Redundancy: A question of intent

The concept of redundancy is a reasonably straightforward one – the employer no longer requires the particular job occupied by an individual to be done by anyone. Case closed.

The Fair Work Act 2009 (Cth) (FW Act) modifies this by adding that a “genuine redundancy” requires two additional elements:

• that is was unreasonable to redeploy the employee to another role elsewhere in the business; and
• that any obligation to consult under a modern award or enterprise agreement was met.

The overwhelming majority of cases considering whether a dismissal by way of redundancy was unfair focus on the above two points.

However, what this shift in focus appears to have done is draw attention away from the fundamental nature of a redundancy.

A recent decision by Deputy President Saunders of the Fair Work Commission in Hill v Fortis Products Pty Ltd T/A Colorguard Steel[1] highlights the need for employers to never forget that an argument of “genuine redundancy” must never be a convenience or a contrivance, but a result genuinely caused by the needs of the business.

 

A strained relationship

Mr Hill was employed by Fortis Products Pty Ltd (Fortis) from 4 September 2017 in the role of internal sales person, with a salary of $80,000 per annum.

During his employment his role expanded to include additional duties, including purchasing and stock management which was formally delegated to him on 11 April 2018.

In October 2018, the owner of the business admonished Mr Hill that his salary and other benefits were not, in the estimation of the business owner, commensurate to the results that were being obtained.

It was strongly indicated that the business would be required to reduce labour costs in the near future, and what the business owner perceived as Mr Hill’s lacklustre performance made him a prime candidate for being removed from the business.

The situation did not improve, and a similar exchange took place between Mr Hill and the business owner in December 2018.

On 8 January 2019 Mr Hill’s employment with Fortis was terminated. The separation certificate, emailed to him on 9 January 2019, specified the reason for dismissal as “Shortage of work”.

 

Proceedings before the Fair Work Commission

Mr Hill filed an unfair dismissal claim challenging his dismissal. Fortis objected to the Fair Work Commission (the Commission) having jurisdiction to determine the matter on two grounds:

• that the Small Business Fair Dismissal Code applied, and Mr Hill had been dismissed in compliance with that Code; and/or
• Mr Hill’s dismissal was a genuine redundancy.

Fortis later withdrew its assertion that it was a small business employer, and as such the question of the Commission’s jurisdiction rested solely on whether Mr Hill’s dismissal was a case of genuine redundancy.

The Commission held that it was not reasonable for Mr Hill to be redeployed within Fortis or any related business due to the downturn in work that the business had experienced.

However, the Commission also held that there had been no consultation as required by the Clerks – Private Sector Award 2010, which the parties agreed applied to Mr Hill’s employment.

Despite this, the Commission determined that the determining factor was not these legislative additions to the concept of “genuine redundancy”, but whether Mr Hill’s position was in fact redundant at all.

 

A chicken and egg question

In considering this case, Deputy President Saunders accepted that an operational restructure had occurred within Fortis’s business which meant that Mr Hill’s role was no longer required, as his duties had been distributed among the remaining employees.

Considering the reason given for Mr Hill’s dismissal, the question for Deputy President Saunders was whether:

• Mr Hill was dismissed because his duties were redistributed among the remaining employees, or
• Mr Hill’s duties were redistributed among the remaining employees because he was dismissed.

If the former, then there was a change in the operational requirements of the business which meant that Mr Hill’s position was redundant.

If the latter, then the change to operational requirements was the result, rather than the cause, of Mr Hill’s dismissal, and consequently his dismissal was not a case of genuine redundancy within the meaning of the FW Act.

Having regard for the ongoing strained relationship between Mr Hill and the business owner, and the evidence that Mr Hill was not in fact given a reason for his dismissal on 8 January 2019, Deputy President Saunders held that the true reason for Mr Hill’s dismissal was the business owner’s ongoing frustration with Mr Hill’s performance.

In so concluding, Deputy President Saunders held that any operational change was the result, not the cause, of Mr Hill’s dismissal, and as such there was no genuine redundancy.

 

Harsh, unjust and unreasonable

Finding that he had jurisdiction to determine the matter, Deputy President Saunders subsequently found that Mr Hill’s dismissal was:

• unjust because, on the evidence, there was no valid reason for dismissal;
• unreasonable, as Mr Hill was not provided with any procedural fairness; and
• harsh, given Mr Hill’s age (57) and his difficulty in obtaining further employment.

Having determined this, Deputy President Saunders awarded Mr Hill compensation of three months’ pay, or $20,000, subject to tax.

 

A caution against contrivance

This case is a reminder to not forget those fundamental first principles which, sometimes, get lost beneath the layers of detail.

In this case, what was lost was the cause-and-effect between operational change and dismissal to satisfy the requirements of a genuine redundancy.

Looking at the case as a whole, Fortis’s attempt to argue redundancy would appear to be an over-reliance on the jurisdictional objection, as it had very few legs to stand on if the Commission held that it did, in fact, have jurisdiction.

What is striking about this case is the reminder that the mere say-so of the employer that Mr Hill’s role was redundant, including assertions to this effect or similar in the separation certificate and the Small Business Fair Dismissal Code checklist, was not sufficient to establish that this was the case.

In cases of genuine redundancy, the Commission will not stand in the shoes of the employer to make a business decision about who specifically should be made redundant; businesses are free to make this decision for themselves without interference.

The Commission can, however, go to significant lengths to determine whether the true and motivating reason for dismissal was redundancy, or whether such an argument is a mere contrivance.

Here, the Commission examined all of the evidence, including the evidence of the business owner’s prior frustration with Mr Hill, to conclude that the true and motivating reason for dismissal was something other than redundancy.

That is, the dismissal was not “because of” changes in the operational requirements of the business, but because of some other reason not specified by the employer in the documents.

It is not unheard of for businesses to ‘create’ a redundancy situation in order to exit a troublesome employee from the business. If this case is a reminder of anything, it is that contrivances of this nature are not beyond the reach of the Commission. Proceed with caution.

[1] [2019] FWC 5567 (9 August 2019)

 

By Alex Millman and Lindsay Carroll, NRA Legal