FWC Reinforces Importance of Consultation to “Genuine Redundancy”

Employers have been put on notice to take a more cautious and methodical approach to consultation with employees before redundancies after the Fair Work Commission reasserts the importance of proper consultation processes.

What is a Genuine Redundancy?

Under s389 of the Fair Work Act, an employee’s dismissal will only be a case of genuine redundancy (and therefore exclude the possibility of an unfair dismissal claim) if:

  • changes in the operational requirements of the business mean the employee’s job is no longer required to be performed by anyone; and
  • the employer has complied with any obligations under an award or enterprise agreement to consult the employee about the redundancy.

The award obligation to consult means that an employer must consult with employees whenever there is a major workplace change that will significantly affect them, such as a redundancy… But what exactly does “consultation” mean?

Particularly when only one or a few employees are affected, it is easy to take a cursory approach to consultation.  Often, employers assume too easily that the employee/s will have nothing useful to say about the reasons for redundancy, and underestimate the significance of the redundancy for each employee (or over-estimate the extent to which “getting a redundancy” makes an employee feel better about it).  However, a recent case has provided a strong reminder that care needs to be taken about consultation if the employer is to pass the “genuine redundancy” test.

An Expensive Example of Insufficient Consultation

The recent case of Buttar v PFD Food Services Pty Ltd (FWC 2017) shows that it is not enough to take a “tick the box” approach when it comes to consultation.

Mr Buttar’s position was made redundant by PFD after a legitimate restructure of the business meant his role no longer existed.  Under the Seafood Processing Award, PFD was supposed to discuss any major workplace changes with employees as soon as practicable after a definite decision was made, and to provide all relevant information in writing and take steps to mitigate any adverse impacts – the standard modern award requirements The issue was whether PFD had discharged its obligation to consult with Mr Buttar about the changes and his redundancy.

PFD’ s General Manager met with Mr Buttar and informed him in general terms that there was going to be a restructure that may affect him, but with no further specifics.  Once it became clear to Mr Buttar that he was being dismissed, along with others, he was not provided with any further opportunity to respond.

The Commission found that this did not amount to meaningful or sufficient consultation, and referred to the case of CEPU v Vodafone Network (2001), where the meaning of consultation was explained in these terms:

“Consultation is not perfunctory advice on what is about to happen.  This is a common misconception.  Consultation is providing the individual or other relevant persons with a bona fide opportunity to influence the decision maker.”

That doesn’t mean that consultation operates to prevent management from making organisational decisions.  It is intended to make the decision making process as informed as possible, for both parties, especially when an employee’s employment prospects may be affected.  In CEPU v Vodafone, the court also stated, “the opportunity to avoid or mitigate the effects of a termination cannot be underestimated by those who wield power over those and their families who will be the subject of the exercise of that power”.

The general nature of the information provided to Mr Buttar could reasonably have led him to believe the unspecified restructure may not affect him at all, and that he could continue working without any concerns for his job security.  PFD also failed to allow Mr Buttar to influence the employer’s decision with possible alternatives, as there was insufficient information to give him anything to respond to.  The Commission also noted that there was nothing to prevent the General Manager from conducting a proper consultation with Mr Buttar at any time on that day or during the week.

As PFD did not discharge its consultation obligations,  Mr Buttar’s dismissal was not a  “genuine redundancy”.  PFD should have provided Mr Buttar with full details, in writing, of how the restructure would affect him personally and given him an opportunity to comment.

The Commission then turned to whether the dismissal was “harsh, unjust or unreasonable”.  Because Mr Buttar was refused a support person, and was and not consulted individually, it held that his dismissal was unfair.  As a result, the Commission ordered PFD to reinstate Mr Buttar and to pay compensation for his lost earnings.

The Bottom Line for Employers?

The key takeaway from this case is that meaningful consultation processes are very important when conducting redundancies.  Short-circuiting the process opens up the risk of a claim in the FWC.