A recent High Court decision has reinforced the need for employers to approach redundancies with great care. Where a business is considering making employees redundant, it must assess its operations as a whole and consider whether redeployment is possible – not only within its own business but also across associated entities.

If the dismissal is not a ‘genuine redundancy,’ it may amount to an unfair dismissal. Employers often rely on ‘genuine redundancy’ as a defence, but it is then open to the employee to argue otherwise.

The Law: Section 389 Fair Work Act

Under section 389 of the Fair Work Act, a dismissal will only be a ’genuine redundancy’ if:

1. the employer no longer requires the person’s job to be performed by anyone due to changes in the operational requirements of the employer’s enterprise;
2. the employer has complied with any obligation in a modern award or enterprise agreement that applied to the employment to consult about the redundancy; and
3. it would not have been reasonable, in all the circumstances for the person, to redeploy the employee within:
4. the employer’s enterprise; or
5. the enterprise of an associated entity of the employer.

The Case: Helensburg Coal Pty Ltd

In 2020 during the COVID-19 pandemic, Helensburg Coal responded to falling demand by reducing coal production and retrenching 90 employees and reducing in the number of contractors engaged by approximately 40%.

It was not in dispute that the employer no longer required the jobs of each employee to be performed because of changes of the operational requirements of the mine and that there was no vacant role in employer’s enterprises to which any of the redundant employees could be redeployed.

However, labour hire workers were engaged to perform work that the retrenched employees could have done. The High Court found that, in these circumstances, redeployments were available to the employees who were made redundant, and these should have been considered.

The employer argued that the Fair Work Commission was not entitled to consider whether the employer could have made changes to its business to create redeployment opportunities. The Court rejected this, confirming that the Commission can look broadly at all the circumstances.

‘All the Circumstances’

The phrase ‘in all the circumstances’ under section 389(2) is intentionally broad. The High Court found that factors the Commission may consider include:

• the skills, training, and experience and other relevant attributes of the redundant employee;
• the attributes of the employer’s enterprise that concern its workforce, such as: its policies, including appetite for risk; plans; processes; procedures; business choices, such as a decision to terminate a contract in the future and a decision to persist with using contractors
• decisions regarding the nature of its workforce, such as whether it has a blended workforce of both employees and contractors;
• contract terms, such as contracts on an “as needs” basis;
• whether the contractors are on daily work orders or on some long-term fixed commitment; practical concerns, such as whether redeployment would require the employee to undergo further training; and
• anticipated changes, such as another employee going on parental leave or retiring, a contract expiring, or a position being performed by a contractor while waiting for an employee to be hired.

Employers must therefore consider all the relevant circumstances, not just existing vacancies, but whether work being done by contractors or labour hire workers could reasonably be offered to the employees who are at risk of redundancy.

What Employers Should Do

The High Court’s decision reinforces the need for a careful, well-documented process when considering redundancies and to consider consulting with HR and/or legal experts. Employers must take into account a broad range of circumstances – particularly where contractors or labour hire are used – and ask the critical question:

“Can this employee be deployed within our business or an associated business – even if this requires adjustment of roles or creation of a new role?”

Before making any redundancy decision, employers should, at a minimum:

1. review redeployment options across the business and associated entities;
2. consider employees’ skills and experience and whether training could make redeployment possible;
3. examine ongoing and upcoming contractor and labour hire arrangements and whether these roles could be offered to employees;
4. look at upcoming workforce changes (e.g., retirements, parental leave, contract expiries) that may create opportunities; and
5. seek HR and legal advice to confirm compliance and minimise the risk of claims.

If you would like assistance with navigating your employment responsibilities, please contact our Employment Law team on 07 3220 1144.

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