[Ed Note: Retrenchment occurs when an employee’s employment is terminated because their job has become redundant.

If you need to make an employee’s job redundant, it’s important to ensure that the redundancy is genuine – otherwise, the dismissal will not be exempt from unfair dismissal laws.

Under the Fair Work Act 2009 (Cth) (FW Act), a redundancy is genuine when:

• The employee is dismissed because the employer no longer wants anyone to do the job, due to changed operational requirements;
• The employer has complied with any consultation requirements in an applicable enterprise agreement or modern award; and
• It was not reasonable (in all the circumstances) for the employer to redeploy the employee within their own enterprise or that of an associated entity.

Today, Charles Power will look at these requirements in more detail.

But first…

Before you decide to dismiss an underperforming employee, you need to consider the legal risks involved.

If you don’t take reasonable steps to help improve your employee’s performance, you may leave yourself vulnerable to an unfair dismissal claim.

Until next time…]

3 questions to ask to determine whether a redundancy is genuine

To meet the requirements of a ‘genuine redundancy’ as defined in the FW Act, make sure you can answer ‘yes’ to the following three questions:

1. Does your business no longer require anyone to perform the role due to operational changes?

Operational changes can occur due to:

• Restructuring, where the redundant role is given to another employee or split up between multiple employees;
• Downsizing, where you decide to reduce the number of employees in the business due to genuine financial reasons (and the way you select employees for retrenchment is lawful);
• Closing down, where you close down a part or all of the business; and
• Outsourcing, where you contract out a function of the business to a third party.

2. Have you complied with your consultation obligations?

You must comply with any consultation provisions set out in an applicable enterprise agreement or modern award.

If you are covered by an enterprise agreement, you are required to consult with employees about any major workplace changes that are likely to significantly affect them.

Generally, modern award consultation provisions will require you to meet with affected employees to:

• provide them with relevant information; and
• discuss measures that can be taken to avert or minimise retrenchments, e.g. redeployment, and measures that can be taken to lessen the adverse effects of retrenchments, e.g. a service to assist with job hunting.

3. Is it unreasonable in the circumstances for you to redeploy the employee?

If it is reasonable, you are required to offer a redundant employee continued employment in another role as an alternative to retrenchment.

This requires:

• You to obtain a job for the employee, i.e. you cannot simply invite the employee to apply for the job; and
• The employee to agree to alternative employment.

Redeployment will be reasonable if:

• There is a position available and you have the power to offer it to the employee;
• The employee has the requisite skills and competence to perform the role to the required standard, if not immediately, then with a reasonable amount of retraining;
• The location of the job in relation to the employee’s residence makes the redeployment feasible; and
• The employee will not earn less in the new role such that the redeployment is not feasible.