By Joseph Nunweek

There’s a bitter irony in sitting down to read about any redundancy gone wrong.

Typically, it begins with a business reluctantly being forced to make changes to ensure their continued viability. They’ll need to downsize, or restructure to be able to compete at all, or outsource certain functions that they can no longer perform efficiently.

The idea is to save money and keep everything ticking along – particularly in times like these, when you might need to batten down the hatches until bad times turn to good.

But get the procedure wrong, and the savings for your business will quickly fly out the window.

The time, legal fees and compensation involved in an unfair dismissal case (let alone several unfair dismissal cases) can quickly make a redundancy uneconomic.

And here you were trying to save your business…

Avoid the mistakes, learn the lessons

Not every unfair dismissal case will wind up with a finding of wrongdoing on the employer’s part. Though it can be cold comfort, after all the disruption of defending a claim.

But these cases clarify what an employer can and cannot reasonably do when implementing redundancies. That makes them invaluable to you.

Take the decision I’m talking about today – reached by a FWC Vice President at the start of September. It spells certainty for employers who decide to reduce the number of roles for permanent employees while simultaneously electing to use a roster of labour hire workers.

More generally, it shows that the courts and tribunals won’t second-guess your business decisions, provided they’re on the right side of the law.

But tread carefully –the lessons held in case law are never ‘one size fits all’!

Brown and Ors v Clermont Open Cut [2015] FWC 3862

The matter began in November 2014 when a large group of employees at Clermont Mine in Central Queensland were made redundant due to a global downturn in the demand for coal.

Six employees claimed their dismissals were unfair, and sought reinstatement to their original positions. The reason? They argued they could have been reasonably redeployed elsewhere within the business.

The employees argued their redeployment opportunities could have come about through the replacement of existing labour hire positions within the business. Stop using labour hire, keep employing us instead – that was the gist.

So is it reasonable for a business to replace its contractors with employees who would otherwise be made redundant? That’s the call the FWC had to make.

FWC: Replacing labour hire workers a step too far

It was agreed that the redundant employees’ skills meant they could easily work in the positions held by the labour hire workers, including operating the same specialised equipment.

Clermont argued that its labour hire workers filled a particular need by filling in for permanent employees during leave and during training.

It was difficult from an operational and cost perspective to have employees taking on these roles instead, because their hours could not be predicted with certainty.

In short, the labour hire workers ensured a certain degree of operational flexibility that wouldn’t be available otherwise.

Considering Clermont’s evidence, the FWC noted that it was reluctant as a rule to criticise the legitimate business models of companies, and that requiring a business to alter a business model which it had provided justification for would not be appropriate.

Separately, the FWC also noted that the employees who had claimed unfair dismissal were given the opportunity to take up redeployment opportunities at other Clermont sites – but for various personal reasons, chose not to.

In this case, it was held that the dismissals were cases of genuine redundancy.

Not quite a perfect touchdown

Clermont followed a rigorous process when preparing for these redundancies.

Assessors in its management team used a detailed matrix to evaluate employee skills, performance and abilities. But it also assessed employee ‘attitude’. And that’s where it’s run into trouble in a separate court case that arose out of the same round of layoffs.

In CFMEU v Clermont Coal Pty Ltd [2015] FCA 1014, an employee who had been actively involved with his union on-site claimed he was selected for redundancy in part because of those activities – and a Federal Court judge agreed.

The judge felt that the difficult relationship the employee had had with at least one of the assessors because of tense discussions about union issues in the past meant that a fair decision about his redundancy was not made.

So as you can see, two steps forward can immediately be followed by one step back.

What you need to do

Redundancy isn’t rocket science. But it can turn into a complex project in its own right. As well as understanding the law, a redundancy process requires active management to ensure that your actions will stand up to a challenge later on.

A few pointers from Clermont’s case, while you’re here:

Be able to present your business case

The good news from the first of the two cases I looked at today is that the FWC won’t just wade into your organisation and say how many workers you should employ, and on what basis.

Does the flexibility of labour hire suit your operations, compared to hiring more permanent employees for the job? That’s your prerogative. You’re still the boss.

But everything’s a lot more straightforward if you can succinctly explain this to employees and to a tribunal. You should be able to paint a clear picture of how your hiring – and firing – decisions work.

Always consider redeployment

You’re not obliged to find somewhere to put an employee whose role becomes redundant, no matter what.

But the possibility of redeployment is one factor under the Fair Work Act 2009 when considering whether a redundancy was genuine. The question of whether it was reasonable in all the circumstances to redeploy a person elsewhere in your enterprise is part of the test.

This means you need to be able to show you’ve considered and investigated the possibility of redeployment – even if it turns out not to be a practical option for your business.

Watch out for bias

If someone making the redundancy decisions in your business has ‘history’ with an employee who may face dismissal – if they’ve butted heads, or there’s a reason why the decision-maker may take issue with the employee’s attitude – proceed with caution.

A perception of bias against an employee opens your whole redundancy process up to challenge.

If you need to, be prepared to consider engaging an external agency or consultant to negotiate the HR process. Apart from (hopefully) having a measure of expertise, they’ll also reinforce that the process is independent and fair.