The pandemic hasn’t changed redundancies, but organisations should be careful with how they interact with JobKeeper.
It’s no surprise that employers have been responding to the economic impacts of COVID-19 by making staff redundant.
Despite the pandemic being unprecedented, the Fair Work Act 2009 Cth (Act) still requires that every redundancy is genuine, and a fair process be followed when making an employee redundant. Specifically, a dismissal is considered to be a genuine redundancy where an employer meets the following requirements:
- the organisation no longer requires the job to be performed by anyone due to changes in the operational requirements of the business;
- the organisation complies with all consultation requirements existing in an award or enterprise agreement; and
- it was not reasonable in all the circumstances for the person to be redeployed, either within the business or to another role within an associated entity.
The test focuses on whether the role has survived the restructure as opposed to a consideration of whether or not there is still a need for the specific duties to be performed. Therefore, an employee’s role may still be genuinely redundant even if there are some parts of their duties that are being performed by other employees. If a redundancy is not genuine, employees may make an unfair dismissal claim with the Fair Work Commission (FWC).
The recent FWC decision in ASU v Auscript Australasia Pty Ltd serves as a timely reminder of the importance of consulting with impacted employees before reaching a decision to terminate employment. Auscript made a portion of its workforce redundant in two tranches this year: the first following closures of offices in Adelaide, Sydney and Hobart and the second due to the adverse impacts COVID-19 had on its business. While Auscript did meet with the impacted employees in the second tranche, it was found that it failed to genuinely consult and give due consideration to other options such as redeployment. This was in breach of its enterprise agreement.
Consultation requires meeting with each employee considered for a redundancy to explain the possibility that their role may cease to exist, albeit that no final decision has yet been made. Employers must give employees an opportunity to provide feedback and input as to options to preserve their employment as well as involve unions where required by an award, industrial instrument or the law. They must also give due consideration to such feedback.
While JobKeeper has given businesses in the worst affected industries a critical lifeline, it’s not a silver bullet or a permanent solution. Boeing is one organisation that has been particularly hard-hit.
The pandemic has all but wiped out demand for the production of new aircraft in the foreseeable future. While the business confirmed redundancies would be made among factory workers in April, Boeing has since qualified for, and is claiming, JobKeeper. Nevertheless, the company anticipates the redundancy process will resume and continue until late this year. This means workers remain employed, are tagged for redundancies, but have little useful work to do in the meantime.
Conceivably, this situation could mean employees have no incentive to resign from employment while receiving JobKeeper and with pending expectations of redundancy pay.
The temporary amendments in Part 6-4C of the Act allow employers to make JobKeeper enabling directions and stand down staff on reduced or nil hours where they are unable to be usefully employed. In early September, legislation was passed to extend these amending provisions to align with the extension of JobKeeper payments until 28 March 2021.
The amendments assist employers who do not qualify for JobKeeper payments under the amended scheme, but are still suffering a downturn in business due to the adverse economic effects of COVID-19. Employers will need to carefully examine whether they can issue JobKeeper-enabling directions under the extended provisions, particularly in light of the toughener penalty regime, and consider alternate measures to reduce labour costs where they do not meet eligibility requirements.
It’s crucial organisations start casting projections and planning ahead for when JobKeeper subsidies are reduced for a second time on 4 January 2021 and then when they cease entirely in March next year.
Many organisations are revisiting their structures and redundancy processes and considering broader workplace planning strategies in preparation.
There remain, of course, a number of other options organisations can consider in order to control employment costs before resorting to making staff redundant. Redundancies produce legal risk when processes are not followed properly and can create cash flow challenges in and of themselves. It can also mean that once operations stabilise, businesses are faced with a need to recruit, train and mobilise talent, which can be quite timely, high effort and costly.
Organisations should carefully weigh up proposals to make staff redundant in accordance with the requirements in the Fair Work Act and against cash flow projections and future workplace planning strategies.
A version of this article originally appeared in the September 2020 edition of HRM magazine. The information in this article was up to date as of October 2, 2020.