Genuine Redundancies and Consultation Obligations

An unfortunate consequence of the COVID-19 Pandemic has been the need to save wage costs during either short or extended downturns in business, leading to many companies deciding to restructure to better set up for medium and long-term growth/success. Several important precedents have been set since January 2020 in the Fair Work Commission and below are some important details to consider when restructuring and considering potential redundancies.

Consultation obligations 

In Australia Municipal, Administrative, Clerical and Services Union v Auscript Australasia Pty Ltd (the Case), a Union representing employees requested dispute settlement in the Fair Work Commission on a decision to make a number of employees redundant due to the impacts of COVID-19. Redundancy is an expensive and disrupting process to any organisation and genuinely engaging and consulting with your employees (and any appointed representatives) is vital in ensuring compliance with the Fair Work Act 2009 (Cth) and promoting a good work culture where employees feel valued.

The outcome of this case determined that the employer had failed to meet the consultation requirements under their Enterprise Agreement, and the Fair Work Commission ordered to employer to extend the consultation period and undertake to genuinely consult with employees. This view was taken as the Union effectively argued the Employer dismissed suggestions to avoid redundancies by employees, and that a final decision was already made prior to consultation

The key takeaways from this case are to ensure you have a solid business case for a proposed redundancy and to genuinely consult with employees before settling on a final decision. This becomes increasingly important when a redundancy aims to resolve potentially short-term issues, such as reducing wages costs during temporary government lockdowns and similar situations where a business may re-engage employees in similar positions in the future. The costs of these mistakes can be high, ranging from additional payroll-related costs for an extended process, reputational damage for non-compliance, and cultural issues with trust that can last for years to come.