When an employee’s job gets made redundant, they normally get a redundancy payment right? Sometimes employers are reluctant to make redundancy payments, particularly where employers have generous policies or enterprise agreements providing for more than the National Employment Standard statutory scale under the Fair Work Act. So how do employers try to get around this obligation?
What are the basics of redundancy? Redundancy is a type of employment termination. Redundancy commonly occurs where the job itself no longer exists, for instance, because of technical obsolescence (remember toll gate operators) or where the duties of a job are redistributed amongst other existing staff. A third category exists where a new job is created which includes some of the duties of the old job but is substantially different. Redundancy is given special treatment by the law (it is a complete defence to an unfair dismissal claim) because the termination relates to the job itself, not the employee’s performance of that role. However, several requirements must be met to obtain this protection from unfair dismissal claims and other legal action:
- The termination must be a “genuine” redundancy and not just a sham or cover for unrelated reasons (which may be unlawful);
- If employees are covered by an industrial award or enterprise agreement, then they must be consulted as soon as practicable after an employer has made a definite decision to make major change. For award covered employees, the employer must:
- discuss the nature of the changes with affected employees, likely effects and measures to avoid or lessen the effects;
- give consideration to any issues raised by the employee; and, for all employees
- consider whether there are any other suitable positions open for the employee in the organisation (including other companies in a group) including positions of a lesser nature.
- If there are no alternatives to termination, an employee will be entitled to notice (either worked out or paid in lieu) and a separate severance/redundancy payment either under the Fair Work Act, award/enterprise agreement, contract of employment or employer policies (whichever is the higher). They may also be entitled to other benefits such as time off to look for other work. There is an exception for employers with less than 15 employees.
Forced transfers – We have recently seen several instances where employers have told employees their job is redundant and they are being transferred to another role, without any choice. Or lip service is paid to consultation but when an employee says they don’t wish to accept the other role, the employer says they have no choice and it will be a deemed resignation if they don’t accept it. This normally happens with higher earners. In this case, the wording of the employment contract can be important and sometimes the contract is expressed so broadly that an employer can simply change the job of the employee contractually. But that is not always the end of the matter though because there may be unlawful reasons for the change. This is why employees are best advised to check (before they accept a job offer) that they are employed in a specific job, not just a specific job for the time being. But there is no such thing as a “deemed” resignation. The situation can, however, result in a stand off. One of the options for an employee is to treat the employer’s actions as a repudiation of the employment contract, or constructive dismissal, but these are extreme options and advice should be sought before pursuing these options (particularly where the employee earns over the high income threshold for unfair dismissal purposes).
Comparable jobs – Another approach taken by employers to minimise their redundancy payment exposure is to make an offer of a “comparable” position but say that redundancy won’t be payable if the employee doesn’t accept it. This approach will normally breach the Fair Work Act. If an employer makes an offer of a comparable position which is not accepted by an employee, then it is usually up to the employer to make application to the Fair Work Commission for an order to reduce or discharge their redundancy pay obligations and it is then for the FWC to decide. It is generally a breach of the Fair Work Act for an employer to simply refuse to pay redundancy pay.
“Minor” changes – Lastly, employers increasingly are adding or deleting duties to positions and changing the titles but maintaining it is the same position, or not substantially different. This is the most difficult scenario for employees to challenge. Where an employee is covered by an industrial award or enterprise agreement, they may be able to raise a dispute in the Fair Work Commission but it is otherwise difficult to obtain any external review of the employer’s decision without significant legal action whether through a statutory unfair dismissal claim or having to rely on the presence of unlawful reasons or the unattractive option of a common law claim. However, employees can practically fight back by pointing out the differences between roles and their non acceptance of the new role. What employees should not do is think they can take up the new role on a trial basis and then decide they don’t want it later on.
In many instances, one might think that it is cheaper for employers to just pay redundancy pay but this is sometimes not the case. It is also possible that some employers may think that by applying pressure to the employee, the employee will simply resign. Employees (and employers) should obtain advice before making any rash decisions in these situations – see our bulletin on redundancy trouble issues.
Please contact us if you would like any further information or help.