the three rs of workplace change: restructure, redeployment & redundancy
TRANSCRIPT
THE THREE R’S OF WORKPLACE CHANGE: RESTRUCTURE, REDEPLOYMENT AND REDUNDANCY
March 2015
OUR OFFICE
The three R’s of workplace change: restructure, redeployment and redundancy
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OUR SERVICES
The three R’s of workplace change: restructure, redeployment and redundancy
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Work Related Injuries
Road Accident Injuries
Medical Negligence
Asbestos Diseases
Superannuation & Insurance Claims
Public Liability
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Comcare
Will Disputes
Financial Advice Disputes
Employment & Industrial Law
Class Actions
Social Justice
TODAY’S OUTLINE
The three R’s of workplace change: restructure, redeployment and redundancy
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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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MEANING OF REDUNDANCY
• 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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MEANING OF REDUNDANCY
• 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.
The three R’s of workplace change: restructure, redeployment and redundancy
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NES obligations regarding redundancy including pay, exceptions and variations
The three R’s of workplace change: restructure, redeployment and redundancy
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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
3 At least 3 years but less than 4 years 7 weeks
4 At least 4 years but less than 5 years 8 weeks
5 At least 5 years but less than 6 years 10 weeks
6 At least 6 years but less than 7 years 11 weeks
7 At least 7 years but less than 8 years 13 weeks
8 At least 8 years but less than 9 years 14 weeks
9 At least 9 years but less than 10 years 16 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
The three R’s of workplace change: restructure, redeployment and redundancy
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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REDUNDANCY AND TRANSFER OF BUSINESS
The three R’s of workplace change: restructure, redeployment and redundancy
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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REDUNDANCY AND TRANSFER OF BUSINESS
The three R’s of workplace change: restructure, redeployment and redundancy
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
REDUNDANCY AND TRANSFER OF BUSINESS
The three R’s of workplace change: restructure, redeployment and redundancy
• 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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REDUNDANCY AND TRANSFER OF BUSINESS
The three R’s of workplace change: restructure, redeployment and redundancy
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 TRANSFER OF BUSINESS
The three R’s of workplace change: restructure, redeployment and redundancy
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
The three R’s of workplace change: restructure, redeployment and redundancy
• 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
The three R’s of workplace change: restructure, redeployment and redundancy
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
The three R’s of workplace change: restructure, redeployment and redundancy
Interaction between redundancy and notice
The three R’s of workplace change: restructure, redeployment and redundancy
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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
The three R’s of workplace change: restructure, redeployment 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
The three R’s of workplace change: restructure, redeployment 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
The three R’s of workplace change: restructure, redeployment and redundancy
• 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
The three R’s of workplace change: restructure, redeployment and redundancy
Redundancy and Personal Injury Litigation
Andrew McKenzie, Principal
The three R’s of workplace change: restructure, redeployment and redundancy
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1800 810 812 (business hours)
mauriceblackburn.com.au