Redundancies during COVID-19

  • COVID-19
  • Published 21.10.2020

Key Takeaways

In response to the impact of COVID-19 on profitability, many businesses have been forced to restructure or downsize which, in some cases, leads to employee redundancies. The recent unfair dismissal decision of Rachael Freebairn v Dandiie Pty Ltd and others (FWC 2020) serves as a reminder to employers of their statutory obligations regarding the procedures for valid redundancies (including the requirement for consultation under any relevant modern award).

Brief Facts

TJL Business Advisors and Accountants (‘TJL’) was one of the many businesses affected negatively by COVID-19, suffering significant decline in revenue. A decision was made to reduce the hours of administrative staff and in some cases to make employees redundant. 

Ms Freebairn was one of the staff members whose role was made redundant. The process of implementing the redundancy was not handled well. On 25 March 2020, Ms Freebairn was advised during a meeting with TJL that she would be ‘better off financially’ if she did not remain employed by TJL and instead received JobSeeker payments. TJL asked if Ms Freebairn had any ‘questions, comments or suggestions’ and Ms Freebairn said she did not. At this meeting, TJL confirmed the decision to make Ms Freebairn’s role redundant.

Following her dismissal, Ms Freebairn filed an unfair dismissal application on the grounds that her dismissal was harsh, unjust and unreasonable; and her redundancy was not a genuine redundancy because TJL failed to engage in proper consultation with her before making the decision to make her role redundant in contravention of cl.38 of the Clerks – Private Sector Award 2020 (being the award which covered Ms Freebairn during her employment with TJL). 

Judgment

According to s385 of the Fair Work Act 2009 (Cth), a person has been unfairly dismissed, if the Fair Work Commission (‘FWC’) is satisfied that:

  • the person has been dismissed; and
  • the dismissal was harsh, unjust or unreasonable; and
  • the dismissal was not consistent with the Small Business Fair Dismissal Code; and
  • the dismissal was not a case of genuine redundancy.

For an employee to have standing to bring an unfair dismissal application, the employee must have, amongst other things, lodged the application within 21 days of dismissal and been employed for the relevant minimum employment period (either 6 months or 1 year depending on whether the employer is a small business).

A person’s dismissal is a case of genuine redundancy if:

  • the employer no longer required the employee’s job to be performed by anyone because of changes in the operational requirements of the employer’s enterprise; and
  • there was no ulterior motive (e.g. performance issues or discrimination) for the employer’s decision to make the employee redundant;
  • the employer complied with any obligation in a modern award or enterprise agreement that applied to the employment to consult about the redundancy;2 
  • it would not have been reasonable in all the circumstances for the employee to be redeployed within the employer’s enterprise or an associated entity at the time of the dismissal.3 There must be evidence to support this requirement.

Although the FWC was satisfied that Ms Freebairn’s role was no longer required to be performed by anyone because of changes to the operational requirements of TJL’s enterprise; and that she could not have been reasonably redeployed to another position within TJL; the FWC found that TJL failed to meet the consultation requirements under the Award because:

  • Merely asking Ms Freebairn whether she had any ‘questions, comments or suggestions’ and telling her she was better off receiving JobSeeker payments did not satisfy the Award requirement for ‘consultation’.
  • Had proper and meaningful consultation taken place with Ms Freebairn, the option of Ms Freebairn reducing her days of work from 3 per week to 2 per week could have been considered and Ms Freebairn potentially could have retained her employment with TJL (something that other employees had been allowed to do). 
  • Had Ms Freebairn been properly consulted, she could have stayed employed with TJL until JobKeeper commenced, allowing her to register for the payments whilst keeping her job. 

The FWC therefore found that Ms Freebairn’s redundancy was not a ‘genuine redundancy’ and TJL’s dismissal of Ms Freebairn was harsh and unreasonable; and awarded compensation in favour of Ms Freebain (being the difference between what Ms Freebairn would have received under JobKeeper for that period and what she received as pay during her notice period).

Implications

It is only natural that many businesses in the current COVID-affected market will be, at some stage, deciding to make some positions in the business redundant. However, this FWC decision emphasises the key redundancy considerations businesses must take into account to ensure they are properly complying with their obligations under the Act and modern awards during these unpredictable times to avoid allegations of unfair dismissal. 

We have experience assisting employers on how to lawfully dismiss their employees and how to deal with unfair dismissal applications. If you would like more information about lawful dismissals or unfair dismissal applications, please contact Melissa Jarvin.


1Christina Adams v Blamey Community Group (FWCFB 2016). 
2ss389(1) of the Fair Work Act 2009 (Cth)
3ss389(2) of the Fair Work Act 2009 (Cth)