Redundancies breach Enterprise Agreement provisions

How does it affect you?

• Employers must carefully consider an employee’s terms and conditions of employment, including in an enterprise agreement, before retrenching them.
• Employers should be especially wary of clauses in enterprise agreements that limit the circumstances in which employees can be retrenched (eg no forced redundancy) or require consideration of alternatives to forced redundancy (eg redeployment into alternative roles).

Background

Port Kembla Coal Terminal (PKCT) decided to retrench three employees following an operational review. PKCT’s enterprise agreement contained redundancy and consultation provisions requiring it to:

• make use of redeployment and voluntary redundancy before implementing forced redundancies;
• investigate all avenues to avoid forced redundancies, including a reduction in contractors; and
• consult with employees where there is a major change in its workforce.

The Construction, Forestry, Mining and Energy Union (CFMEU) and the employees alleged that PKCT had failed to comply with these obligations. One of the employees was a CFMEU representative and so also commenced a general protections claim alleging that the termination of his employment was because he was an industrial representative.

At first instance, the Federal Court agreed that PKCT had breached its enterprise agreement by failing to properly consult and to consider voluntary redundancy and redeployment opportunities for the employees. It also upheld the general protections claim. PKCT appealed the decision.

The decision

The majority of the Full Court upheld the finding that PKCT had failed to comply with its redundancy obligations in the enterprise agreement. In particular, the majority found that PKCT had not undertaken any assessment of the employees’ skills and competencies to determine the viability of redeploying them into positions held by contractors. Further, the Full Court found that PKCT was obliged to undertake a voluntary redundancy round, offering voluntary redundancies to the retrenched employees or to employees who occupied positions to which the retrenched employees could have been redeployed.

However, the majority overturned the finding that PKCT had not complied with its consultation obligations, deciding that the operational review that resulted in the redundancies did not constitute a ‘major change’ that triggered the consultation requirement.

The majority also found error in the primary judge’s decision that PKCT had breached the general protection provisions and so remitted this claim for a fresh hearing.

Based on its findings that there had been a breach of PKCT’s redundancy obligations, the court upheld the order for reinstatement of two of the employees with back-pay for the period since termination.

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