All modern awards and enterprise agreements now require an employer to consult with an employee prior to that employee’s position being made redundant. Although such terms were commonly included in agreements prior to 2010, the Fair Work Act 2009 now mandates their inclusion. If an employer does make an employee redundant without consulting the employee, the employee may successfully bring an unfair dismissal claim.

The standard consultation clause obliges employers to notify employees of significant workplace changes, including a decision to make the employee redundant. Employees can elect to be represented for the purposes of that consultation. Any significant change must be discussed with the employee, including the effect that the change is likely to have on the employee, and any possible measures to mitigate the adverse effects. The employer must give genuine consideration to any matters that the employee or their representative raises during the consultation. The discussion must occur as soon as practicable after the employer has decided to make the change and the employee must be provided, in writing, with all relevant information about the change.

It is extremely important that an employer complies with the consultation requirement, so that they can rely on the ‘genuine redundancy’ exemption from unfair dismissal claims. Under s389 of the Fair Work Act 2009, an employee cannot bring an unfair dismissal claim if their employment has been terminated in circumstances of genuine redundancy. This exemption applies where:

a) the employer no longer requires the person’s job to performed by anyone because of changes in the operational requirements of the enterprise; and

b) the employer has complied with any obligation under a modern award or enterprise agreement to consult about the redundancy; and

c) it is not reasonable in all the circumstances to redeploy the employee in either the employer’s enterprise or an associated entity of the employer.

A recent case involving an employer’s consultation obligation was heard by the Fair Work Commission in March 2014. The case involved Ms Karen Baker, who was made redundant from her position in Human Resources at Roy Morgan Research Ltd.

Roy Morgan Research Ltd v Karen Baker [2014] FWCFB  1175

Karen Baker was an employee of Roy Morgan Research Ltd (Roy Morgan). The Roy Morgan Research Enterprise Agreement 2009-2013 contained the model consultation clause. Ms Baker was told by Roy Morgan that she was being made redundant after the company restructured its HR team. She argued that her dismissal was unfair because Roy Morgan had not complied with its obligation to consult with her prior to redundancy.

On 8 January 2013, Sam Schwartz, the Director – HR and Transformation, told Ms Baker that her position was being made redundant, and a new position would be created that she could apply for. He told her that she could participate in the redeployment programme, but if an appropriate position was not found, her employment would be terminated.

In determining what the employer must do to comply with their consultation obligation, Deputy President Gooley referred to a quote by former Commissioner Smith.

“Consultation is not perfunctory advice on what is about to happen. This is [a] common misconception. Consultation is providing the individual, or other relevant persons, with the bona fides opportunity to influence the decision maker.” 

The Decision

The Fair Work Commission found that Mr Schwartz had not consulted with Ms Baker after he decided to make her position redundant. While Mr Schwartz did tell Ms Baker that he had made the decision, he did not “discuss” the change with her. The conversation merely involved Mr Schwartz informing Ms Baker that her position was being made redundant, and the consequences of that decision. Ms Baker was given no real opportunity to change his mind.

The Fair Work Commission therefore found that Roy Morgan did not comply with the obligation to consult prior to Ms Baker being made redundant. As such, Ms Baker’s dismissal was not a case of genuine redundancy. As Roy Morgan did not establish any other rationale for the termination of Ms Baker’s employment, the Fair Work Commission found the dismissal harsh, unjust and unreasonable. Hence Ms Baker’s unfair dismissal claim was successful, and she was granted a remedy under s394 of the Fair Work Act 2009. Roy Morgan was ordered to pay Ms Baker $37,000 in compensation.

Lessons for Employers from the Case

The Fair Work Commission regards a failure to consult with an employee prior to making the employee redundant as a serious defect in the dismissal process. If an employer does not comply with the obligation, then they are precluded from relying on the ‘genuine redundancy’ exemption from an unfair dismissal claim. As the case demonstrates, complying with the obligation requires more than simply telling the employee about a redundancy decision. Rather, the employee, and if applicable their representative, must be given a genuine opportunity to discuss the redundancy with the decision maker. This includes providing the employee with a bona fide opportunity to change the decision maker’s mind about the redundancy. Failure to comply with the consultation obligation can have serious consequences for an employer, as they will not be able to rely on the “genuine redundancy” exemption. Thus, the employee may bring a successful unfair dismissal claim, if it is found that the dismissal was harsh, unjust or unreasonable.

If you have any queries concerning termination of employment please contact Michael Bishop of our office on 03 9614 7707.

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