The Fair Work Commission has recently made orders reinstating four employees whose employment had been terminated for reason of redundancy. The decision is a timely reminder of the importance of employers ensuring that they consult in a meaningful and genuine way with affected employees in a redundancy situation, where those employees are covered by an award or other industrial instrument.
Following a decision to lower operating costs, Staples Pty Ltd (employer) made 12 full time positions in the distribution warehouse redundant.
Relevantly, the employer was covered by the Staples Enterprise Agreement 2014-2016 (Agreement). Three separate provisions of the Agreement required Staples to consult with employees regarding “major workplace change” and redundancy. Two of the provisions were based on legislative model terms, and the third required the employer to involve their “Joint Consultative Committee” (JCC) in any decision making. Notwithstanding this obligation, under the Agreement, the employer had the right to make any final decision.
In order to understand the importance of the decision, it is useful to retrace the consultation process that was undertaken.
- on 5 July 2010, the employer decided to reduce the number of permanent warehouse employees by between 10 to 14 , to reduce the operating costs of the warehouse;
- on 11 July 2016, the decision to implement redundancies for permanent warehouse employees was announced to a meeting of the JCC;
- following the JCC meeting, the employer held meetings with various employees to discuss the redundancies;
- all employees were provided with a letter notifying them of the impending redundancies and confirmed that the employees would be assessed by use of a “selection matrix” by 13 July 2016;
- on 12 July 2016, a meeting was held on site attended by union officials, delegates and management of the employer, during which the union complained that there had not been proper consultation regarding the redundancies; and
- on 13 July 2016, 12 employees were advised by letter that their employment was terminated for reason of redundancy.
Four of those employees brought unfair dismissal claims against the employer. The main arguments put forward by the employees were that:
- the consultation obligations under the Agreement were not properly followed;
- the employer had not properly explored redeployment options; and
- there had been no opportunity to challenge the basis for their redundancy selection.
The employer raised a jurisdictional objection on the basis that the redundancies were “genuine redundancies” within the meaning of s 389 of the Fair Work Act 2009.
Ultimately, it was the 2-day period between the announcement and the implementation that was critical to the Fair Work Commission’s decision that the consultation obligations in the Agreement had not been properly observed. The Commission was critical of the employer.
Commissioner Cambridge held that the approach to consultation was “unduly hasty and largely tokenistic”, and that management “did not engage in genuine consultation with its employees” but rather made “disingenuous gestures which it sought to portray as consultation”. The Commissioner further remarked that the employer’s actions regarding the implementation of the redundancies was “so significantly non-compliant as to be grossly deficient”.
Further, in December 2016, the employer engaged 19 new permanent employees in the jobs that had previously been made redundant. This was pursuant to an express term of the Agreement which required the employer to do so by 31 December 2016. The Commission held that it would have been reasonable to redeploy the dismissed employees into positions which were, in effect, pending and required to be filled by virtue of the commitment under the Agreement.
Based on these findings, the Commission held that the redundancies were not genuine redundancies and the employer failed in its jurisdictional objection. It was held that the process which the employer adopted for the implementation of its decision to restructure the warehouse was so severely flawed that the consequential dismissals of the applicants were entirely unreasonable. This, in the Commission’s view, was compounded by the manifest failure of the employer to comply with the consultation obligations of the Agreement.
The applicants were reinstated to their former position, with provision for lost pay (less any redundancy pay).
Lessons for employers
This case illustrates that employers, when considering redundancies, need to engage in a genuine, fair and meaningful consultation process with employees. Making token attempts or merely going through a box ticking exercise is insufficient. Employers must give proper consideration to any obligations in the relevant industrial instruments and determine whether it is reasonable for employees to be redeployed into other areas of the business.