The importance of a consultation process for redundancies

In a recent case, the NSW Personal Injury Commission has highlighted the importance of employers undertaking a proper consultation processes, especially when it comes to redundancy decisions. The case, Khan v Hitachi Energy Australia Pty Ltd [2025] NSWPIC 22, serves as a reminder to employers of the legal requirements for consultation and the potential consequences of failing to adhere to these requirements.

Background to Khan

In this case, a long-standing employee, Khan, had worked as a tax manager for Hitachi Energy Australia for several years and was informed of his redundancy in an informal manner. At the time, Khan was 66 years old and had expressed his intention to remain with the company for several more years. However, in June 2023, Khan’s CFO invited him to grab a coffee, which was something they did together often. The meeting took place in a busy public street in Sydney’s CBD, during which Khan was informed that his employment would end on 31 December of the same year.

The shock of the news, combined with the lack of clarity around whether he was being made redundant or simply replaced, led to significant emotional distress for Khan. The conversation took place in full view of others, leaving him feeling hopeless and overwhelmed. The following day, Khan sought medical attention for the psychological injury he had suffered as a result of the abrupt announcement. He subsequently made a workers’ compensation claim.

Legal Arguments and Outcome

Hitachi Energy denied liability, arguing that the redundancy process was reasonable, and that the employee’s condition was caused by reasonable actions taken during the process. They contended that the CFO’s decision to inform Khan over coffee was an attempt to soften the impact of the news. However, the Commission rejected this argument, with Member John Isaksen finding that the employer’s actions were unreasonable. The Member noted that the company had failed to follow its own redundancy policies and procedures. There was no evidence to suggest that Khan had been adequately informed about the reasons for his redundancy or the company’s rationale behind the decision. The manner in which the meeting took place – on a public street, without notice, and with no support person – was found to be entirely inappropriate.

The Commission found that the redundancy was likely influenced by Khan’s age, which further compounded the lack of procedural fairness. The company’s actions in this case were not reasonable and Hitachi was ordered to pay Khan for his lost wages and medical treatment costs.

The importance of a proper consultation process

This case highlights the essential role that a proper consultation process plays when making any significant changes to an employee’s role, including redundancies. Workplace health and safety legislation requires employers to ensure the physical and psychological safety of their workers. This includes managing risks that could lead to physical or mental harm, such as those arising from poor communication and sudden workplace changes.

Employers are required, for award or agreement-covered employees (although it is best practice for all employees), to engage in a genuine consultation process when considering redundancies. This process involves providing employees with clear and comprehensive information about the proposed change, offering them an opportunity to express their views, and genuinely considering those views before making a final decision.

Failure to follow a proper consultation procedure can create legal challenges, including compensation claims and potential reinstatement of employees.

Implications for Employers

The case of Khan serves as a reminder for employers about the importance of following a proper consultation process during redundancies. Employers should ensure that any decisions regarding redundancy are well-documented and communicated in a manner that considers the psychological well-being of employees.

The case also reinforces the need for employers to remain transparent, offer support, and ensure that all employees are given a fair opportunity to understand and respond to major changes in their employment. By adhering to consultation requirements, employers can avoid legal complications and create a more supportive and respectful workplace environment.

If you need assistance in navigating business restructures and redundancies, call our team of workplace relations specialists on 1800 738 245.

Khan v Hitachi Energy Australia Pty Ltd [2025] NSWPIC 22 (28 January 2025)