Planning Staff Cuts, Restructuring & Compliance - 3 Things Business Owners Need To Consider Right Now
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Last Sunday, September 27 marked the last day of the federal government’s original JobKeeper with the reduced JobKeeper extension (also referred to JobKeeper 2.0) coming into effect.
While the latest figures from the Australian Bureau of Statistics show a decline in Australia’s unemployment rate since July we are likely to see this change in the coming weeks as businesses who were relying on the $1,500 fortnightly subsidy find themselves unable to manage increased labour costs.
Restructures and redundancies are common practices for businesses needing to reduce labour costs. However, now, more than ever, it is important that businesses manage redundancies properly and fairly.
For employers there can be serious implications for getting it wrong and with the Fair Work Commission revealing that they had seen a 70% increase in unfair dismissal claims during the height of the COVID-19 pandemic and many employees struggling financially, businesses may find more employees challenging redundancies.
Here we explore some of the considerations for employers when restructuring and making positions redundant.
Genuine Redundancy
An employee’s position is redundant if the employer no longer requires that position to be performed by anyone because of changes in the operational requirements of the business. When considering making an employee redundant, an employer should determine that the position itself no longer needs to be filled by anyone. Redundancy should not be taken as an opportunity to remove a problematic employee from the business nor should the selection of the employee be based on protected attributes, such as gender or parental responsibilities.
Genuine redundancy often arises from closure or downturn of business, relocation to new premises, new technologies or restructure due to business sales, mergers or acquisitions. In the case of restructure the work can be redistributed or contacted out. Business can face the risk of claims of unfair dismissal or unlawful termination if the reason for redundancy is not genuine or if an employee feels they were selected due to a protected attribute.
For example, recently Sydney’s Macquarie University was ordered to pay more than $600,000 in compensation and penalties after it was found to have contravened the general protections provisions of the Fair Work Act 2009 (Cth) (the Act) by making a former employee redundant because the former employee had made complaints about her direct report.
Procedural Obligations
Most employers have obligations during the process of redundancy to seek redeployment opportunities and consult with the affected employee/s. Before terminating an employee for the reason of redundancy employers must consider where there are any other roles the employee could perform and afford the employee an opportunity to provide any suggestions they may have in relations to the redundancy, any proposed redeployment or termination and must consider these suggestions. Ensuring good process includes retaining supporting documents, including noting reasonable redeployment opportunities, and the reasons why a particular employee has been selected over other employees and documenting conversations during the consultation process.
Appropriate written notification should be given to the employee and include such full particulars and advise termination of employment based on redundancy.
Notice and Redundancy Payment
When terminating an employee on the basis of redundancy, notice of the termination, or a payment in lieu of that notice period, must be provided in accordance with statutory or contractual minimums. Under the Fair Work Act, employees are entitled to up to 16 weeks’ redundancy pay, depending on their length of service however some businesses may have alternative redundancy schemes (such as those in a specific Modern Award or Enterprise Agreement) entitling the employee to additional benefits which the employer must adhere to. Small businesses (those with fewer than 15 employees, including regular and systematic casuals) are excused from paying redundancy pay.
What if rapidly changing conditions mean the role is required again shortly after being made redundant?
There is no prescribed time limit when rehiring after a redundancy. However, there are factors that employers need to consider before deciding to re-engage an employee whose employment was terminated due to redundancy or advertise the same position. Generally speaking, the longer the period between the redundancy and the employer re-advertising the job, the lower the risk that the original decision will be challenged.
However, the real test is whether the original redundancy was genuine, which will depend on the circumstances of the original redundancy and whether the employee could have been deployed into the new role.
A recent decision by the Fair Work Commission in Lakhan v United Petroleum Pty Ltd [2020] FWC 4970 highlights this test.
The Commission was satisfied that the Applicant's dismissal was a case of genuine redundancy, despite the company advertising the same role in less than one month. Given the timeline of events, the Commission recognised that Mr Lakhan had reason to be sceptical of United Petroleum’s conduct since his termination however accepted that this could be explained by the fact that the market in which the company operates had fluctuated appreciably in the wake of COVID-19 requiring it to quickly adapt and refocus its operations.
The Commissioner was satisfied that the company had made the decision to make the positions of the Applicant and five other retail store specialists redundant because of changes in its operational requirements. The company gave evidence regarding the drop in petrol sales during April 2020, that there was a great deal of pressure on the business to reduce rents and that a large number of employees were either stood down completely or partially because there was not enough work. On the evidence that once the COVID-19 restrictions were initially relaxed after the Applicant's termination, the company's sales performance improved "dramatically" which required the company to rehire employees.
The Commissioner accepted that at the time of the Applicant's dismissal there were no available positions within the employer to re-deploy the Applicant and therefore, that the dismissal was a case of genuine redundancy.
How can Infinity HR help?
If you are considering a restructure Infinity HR can provide you support and guidance throughout the process. We can provide you will tailored project timelines, documentation, letters and consultation scripts and even facilitate the consultation with you. Alternatively you can purchase our templates and modify then as required. No matter which you choose Infinity HR can help you ensure compliance through what we know is a challenging time for all involved.
Contact us today on 0400 489 743 or email info@infinityhr.com.au to learn more.
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