17 Jan REDUNDANCY: GENERAL INFORMATION
Redundancy: Is a situation of redundancy when: the employment is terminated, at the employer’s initiative, because the employer no longer requires the job done by the employee to be done by anyone.
Logically, a situation of redundancy may be filled with emotion for both the employee(s) and the employer.
Below we deal with some of the rights associated with the redundancy situation, some concerns, some examples and some lessons.
Employees and employers have particular obligations and rights they should be aware of in a process of redundancy, retrenchment and/or redeployment.
Redundancy Pay and Entitlements
Provisions for redundancy entitlements may be set out in employment contracts, enterprise agreements, awards, legislation such as the Fair Work Act 2009. The redundancy pay entitlement is ordinarily calculated on an employee’s period of continuous service with the employer at the date of the termination of the employment. That is the basis for the calculation under section 119 of the Fair Work Act 2009.
From an employer’s perspective, paying redundancy can be a difficult. From an employee’s perspective, obtaining a redundancy payment is not guaranteed even where a clear legal right to the entitlement exists. An employer may not pay it for a variety of reasons.
Non-compliance with and contravention of minimum standards or entitlements is a common problem. The employer may not be able to pay because the employer does not have the funds. For instance, redundancy can by definition occur when an employer becomes insolvent or bankrupt. There are government schemes set up to provide for assistance to employees who do not receive certain unpaid entitlements. The Fair Entitlements Guarantee (FEG) provides for redundancy pay for eligible employees.
Not all employees are entitled to redundancy pay. Small businesses are not always required to pay redundancy pay. There is also a minimum period of service for the entitlement to exist under the Fair Work Act 2009.
Some of the cases have been concerned with redundancy policies and procedures. Sometimes employees have relied on a policy that is provides for greater redundancy pay, or procedures, that are not set out in the redundancy legislation or the industrial instrument, such as an award.
Awards provide for consultation provisions. Such provisions in awards must be abided by, and provide that opportunities for redeployment should be pursued. The process of consultation often involves notice, discussions with the relevant employee(s) and their representatives and assessing and exploring the opportunities for redeployment.
Unfair dismissal decisions of the Fair Work Commission and general protections decisions of the courts have made clear that employees are entitled to pursue claims in cases of “non-genuine redundancies”. If a redundancy is not genuine, it is possible to make a dismissal application to the Fair Work Commission within 21 days of the date an employee was dismissed.
Definition and minimum standard
Minimum redundancy entitlements for national system employees are one of the National Employment Standard (NES) contained in the Fair Work Act 2009. The entitlement ranges from between 4 weeks of pay to 16 weeks of depending on the length of continuous service. An employee with less than a year of service is not entitled to redundancy pay under the NES.
The definition of redundancy in the NES is when an employee’s employment is terminated:
- At the employer’s initiative because the employer no longer requires the job done by the employee to be done by anyone, except where this is due to the ordinary and customary turnover of labour; or
- Because of the insolvency or bankruptcy of the employer.
This definition of redundancy can be modified in an award, enterprise agreement employment contract or a policy but not to the detriment of an employee. The amount of redundancy pay an employee is entitled to can also be increased under these arrangements.
Employees are often asked to sign deeds or other release documents to receive their entitlements. Deeds may offer incentives offered above statutory or industrial instrument (Award) minimum payments. Incentives may be offered in exchange for releasing an employer from certain claims, such as unfair dismissal or general protections. Click here for more about Deeds. See here for more about Unfair Dismissal.
Exclusion from unfair dismissal protection
If an employee’s dismissal is a genuine redundancy they will be excluded from the unfair dismissal protection that may otherwise apply under the Fair Work Act 2009. A person’s dismissal is considered a genuine redundancy if:
- the person’s employer no longer required the person’s job to be performed by anyone because of changes in the operational requirements of the employer’s enterprise; and
- the employer has complied with any obligation in a modern award or enterprise agreement that applied to the employment to consult about the redundancy.
A person’s dismissal will not be considered a case of genuine redundancy if it would have been reasonable in all the circumstances for the person to be redeployed within:
- the employer’s enterprise; or
- the enterprise of an associated entity of the employer.
The selection of employees to be made redundant
If the employer can establish that there were operational requirements which justified their decision to make a certain number of positions redundant, an employee will generally not be able to challenge their selection from a pool of employees.
However, an employee may be entitled to relief under the general protections provisions of the Fair Work Act 2009 if they can establish that the reason they were selected to be made redundant was related to a personal characteristic such as race, colour, sex, sexual orientation, age, physical or mental disability, marital status, family or carer’s responsibilities, pregnancy, religion, political opinion, national extraction or social origin.
The employee may also be entitled to relief if they are selected to be made redundant because they are a trade union member or they have previously made complaints or raised issues about industrial entitlements.
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