From a casual coffee chat to a workers compensation claim: how to avoid mishandling the redundancy process

In a recent case, the NSW Personal Injury Commission has highlighted the importance of employers undertaking proper consultation processes, especially when it comes to redundancy decisions. The case, Khan v Hitachi Energy Australia Pty Ltd [2025], 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, applicant Sefal Khan was employed as a tax manager by Hitachi Energy Australia. Mr Khan had been engaged by Hitachi for nearly 27 years and had expressed an intention to remain with the company for several more. In June 2023, Hitachi Energy CFO Jeremie Moules invited Mr Khan to grab a coffee at the beginning of the work day, something they did together often. After collecting their coffees, Mr Moules and Mr Khan were walking through a busy public street in Sydney’s CBD when Mr 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 Mr Khan. The conversation took place in full view of others, leaving him feeling “helpless and sick in the stomach”. Mr Moules advised Mr Khan that he would receive a call from Human Resources to provide further details, which never eventuated. The following day, Mr 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 for this harm.

Legal Arguments and Outcome

In the Personal Injury Commission proceedings, Hitachi Energy denied liability for Mr Khan’s psychological injury, arguing that the redundancy process was reasonable, and that the employee’s condition was wholly or predominantly caused by reasonable actions taken during the process. They contended that the CFO’s decision to inform Mr 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 Mr 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 further found that the redundancy was likely influenced by Mr Khan’s age, which compounded the lack of procedural fairness. The company’s actions in this case were not reasonable and Hitachi was ordered to pay Mr 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 redundancy. 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. It is also important that employers ensure they abide by their own policies and procedures surrounding consultation, which may apply even to non-award employees. 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 restructuring and redundancies, call our team on 1800 572 679.

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