“Hopelessly cavalier”: Fair Work Commission cracks down on discriminatory redundancies

The Fair Work Commission has taken aim at a family-owned retail business and a financial services firm, both of whom restructured their operations after they were notified that two respective employees had fallen pregnant.

In a rare consent arbitration, Compuworld was found to have breached the workplace rights of a full-time Receptionist after she requested time off work to attend medical appointments associated with complications during her pregnancy.

Then, less than two weeks later, a small accounting firm in New South Wales, ‘The Advice Spot’ found itself in the spotlight after it unfairly dismissed its part-time Bookkeeper while she was overseas in New York shortly after she notified them that she was pregnant with her second child.

Despite the fact that both employees attempted to access unpaid parental leave, there were in fact very few similarities between the two cases. In this article, we examine the factors that led to one being required to pay more than $50,000 in compensation, and the other just $6,500.

More than just requests for unpaid parental leave

A request to access unpaid parental leave is protected under the Fair Work Act, and an employee cannot be disadvantaged because they made this request. In addition, accessing sick leave, having family and carer’s responsibilities, and even being pregnant are also separately protected.

In Compuworld’s case, the employee had not yet commenced a period of unpaid parental leave, and in fact it was unclear whether this request had been made before the decision to make her role redundant. Instead, the employee was eventually found to be discriminated against on the basis of:

• her pregnancy;
• a disability she was suffering associated with her pregnancy; and
• accessing personal leave related to her disability.

Just because an employee’s role was made redundant this will not automatically be a breach of the Fair Work Act. Instead there must be a nexus between the request for unpaid parental leave and the employer’s decision to make the role redundant.

It was argued that the decision was made due to a significant downturn in business, and the evidence suggested that the business had suffered a 19.05% reduction in sales over the past three quarters.

However, on the day of the termination, the employee was due to commence a period of annual leave of more than a month. As such, when this leave was granted, Compuworld must have intended for her role to continue for at least another month. The decision to make her role redundant was also made some two months before the redundancy actually occurred, which was inconsistent with the “dire” financial position of the company at that time.

Perhaps the most significant factor suggesting that the redundancy was discriminatory was a series of comments allegedly made by one of Compuworld’s directors. It was alleged that the director had made comments about the employee’s pregnancy, and expressed concern about her returning to the workplace after she had accessed parental leave. Despite these allegations being central to the case, Compuworld did not call the director to give evidence and refute these allegations.

As such, it was held that the reason for the redundancy was not Compuworld’s financial position but because of discrimination against the employee, and Compuworld was ordered to pay more than $50,000 in compensation to the employee.

How can employers avoid a similar outcome?

Compuworld’s case demonstrates the range of factors that the Fair Work Commission may examine to determine the true reasons for a dismissal, and reinforces that redundancy cannot be used to disguise discrimination.

On the other end of the spectrum, despite having unfairly dismissed its part-time Bookkeeper, ‘The Advice Spot’ was not found to have engaged in discrimination.

‘The Advice Spot’ made the decision to make the employee’s position redundant on 27 November 2019, and informed her the same day while she was overseas without so much as a meeting having been scheduled.

To be able to rely on the jurisdictional objection of “genuine redundancy” to defend against an unfair dismissal claim, there are certain criteria that must be satisfied. One of the most common causes that a redundancy will fail to be genuine is where the employer does not consult in circumstances where it is required by a modern award or enterprise agreement to do so.

While the firm attempted to argue that its regular morning meetings were a sufficient form of consultation about the financial position of the business, Deputy President Sams considered this suggestion to be “nonsense”, as these conversations were only of a general nature and did not specifically relate to the employee’s role.

The firm was found to have failed to discharge its obligation to consult with the Bookkeeper about the redundancy, and effected the termination in a “hopelessly cavalier and perfunctory manner”. However, despite these comments, Deputy President Sams was ultimately not convinced that the restructure was discriminatory.

‘The Advice Spot’ was ordered to pay the employee $6,500 plus superannuation almost certainly as a result of its failure to consult with the employee, significantly less than Compuworld for engaging in discrimination. That being said, had the firm managed the process more effectively, it is possible that it could have avoided paying anything entirely.

Key learnings

When an employee challenges a redundancy, the Fair Work Commission will seldom examine the circumstances that necessitated the restructure, as it is ultimately the prerogative of employers how they run their business.

However, Compuworld is a stern reminder that this discretion is not unlimited, and at a minimum the reason for the restructure cannot be discriminatory. It is best practice to ensure that any decisions about a restructure are sound, and well documented.

Finally, if you are required to consult with employees about a restructure, any consultation must be genuine and meet the requirements in your modern award or enterprise agreement, as failure to do so can be costly in and of itself.

If you are considering implementing a redundancy, and are concerned about whether there are any potential discrimination issues, call NRA Legal on 1800 572 679.

By Calum Woods and Lindsay Carroll