What is a Genuine Redundancy?
It is not unusual for employees’ positions to no longer be required, or to become redundant, following a workplace’s reorganisation or change which effects its operational requirements. This can be the case even where some of the employee’s duties are still required by the workplace and continue to be performed by other employees. Employees whose positions have been made redundant may lose their job, though they will generally be entitled to redundancy pay.
For some employees, particularly those who are nearing retirement or are planning to leave their job, being made redundant and receiving a redundancy payment may be a sensible or even welcome next step in their working lives. However, for the majority of employees who planned to continue in their job, being made redundant can be an unwanted and stressful experience.
It is important to understand whether a redundancy is a genuine redundancy, as defined by the law, as this can have significant consequences. For example, if it is a genuine redundancy, the employee will likely receive redundancy pay, but will be prevented by law from making an unfair dismissal application. However, if it is not a genuine redundancy, there may be remedies available to the employee, including reinstatement or compensation.
There are three criteria which must all be satisfied for the end of an employment relationship to be a genuine redundancy. These are:
1. The employer does not require the job to be performed anymore by anyone due to changes in its operational requirements
To be a genuine redundancy, an employee’s job must become redundant as a result of a change in the employer’s operational requirements. The focus is on the position itself, which must be abolished, not the employee. In other words, a simple name change of the position where most of the same duties are retained will not constitute a redundancy.
Some kinds of change which commonly impact operational requirements are:
- restructuring or reorganisation
- technological change, including automation
- a downturn in demand
- completion of a particular project
- closure of the business
When there has been a redundancy following a workplace change, the Court will consider the need for the employee’s position in light of the employer’s operational requirements, including its management and performance, any steps implemented to improve efficiency or productivity, and the current market.
A termination of employment will not necessarily be a genuine redundancy just because it follows a workplace change. For example, a termination is not likely to be a genuine redundancy where the employee is simply replaced with another employee or contractor, even where that person is more qualified.
It is up to the employer to prove that the redundancy was due to changes in its operational requirements. If it cannot do so, the redundancy will not be a genuine redundancy.
2. The employer has complied with its consultation obligations under the applicable Award or Agreement
Most employees and employers are covered by an Award or an Agreement which sets out their rights, entitlements and obligations. Many Awards and Agreements contain a requirement that employers consult employees about redundancy before the decision is made to make them redundant. The law requires consultation to be genuine and meaningful, and for employees to cooperate.
If an employer is obliged by the Award or Agreement to consult the employee about redundancy, and it fails to do so, the redundancy will not be a genuine redundancy.
3. It would not have been reasonable in the circumstances for the employer to redeploy the employee within the business (or within the business of an associated entity)
Employees cannot be made redundant where they could reasonably have been redeployed by the employer. Whether or not it would have been reasonable to redeploy an employee depends on a number of factors, including the existence of suitable alternative employment given the employee’s qualifications, skills and experience, the location of any alternative role and the remuneration offered.
Generally, an employee must have the necessary skills or experience for the alternative position. Notably, there is no automatic assumption that a role requiring fewer skills or qualifications, or with lower remuneration or less responsibility is unsuitable for the employee.
Employers should actively consider the employee whose position has been made redundant for all of their vacancies. If an employer subjects an employee whose position has been made redundant to a competitive recruitment process rather than offer them the position, the employee’s termination may not be a genuine redundancy.
What if it is a genuine redundancy?
If the termination of employment is a genuine redundancy, the employee will generally be entitled to a redundancy payment. The amount is calculated using the employee’s ordinary pay rate and is based on the period of continuous service of the employer. See as follows:
Period of continuous service
However, some employees, including those who have worked for the employer for less than 12 months, apprentices, small business employees (employees of a business which employs fewer than 15 people), and casual and seasonal workers, are not entitled to redundancy pay regardless of their length of service.
Johnston Withers Lawyers can help
It is important to get legal advice if your position has been or may be made redundant so that you understand whether it is a genuine redundancy and what your rights are. Johnston Withers’ employment lawyers have a long history of acting for employees and a wealth of experience providing advice about termination of employment, including redundancies, and employee entitlements. If you’d like advice about a redundancy, please contact us on 08 8231 1110 or get in touch online.