28 Oct 2005

Restructuring, redundancy and discrimination

by Joe Catanzariti

To avoid claims of unfair dismissal and discrimination, redundancies must be based on genuine operational reasons.

Employer's right to restructure business

Business restructuring can result in redundancies, which can also lead to employee claims of unfair dismissal and discrimination. To avoid these claims, redundancies must be based on genuine operational reasons. For example, the introduction of workforce reductions, due to the financial circumstances of the business or technological changes making the position in question obsolete or unnecessary.

Before making employees redundant, employers should develop a "redundancy strategy" which addresses issues such as the reasons behind the restructure and the redundancy selection criteria.

Recent cases have provided important lessons for employers contemplating a restructure.

Termination of employee with family responsibilities on grounds of redundancy found not to be discrimination

In Georgiadis v Powerlab Pty Ltd a woman who had been employed full-time by Powerlab in various administrative roles took maternity leave, and then further unpaid leave to care for her terminally ill mother. The employee later requested to return to work part-time. The employer did not respond for two months, then denied the request. Several months later the employee sought to return to full-time work, but was notified that her position had become redundant and her employment terminated. She brought an unfair dismissal claim in the AIRC, and won. But her case was overturned on appeal.

This case indicates that terminating an employee who happens to have family responsibilities will not necessarily be an unfair dismissal, provided the termination is genuinely on the grounds of redundancy, with a bona fide and reasonable selection process implemented, and not connected to family responsibilities. Also, the Commission is prepared to adjust procedural requirements when assessing unfair dismissal and discrimination claims, to recognise the differing sizes, structures and circumstances of particular workplaces.

Details of this case

Powerlab employed seven people. It argued that it needed to reduce administrative staff generally, and increase the proportion of administrative staff with tertiary qualifications to handle certain accounting-oriented administrative tasks. Ms Georgiardis, along with a part-time employee, had been selected for redundancy over other administrative employees because she did not possess the relevant qualifications.

Ms Georgiadis did not dispute Powerlab's need to reduce administrative staff. But she believed that the tertiary qualification criteria adopted as a means to reducing staff was a sham designed to disguise the fact she had been selected for redundancy because of her family responsibilities. In support of this she said that she was currently acquiring tertiary qualifications, and that no new person with these qualifications had subsequently been employed. She also suggested that Powerlab's earlier refusal to grant her request to work part-time evidenced a hostility by the company towards accommodating her carer's responsibilities.

The Full Bench of the AIRC rejected the employee's claim. Although she was acquiring tertiary qualifications, these were in networking and multimedia design, and not relevant to Powerlab's accounting requirements. The fact that no new staff had been recruited supported the company's claim concerning the need to reduce staff, and the fact that the employee retained did have accounting qualifications indicated that it was attempting to increase the proportion of administrative staff with such training. In relation to Powerlab's earlier refusal of the request for part-time work, the Full Bench considered that, given the nature of the position and the size of the company, their reluctance to offer part-time work was "entirely understandable" and provided little or no support for the inference that her family responsibilities were an operative factor in her selection for redundancy. Finally, a voluntary redundancy payment of six weeks was sufficient to redress any unfairness associated with Powerlab's failure to consult with the employee.

Pregnancy and parental status were reasons alternative position not offered

In Du Bois-Hammond v Ariel Cole and Raging Thunder Pty Ltd [2004] QADT 27 the employee took maternity leave from her employment. She was employed as a tourism operator. She requested to return part-time. This request was refused, so she indicated she would return full-time.

One week before her scheduled return date, one of the company's directors informed her that the company had restructured and merged two sections, including the section she had worked in. Another employee was appointed as manager of the new department and the person who had replaced the employee while she was on maternity leave was appointed second-in-charge. As a consequence, the employee was advised that her position was redundant.

The Queensland ADT accepted that the decision to restructure and make the employee's job redundant were made for genuine economic and operational reasons. It did not restructure because of the employee's pregnancy or parental status. The restructure had been discussed for some time and the employee had been involved in those discussions before she went on maternity leave.

However, the Tribunal found that the employer had discriminated against the employee on the grounds of pregnancy and parental status by not offering her the second-in-charge position or a comparable position to her former role. The Tribunal considered that the employee was not considered for the second-in-charge position because of her absence on maternity leave, otherwise she would have been offered the position.

The employee was awarded $26,750 in damages for direct discrimination on the basis of pregnancy and parental status for failure to appoint her to the second in charge position or to offer her a suitable alternative position.

Employers should consult about redundancy even when the employee is on leave

In Aurion Gold v Bilos, the employee was employed as an underground geotechnician. She took maternity leave for three months. During her maternity leave, the employer replaced underground technicians with geologists, and the employee's position was made redundant.

The employee was then offered a position as a database technician but did not accept this offer as she considered that it was not comparable to her former position and resulted in a reduction of her salary because it was not a shift work position like her former role.

The Full Bench of the WA IRC held that the employee's termination was unfair because the employer did not offer her a comparable position in pay and status upon her return from maternity leave.

Further, unfairness was found to have occurred through Aurion Gold's failure to consult with the employee. As soon as Aurion Gold had decided that the employee's position was redundant it was under an obligation to consult with her notwithstanding that she was on leave at the time.

Redundancy selection must be on objective criteria

In Rajaratnam v ANSTO the employee, a chemist, was employed for five and a half years and then made redundant. However, the redundancy selection process was found to be unfair as it was based on senior management making subjective discretionary decisions. At the time, the employee was planning to start a family.

The operational requirements of ANSTO, the reduction of government funding and the need to absorb wage increases, were valid reasons to make employees redundant. But the AIRC found that there was a valid reason for the dismissal of this employee.

If there are a number of employees within the classification and role profile of the position to be made redundant, there must be a selection process based on reasonable and objective criteria to determine those to be made redundant. ANSTO failed to do this, so it had no valid reason for choosing this employee. The employee was reinstated and an appeal by the employer was rejected.

Termination of employment during leave

An employer may not terminate an employee because the employee is absent on paternity leave. But a dismissal by reason of genuine redundancy may be carried out as normal while an employee is on paternity leave. The difficulty is ensuring the selection process is scrupulous and based on objective criteria unrelated to the family responsibilities. Also, the employer's obligations during the redundancy process are the same whether the employee is present at work or on leave. Therefore, while an employee absent on leave makes consultation less practicable, it is no excuse for not observing those obligations.

Thanks to Millen Lo, Eliza Morgans and Morgan Nyland for their help with this article.

This article was written when Joe was a partner at Clayton Utz and does not necessarily reflect his views as Vice-President of the Fair Work Commission.

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