Managing redundancy…what you need to know

Posted on Nov 28, 2016 by Rebecca McKenzie   |   Categories: Employment Law

As business ebbs and flows, an important consideration for any owner or operator is how to manage staff in the event of a downturn.

The reality for many businesses is that in tough times, a strategic downsize in staff levels via redundancy is necessary in order to maintain the operation of the business.

In the recent past, many New South Wales public service jobs have been made redundant, and more locally we are continuing to see jobs cuts to the industrial, mining and other private-sector enterprise.  A redundancy can be very emotional and costly for the people involved, so it’s important to follow the legal framework to ensure fairness and transparency in the process.

Redundancy can happen for many reasons, such as slow down due to lower sales or production, restructures or reorganisation on a merger or acquisition or due to the introduction of new technology.  Employers need to tread carefully when considering and carrying out redundancies, due to strict consultation provisions in awards and enterprise agreements and the legal obligations surrounding re-deployment opportunities within the employer’s business or an associated entity.  The last thing an employer wants at this volatile time is a claim for unfair dismissal or claims relating to discrimination, breach of general protections in the workplace or allegations of a ‘sham’ redundancy.

It’s important for employers to be aware that redundancy pay doesn’t need to be paid in some instances, for example by some small businesses and generally, casual employees and in some cases specified in the Fair Work Act.  If redundancy is payable, the amount of redundancy pay the employee receives is based on their continuous service with the employers and their age.  The calculation is worked out in accordance with the National Employment Standards under the Fair Work Act or sometimes a more generous redundancy entitlement is contained within a workplace agreement.

In a recent significant development, periods of regular and systematic casual employment prior to a position of permanency are to be counted towards redundancy entitlements, in light of a recent Fair Work Commission ruling.  The Australian Manufacturing Workers’ Union appealed after a company planned a large redundancy at its workplace after completing a contract.  In August 2016, the Fair Work Commission confirmed, by a majority, that workers who commenced as casuals before their positions became permanent will be entitled to use their full length of service in the calculation of their final redundancy pay out.

Watch this space, as whilst the case has been touted as being based on the ‘the proper construction’ of the relevant enterprise agreement and the interpretation of the Fair Work Act (which doesn’t disallow regular casual employment in the calculation of redundancy pay) others cite the case as being highly contentious and likely to be appealed.