordinarily, it is necessary for the employee claiming to have been made

redundant to show that the changes in the duties and responsibilities of a

position are so substantial that for practical purposes the position no longer

exists. Thay may come about in a particular case where a position appears to

continue …but the duties and responsibilities of the position are so

substantially altered that it is largely stripped of its functions. [132].

“The changes to the position were not trivial, but they fell considerably short of

justifying a finding that Mr Janik’s position had been abolished or largely

stripped of its functions.” [151]


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Challenging a redundancy as an unfair dismissal


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REDUNDANCY AND UNFAIR DISMISSAL LAWS

• The meaning of genuine redundancy is contained in the unfair dismissal

provisions of the FW Act.

• Under the FW Act a person has been unfairly dismissed if the Fair Work

Commission (FWC) is satisfied that the dismissal was:

1. Harsh, unjust or unreasonable;

2. Not consistent with the small business fair dismissal code; and

3. Not a case of genuine redundancy.

• To challenge a redundancy under the FW Act a person must be eligible to

make an unfair dismissal application which means they must satisfy certain

conditions. The three R’s of workplace change: restructure, redeployment and redundancy

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GENUINE REDUNDANCY

389 Meaning of genuine redundancy

1)A person’s dismissal was a case of genuine redundancy if:

a) 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; and

b) the employer has complied with any obligation in a modern award or enterprise

agreement that applied to the employment to consult about the redundancy.

2)A person’s dismissal was not a case of genuine redundancy if it would have been

reasonable in all the circumstances for the person to be redeployed within:

a) the employer’s enterprise; or

b) the enterprise of an associated entity of the employer.


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JOB NO LONGER REQUIRED

• A job means ‘a collection of functions, duties and responsibilities entrusted, as

part of the scheme of the employer’s organisation, to a particular employee’ .

See Jones v Department of Energy and Minerals (1995) 60 IR 304.

• The test is whether the previous job has survived the restructure or

downsizing, rather than a question as to whether the duties have survived in

some form. See Kekeris v A. Hartrodt Australia Pty Ltd T/A a.hartrodt [2010]

FWA 674.


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JOB NO LONGER REQUIRED

• An employee may be genuinely redundant if the employees duties were

redistributed amongst other employees and aspects of the employee’s duties

are still being performed by other employees. See Dibb v Commissioner of

Taxation (2004) 136 FCR 388.

• The reference to “a job no longer being performed by anyone’ has been

interpreted to mean to anyone employed in the business. See Suridge v Boral

Window Systems Pty Ltd T/A Dowell Windows [2012] FWA 3126


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CHANGES TO THE OPERATIONAL REQUIREMENTS

• The FW Act does not define the term "operational requirements”.

• The Explanatory Memorandum and the Unfair Dismissal Benchbook provide

some examples of a change in the operational requirements of an enterprise.

• The onus of proving on the balance of probabilities that the redundancy was

due to changes in operational requirements rests with the employer. See

Kieselback v Amity Group Pty Ltd (Unreported, AIRC, Hamilton DP, 9 October

2006).


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REQUIREMENT TO CONSULT

• The obligation on an employer to consult about redundancy only arises when

a modern award or enterprise agreement applies to an employee and

contains requirements to consult about redundancy.

• FWC will consider whether in totality the employer complied with the

requirement to consult. See Tyszka v Sun Health Foods Pty Ltd [2010] FWA

1781.


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REQUIREMENT TO CONSULT

• Consultation must be genuine and meaningful and not perfunctory. See

Monks v John Holland Group Pty Ltd [2012] FWA 6453 .

• If “consultation was highly unlikely to have negated the operational reasons

for the dismissal or lead to any other substantive change” the failure to

consult may not be strongly considered by FWC in determining whether it was

an unfair dismissal. See Maswan v Escada Textilvertrieb T/A ESCADA [2011]

FWA 4239.

• Ultimately the obligation is to consult, the employer is not obliged to change

its original decision.


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REASONABLENESS OF REDEPLOYMENT

• A dismissal is not a genuine redundancy if it would have been reasonable in

all the circumstances for the employee to be redeployed within:

(a) the employer’s enterprise; or

(b) the enterprise of an associated entity of the employer.

• Under the FW Act, "enterprise" means a business activity, project or

undertaking (s 12).


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REASONABLENESS OF REDEPLOYMENT

• The Unfair Dismissal Benchbook provides that whether an alternative role will

be considered suitable will depend of a number of matters including the

nature of any available position, the qualifications required to perform that job,

the employee’s skills, qualifications and experience, the location of the job in

relation to the employees residence and the remuneration offered.

• See Ulan Coal Mines Ltd v A. Honeysett & Ors R. Murray & Ors v Ulan Coal

Mines Ltd [2010] FWAFB 7578.


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NES obligations regarding redundancy including pay, exceptions and variations


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REDUNDANCY PAY UNDER THE NES

• The National Employment Standards (NES) in the FW Act establish minimum

employment standards for employees in Australia.

• S119 of the FW Act provides for a minimum redundancy entitlement for

employees. The sections relevantly provides:

(1) An employee is entitled to be paid redundancy pay by the employer if the

employee’s employment is terminated:

(a) at the employer’s initiative because the employer no longer requires

the job done by the employee to be done by anyone, except where

this is due to the ordinary and customary turnover of labour; or

(b) because of the insolvency or bankruptcy of the employer.


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ORDINARY AND CUSTOMARY TURNOVER OF LABOUR

• There is no requirement to pay redundancy pay under the FW Act if the

reason the employer no longer requires the job to done by the employee or

anyone else is ordinary and customary turnover of labour.

• The FW Act does not define “ordinary and customary turnover of labour”.

• The authorities provide that to establish that a termination did not take place

in the “ordinary and customary turnover of labour” is a question of fact and to

be approached by having regard to the normal features of the business where

the employee worked and whether is was customary to dismiss employees

regardless of their service history upon loss of contracts. See Transport

Workers' Union v Veolia Environmental Service (Australia) Pty Ltd [2013]

NSWIRComm 22.


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ORDINARY AND CUSTOMARY TURNOVER OF LABOUR

• A central consideration to whether a termination is as a result of the “ordinary

and customary turnover of labour” is whether the circumstances surrounding

the employment created a reasonable expectation that it would be ongoing.

See Kilsby v MSS Security Pty Ltd t/a MSS Security [2014] FWC 7475.


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EXCEPTIONS

• An employee may not have a right to redundancy pay under section 119 of the

FW Act if:

- Immediately before the time of the termination, or at the time when the

person was given notice of the termination (whichever happened first)

a) the employee's period of continuous service with the employer is less

than 12 months; or

b) the employer is a small business employer. (Section 121(1) of the FW

Act).


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• In certain transfer of business situations (section 122 of the FW Act).

• A modern award may include a term specifying other situations in which

section 119 does not apply to the termination of an employee's employment

(section 121(2) of the FW Act).

• If a modern award includes such a term an enterprise agreement may

incorporate the award term by reference and provide that the incorporated

term covers some or all of the employees who are also covered by the award

term (section 121(2) of the FW Act).


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EXCEPTIONS

• S123 of the FW Act provides that the following employees are not entitled to redundancy pay

under the NES:

• an employee employed for a specified period of time, a specified task, or the duration of a

specified season;

• an employee dismissed for serious misconduct;

• a casual;

• an employee under a training arrangement whose employment is for a specified period of time or

limited to the duration of the training arrangement;

• an apprentice;

• an employee to whom an industry-specific redundancy scheme in a modern award applies; and

• an employee to whom a redundancy scheme in an enterprise agreement applies if the scheme is

an industry-specific redundancy scheme incorporated by reference into the enterprise agreement

from a modern award and the employee is covered by the modern award.The three R’s of workplace change: restructure, redeployment and redundancy

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EXCEPTIONS

AMOUNT OF REDUNDANCY PAY

• Section 119 (2) of the FW Act provides that the amount of the redundancy pay equals

the total amount payable to the employee for the redundancy pay period worked out

using the following table at the employee's base rate of pay for his or her ordinary hours

of work:


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Redundancy pay period

Employee's period of continuous service with the

employer on termination

Redundancy pay

period

1 At least 1 year but less than 2 years 4 weeks

2 At least 2 years but less than 3 years 6 weeks








10 At least 10 years 12 weeks

PRE 2010 SERVICE

• Any service prior to 1 January 2010 does not count as service for the purpose

of calculating an employee’s NES redundancy entitlement, unless the

employee had an existing entitlement to redundancy pay under their “terms

and conditions of employment” prior to 1 January 2010. (Cls 4 and 5, Sch 4

of the Fair Work (Transitional Provisions and Consequential Amendments) Act

2009 (TPCA Act)).

• “Terms and conditions of employment” includes those in a contract of

employment, pre-reform award or another applicable industrial instrument.

• If the employee did not have an entitlement to redundancy immediately prior to

1 January 2010, the employee’s service for the purpose of the NES

redundancy pay entitlement is deemed to commence from 1 January 2010.


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VARIATION TO REDUNDANCY PAY

• Under section 120 of the FW Act an employer can apply to the FWC to make a

determination to vary redundancy pay payable to an employee under section

119 of the FW Act on the basis that the employer:

(i) obtains other acceptable employment for the employee; or

(ii) cannot pay the amount.

• The FWC may determine that the amount of redundancy pay is reduced to a

specified amount (which may be nil) that the FWC considers appropriate.

• See Mantra Hospitality (Admin) Pty Ltd [2013] FWC 1063, MUA v FBIS

International Protective Services [2014] FWCFB 6737 and Moltoni Waste

Management v P Fairs and others [2012] FWA 5590


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Morning Tea Break


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Redundancy and transfer of business


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1. Transfer of employment: where an employee moves from one employer to another if:

a) The employee employed by the second employer within 3 months of ceasing job

with first employer;

b) Employer 1 and 2 are associated entities; OR

c) There is a transfer of business from employer 1 to 2 and they are not associated

entities.

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REDUNDANCY AND TRANSFER OF BUSINESS


Transfer of business requires a connection between old employer and the new employer

under s311(1)(d) of the FW Act by reason of:

• An arrangement whereby employer 2 owns or has use of assets of employer 1;

• Outsourcing of work from employer 1 to 2;

• Insourcing or work that was previously outsourced; OR

• New employer associated entity of old employer at time of transfer.

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An associated entity; see definition in s.50AAA of the Corporations Act.

In general, entities are associated if one has a controlling interest in the other.

2.In a transfer of employment, if second employer recognises employee service with first

employer, no entitlement to statutory redundancy pay with first employer, s122(2).

3. What happens if employee refuses employment with second employer?

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An employee will not be entitled to NES redundancy pay if they reject the new employer's

job offer and:

• its terms and conditions are substantially similar to those of the old job & overall, no

less favourable;

• it recognises the employee's service with the old employer for redundancy pay;

• there would have been a transfer of employment if the employee had taken the job,

s.122[3];

• BUT subject to s.122(4), if the FWC is satisfied that s.122(3) operates unfairly to an

employee, it may order payment of specified redundancy by 1st employer; and

• A new non-associated employer has option of not recognising a transferring

employee’s previous service re NES redundancy pay.35



• An enterprise agreement is transferable s312. That is the default position i.e.

Where there is a relevant transfer, EA automatically transfers.

• Svitzer Aust v MUA (2011) FWAFB 7947.

• Svitzer selling Port Botany business to NMS and 14 employees offered jobs

with NMS.

• EA cl 17: where an employee is surplus to the requirements of the company

due to changed Port conditions…redundancy payable acc. to a set formula.

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Held:

• A redundancy arises where the job being done by employee is no longer done by

anyone;

• Where a transfer of business occurs, EA automatically transfers to new employer;

• The transferring employees would perform same work under same conditions but with a

different employer.

• The reference to the company was a reference to NMS, the new employer on

transmission of the EA.

• Unless otherwise provided in the EA, in a transfer situation, transferring employees are

not redundant and therefore not entitled to redundancy pay.

• Did not address situation where employee refused to accept transfer. 37



Redundancy and adverse action


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• Pursuant to sections 340(1) and 351 of the FW Act an employer cannot take

adverse action against an employee or prospective employee because:

- the employee has exercised a workplace right; and

- the employee has a particular protected attribute under anti-

discrimination law (ie race, sex, sexual orientation, age, physical or mental

disability).

• A workplace right includes initiating or participating in a process or

proceedings under a workplace law, having a role or responsibility under a

workplace instrument or workplace law and making a complaint or inquiry in

relation to their employment.

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REDUNDANCY AND ADVERSE ACTION


• Whether adverse action has been taken because of a proscribed reason is a

matter for evidence. If the decision maker’s evidence is accepted as reliable

it will discharge the burden of proof on the employer. See Board of Bendigo

Regional Institute of Technical and Further Education v Barclay [2012] HCA

32.

• See Community and Public Sector Union v Telstra Corporation Ltd [2001]

FCA 267 and NTEU v Royal Melbourne Institute of Technology [2013] FCA

451; and CFMEU v North Goonyella Coal Mine Pty Ltd [2013] FCA 1444

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REDUNDANCY AND ADVERSE ACTION


Consultation regarding redundancies


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• Enterprise agreements will have a clause regarding major workplace change

• Section 205 of FW Act requires a minimum clause

• Employees who are not being made redundant also have a right to consultation about

major workplace change, if it will have a significant effect on them

• Enterprise agreements may have requirement to consult about redundancy as well

• Failure to comply with enterprise agreement can lead to breach of agreement, and

penalties

• See Justice Logan in CEPU & Ors v Queensland Rail [2010] FCA 591, and on

appeal in QR v CEPU & Ors [2010] FCAFC 150

• Section 531 of FW Act also contains obligations to consult after a decision to terminate

15 or more employees, as per CFMEU v BHP Coal Pty Ltd [2012] FWA 3945 42

CONSULTATION


Interaction between redundancy and notice


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• Redundancy pay is to compensate employees for loss of non-transferable

credits, inconvenience and hardship, disruption to the employee’s routine and

the competitive disability to long-term employees arising from opportunities

forgone in the continuous service to the one employer. Termination Change

and Redundancy Case (1984) IR 34.

• Notice or payment in lieu of notice is to give an employee a period to adjust to

a change in circumstances and to seek alternative employment. Notice can

be express or implied.

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INTERACTION BETWEEN NOTICE AND REDUNDANCY


• There are divergent authorities on whether redundancy payments that are ex

gratia payments (not a contractual entitlement) may properly be 'set off' as

against payments for notice of termination. The prevailing authority is that ex

gratia redundancy payments can be set off against payments in lieu of notice.

See Black v Brimbank (1998) 77 IR 405.

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INTERACTION BETWEEN NOTICE AND REDUNDANCY


Redundancy and policies


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• A policy can be held to confer contractual rights upon an employee.

• In determining whether a policy will form part of a contract of employment a

Court will consider the parties’ objective intentions, involving:

‘...consideration not only of the text, but also of the surrounding

circumstances known to the parties, and the purpose and object of the

transaction”. Goldman Sachs JB Were Services Pty Ltd v Nikolich [2007]

FCAFC 120.

• A policy can be incorporated by reference into the employee’s contract of

employment. See Riverwood International Australia Pty Ltd v McCormick

[2000] FCA 889, Romero v Farstad Shipping (Indian Pacific) Pty Ltd [2014]

FCAFC 177.47

REDUNDANCY ENTITLEMENTS IN POLICIES


• A policy can also form part of the employment contract where the wording of

the policy is promissory and the employer requires the employee to sign the

policy. See Goldman Sachs JB Were Services Pty Ltd v Nikolich [2007]

FCAFC 120.

• Policies may also form part of an employment contract because of an implied

duty. While the High Court has found that there is no implied duty of mutual

trust and confidence in Australia there may be an implied duty of cooperate.

See Commonwealth Bank of Australia v Barker

[2014] HCA 32.

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REDUNDANCY ENTITLEMENTS IN POLICIES


Redundancy and Personal Injury Litigation

Andrew McKenzie, Principal


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1800 810 812 (business hours)

mauriceblackburn.com.au