Redundancy: Lessons for Employers (2024 Update)

Key points

  • A redundancy needs to be genuine in order to be legal
  • The employer needs to explore redeployment opportunities for the employee
  • A recent case has shown that redeployment should not amount to a significant demotion

Genuine Redundancy

In order for a redundancy to be valid, it must be genuine. This means that an employee’s job doesn’t need to be done by anyone anymore. Employees also need to receive consultation and adequate notice. To meet the test for genuine redundancy under the Fair Work Act 2009 (Cth), the redundancy process must include the employer exploring, with the employee, any available redeployment options. Related to this concept is that of ‘alternative acceptable employment’ which may affect the redundancy pay.

Recent findings

In Smith v Onesteel Limited & Anor [2013], the Judge had to determine what acceptable redeployment for employees looks like. More specifically, this looked at the issue of ‘acceptable alternative employment’ and how this should be interpreted.

Background

  • Mr Smith’s employer was the Commonwealth Steel Company Pty Ltd for 32 years.
  • Throughout the last 20 years, he worked as a furnace operator. He accrued seniority based on his significant length of service.
  • In mid-2010 Mr Smith was informed that because of a lack of work he would have to commence another role
  • This role involved painting railway wheels on a finishing line.
  • Humiliated and stressed by what he perceived as a considerable demotion, and physically unable to fulfil the requirements of the role, the employee tendered his resignation.

Alternative acceptable employment

The case turned on the issue of alternative acceptable employment. The employee’ resigned after his position as a furnace operator was made redundant. The crux of the case was subsequently then the issue of ‘acceptable alternative employment’. The relevant Award provisions required the judge to consider whether the new role met the test for acceptable alternative employment. If it did, the employee would receive a redundancy payment under the Award. This test involves:

  • The employee’s location of work
  • The employee’s hours and also pay
  • Work load and travel time
  • Job security

Notably, the judge found that the alternative role signified a reduction in status and seniority (accrued because of his long service), and pointed to the employee’s reaction as evidence of this change. The role was also not entirely suitable for the employee, due to a medical issue with his knee. Another critical factor is that the employee did not receive an offer for the other role. The employee was simply directed to move into it without any discussion or consultation. These facts, along with the significant reduction in seniority,  meant the alternative role was not acceptable. The employee subsequently did not act unreasonably in his response, given the lack of an ‘offer’ and any ‘consultation’ with him about his capabilities. The employer had to pay Mr Smith just over $150,000 in redundancy entitlements.

Lessons

The test for acceptable alternative employment is objective, but is also on a case-by-case basis. Employers who intend to redeploy an employee in lieu of redundancy need to therefore ensure that the role is acceptable. In some cases, the level of demotion can fail the test. If you have further questions about redundancy, it may be worth getting in touch with a Employment Lawyer for further advice.

Most Popular Articles
You may also like
Recent Articles

Get the latest news

By clicking on 'Sign up to our newsletter' you are agreeing to the Lawpath Terms & Conditions

Share:

Register for our free live webinar today!

Company Setup 101

12:00pm AEDT
Wednesday 13th March 2023

By clicking on 'Register for webinar' you are agreeing to the Lawpath Terms & Conditions

You may also like

Learn about the types of liquidators, their role when winding up a company and how they impact creditors of a business.
All you need to know about hosting your company's Privacy Policy URL. A Privacy Policy outlines how your platform handles personal data of visitors.
What Is A Modern Slavery Policy? This article explores everything related to a Modern Slavery Policy; from key components to mistakes to avoid.

Thank you!

Your registration is confirmed. Keep an eye on your inbox for an email with details on how to watch the webinar.