14 Oct 2010

Genuine redundancy: What are the redeployment obligations of employers?

by Maurice Baroni, Jack O'Brien

The redeployment obligation requires an employer to actually transfer the employee rather than simply assist the employee to find an alternative position.

An employer must actively attempt to redeploy an employee in an associated entity before the redundancy is considered "genuine" under the Fair Work Act 2009 (Cth) - but what exactly does this entail? A recent case offers some guidance (Howarth v Ulan Coal Mines Limited [2010] FWA 4817).

The employer and the redundancy

Ulan Coal Mines Limited, and a number of other companies, operated coal mines as subsidiaries under Xstrata Coal Pty Ltd. It was not in dispute that these companies were associated entities.

After conducting a review of operations, Ulan Coal made a number of employees redundant. The CFMEU lodged applications on behalf of ten of the dismissed employees, alleging the employees had been unfairly dismissed. The CFMEU claimed the redundancies were not "genuine redundancies" and therefore the employees were able to access an unfair dismissal remedy.

Was there a "genuine redundancy"?

At first instance, Fair Work Australia (FWA) held that the dismissals were not genuine redundancies as Ulan Coal still required the jobs to be performed and had not met all the appropriate consultation requirements. Ulan Coal appealed the decision to the Full Bench of the FWA, which did find the redundancies to be genuine.

The Full Bench noted that the restructure had involved an overall reduction in the size of the non-trade workforce and distinctions were also made between the jobs of mineworkers retrenched and the functions performed by those mineworkers.

The case was remitted to the Commissioner at first instance, to determine whether the redeployment requirements of section 389(2) of the Fair Work Act were satisfied.

Was there an active attempt to redeploy an employee in an associated entity?

FWA found that redeployment of the employees at Ulan Coal mine site was not reasonable. However, FWA also found that Ulan Coal should have redeployed six out of the ten employees to associated entities within the Xstrata group. It was held not to have been reasonable to redeploy the other four workers because of, amongst other reasons:

  • injury, resulting in one worker being placed on lighter duties and without a clear prognosis; and
  • a reluctance of the other workers to travel to the other companies (the closest vacancy was approximately 100km away).

What must an employer do to discharge its redeployment obligations?

FWA held that redeployment requires a transfer of the employee within the employer's enterprise or an associated entity. Merely assisting the employee to find alternative employment or the employee independently finding employment is insufficient to discharge an employer's redeployment obligations.

While Ulan Coal had made vacancies known to employees and facilitated its associated entities offering employment after a selection process, Commissioner Raffaelli held that this was tantamount to assisting the workers gain employment rather than redeploying them. In this, FWA chose to give a narrow reading to the work "redeploy" and disregarded Ulan Coal's argument that it was not in a position to dictate to other Xstrata companies who they should employ.

Further, Commissioner Raffaelli found there to be no requirement that an employee be transferred to a particular position/job, only that they be redeployed within "the enterprise", where reasonable.

What does this mean for employers?

An employer may be liable for an unfair dismissal claim resulting from a redundancy, if it does not ensure that it has fully discharged their redeployment obligations. If it is reasonable in all the circumstances to redeploy the person, the person must be transferred to an alternative position within the entity or an associated entity and not merely assisted in finding an alternative position. This places a substantial obligation on employers.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.