Consultation Obligations for Redundancies

Section 389(1)(b) of the Fair Work Act 2009 states that employers have to consult with an employee before making their position redundant if the employee is covered by an enterprise agreement or modern award. Enterprise agreements and awards typically contain a clause that sets out requirements for how employees should be consulted when there may be redundancies. This article looks at consultation obligations for employers in the redundancy process.

Genuine consultation

Redundancies are an increasingly frequent feature of the modern workplace, where frequent changes to the workforce are necessary because of operational requirements. When business restructuring or automation change the nature of the work, it is reasonable for the employer to have a way to terminate the employment of workers who are no longer required within the business.

A ‘genuine redundancy’ occurs when a role is no longer required to be performance by anyone within the organisation. In addition, for a redundancy to be considered genuine, the employer must comply with the consultation obligation in the relevant enterprise agreement or modern award. The purpose of consultation in this circumstance is to facilitate necessary change in a way that takes into account the viewpoint of the worker.

It is essential that such consultation is not a perfunctory activity that is performed merely to ‘tick the box’. The employer should consult with the employee in a meaningful manner, before making an irreversible decision to terminate the employment. The consultation process provides the individual with a real opportunity to influence the decision-maker. The employee might have ideas about where or how they could be redeployed within the company to meet operational needs. Quite often employees have a more detailed understanding of the operational needs of a business and may well be able to provide insights which could be valuable for the employer when performing workforce planning.

In Patti v Vincent Chrisp & Partners P/L t/a Vincent Chrisp Architects [2012], an employer decided to reduce the workforce because of an overall downturn in business. The employer met with affected employees to discuss the situation and sent letters on the subject. He also complied when the employees asked for further information and wanted recognition of an additional year of service. In this case, the employer was found to have met his consultation obligations.

A failure to consult with the employee will have a significant impact in any FWC proceeding. However, the FWC will note if operational reasons meant that consultation was unlikely to have negated the outcome.

Case study

A recent decision of the Fair Work Commission highlights the importance of fulfilling consultation obligations in the redundancy process. In Frederick Deon Du Preez v MSWA Limited [2024], the FWC found an employer’s failure to comply with this obligation meant that a dismissal was not a genuine redundancy.

The employee was engaged as a Finance Data Analyst by MSWA Limited in June 2022 and was made redundant in November 2023 following organisational changes made by the company’s new Chief Information Officer (CIO). Clause 11 of the MSWA’s collective Enterprise Agreement stated that when the employer decides to take action that will significantly affect an employee, or make an employee redundant, the employee must be informed as soon as reasonably possible.  Additionally, clause 16 of the Agreement required the employer to discuss with the workforce the likely effects that major changes would have and to implement measures to reduce adverse effects on employees.

The CIO determined that structural changes should be made, including the elimination of the Finance Data Analyst role as it was ‘too narrow in scope and skills set’. The employer submitted that it complied with its consultation obligations by informing the employee of the decision in October 2023 and in two subsequent meetings prior to termination. However, the FWC found that MSWA had made the decision to restructure the employee’s team in June 2023, and this was the point at which the obligation was triggered. As the FWC stated, consultation is not just telling the employee that they are redundant seven months after the decision is made to restructure the team.

The employer raised a jurisdictional objection on the grounds that the dismissal of the employee was a genuine redundancy, but the FWC dismissed the objection on the basis of non-compliance with the consultation obligations in the relevant enterprise agreement. The FWC concluded that the failure to consult meant it was not a genuine redundancy and the dismissal was unfair. The FWC ordered the MSWA to pay the employee $7,542 plus superannuation.

As this case makes clear, a redundancy is not genuine unless the employer complies with their consultation obligations in the relevant modern award or enterprise agreement. It is best to seek legal advice to ensure that all requirements are fulfilled. Please contact GTC on 1300 636 846 for any legal assistance or representation.