FWC Says Operational Reasons Not Sufficient to Justify Genuine Redundancy
In the decision of Maria Bakermans v Hargo Pty Ltd T/A Citywest Gastroenterology  FWC 6238 the Fair Work Commission (FWC’) ordered a medical practice to pay compensation after finding the redundancy process did not involve prior consultation with the employee or consideration of redeployment opportunities.
The employee commenced employment on 8 February 2012 at the employer’s specialist consulting practice and was engaged as a permanent part-time Medical Transcriptionist. On 30 March 2020, the employee received an email from the Medical Director advising that as of 31 March 2020 she would be stood down from her employment and placed on unpaid leave. The reason given was that there was a significant downturn in the employer’s business as a result of restrictions associated with the Covid-19 pandemic.
On 31 March 2020, there was a telephone conversation between the employee and the Medical Director whereby the Medical Director explained the financial impact Covid restrictions were having on business operations and that the employer was assessing both short-term and long-term operational practices. The employee asked the Medical Director whether the employer was intending to apply for Jobkeeper payments and was told the employer was still considering making an application.
On 2 April 2020, the employee telephoned the Medical Director after receiving a payslip stating that annual leave had been paid to her which she had not requested. The Medical Director said he was not aware of this and advised that he would have it reversed. The Medical Director gave evidence that he indicated to the employee that her ongoing position in the business could not be assured however, this was disputed by the employee.
On 7 April 2020, the employer held an urgent meeting of its Directors whereby it was agreed to reduce staffing levels from five employees to three and that the employee was to be one of two employees declared to be redundant. A letter advising the employee of her termination of employment effective from 7 April 2020 was emailed to her on 10 April 2020, which was Good Friday.
On 28 April 2020, the employee filed her unfair dismissal application with the FWC. However, it was not until about 6 May 2020 that the employee received her pay in lieu of notice and long service leave.
Was there a Genuine Redundancy?
The FWC had to consider whether the employee’s dismissal was a genuine redundancy. Section 389 of the Fair Work Act 2009 (‘FW Act’) requires satisfaction of the following three elements:
- The job being no longer required due to the operational requirements of the employer’s business;
- The employer complied with consultation requirements in any applicable modern award or enterprise agreement;
- Whether redeployment of the employee would have been reasonable in all the circumstances.
In relation to the first element, the FWC accepted that the position held by the employee was no longer required. There was evidence of technological and other associated changes that enabled the employee’s position to be reconfigured and redistributed thereby only requiring three support staff members.
In relation to the second element, the FWC noted that the employee was covered by the Health Professionals and Support Services Award 2020 which included clause 33 ‘Consultation about major workplace change’. This clause requires an employer that has made a definite decision to make major changes likely to have significant effects on employees, such as termination of employment, to:
- Notify and Discuss – Notify employees, including any representative, who may be affected by the change and engage in discussions that must take place as soon as practicable after the definite decision has been made. The discussions must be about the introduction of the changes, the likely effect on employees and measures to avoid or reduce the adverse effects of the changes on employees; and
- Written Notification – Provide in writing to employees, including any representative, all information about the changes including the nature, expected effect on employees and any other matters likely to affect employees.
The FWC found that the employer failed to comply with its consultation obligations as a definite decision had been made at the Directors meeting on 7 April 2020 and then subsequently issued the termination letter to the employee effective 7 April 2020 by email on 10 April 2020. The telephone calls relied upon by the employer occurred prior to the Directors’ decision made on 7 April 2020 and therefore were not relevant. There was also no written notification given to the employee about the changes prior to her receiving the termination letter.
Despite the FWC finding the employer had not complied with its consultation obligations, the FWC also determined in relation to the third element that the employer had not complied with its obligations to consider any redeployment opportunities for the employee. On this basis the FWC concluded that the employee’s termination was not a genuine redundancy under the FW Act.
Was the Dismissal Harsh, Unjust or Unreasonable?
As the dismissal was not a genuine redundancy under the FW Act, the FWC was required to determine whether the dismissal was harsh, unjust or unreasonable under section 387 of the FW Act.
The FWC decided that the dismissal was harsh, unjust or unreasonable for the following reasons:
- There was no valid reason for dismissal relating to the employee’s capacity or conduct as there was no suggestion the employee lacked capacity or could not otherwise have been engaged in any reconfigured work arrangements that involved a mix of difference tasks and duties;
- While the employee was notified of her dismissal by emailed letter on 10 April 2020, the FWC noted that the manner of notification was “extraordinarily callous”;
- While giving consideration to the employer being a small business employer with less than 15 employees, the FWC noted that even the absence of dedicated human resource specialists could not justify the way the employee’s termination was delivered; and
- The employer’s delay with payment of the employee’s termination payments.
On this basis, the FWC concluded that the employee’s dismissal was harsh, unjust or unreasonable. The FWC further noted that the Small Business Fair Dismissal Code did not apply due to the dismissal arising by way of an alleged genuine redundancy and being concerned with performance based dismissals. The FWC then ordered the employer to pay the employee 18 weeks pay.
Take home points
Employers need to be mindful that any proposed redundancy requires strict compliance with the genuine redundancy requirements of the FW Act.
Despite a reason for redundancy being due to operational requirements, a failure to comply with the consultation requirements of any applicable modern award or enterprise agreement and consider reasonable redeployment opportunities will invalidate the whole process.
The FWC will then have to determine whether the dismissal was harsh, unjust or unreasonable under alternative criteria which may be difficult to satisfy when the original intention was to dismiss for operational reasons.