05 Dec 2013

Redundancy vs redeployment in multinational companies

by Michael Byrnes

It will only be necessary to consider international options for redeployment in certain circumstances.

Somewhat surprisingly in light of the large number of Australian employers that operate across national borders, there's little guidance on their obligation to consider overseas employment options for employees affected by redundancy (Roy v SNC-Lavalin Australia Pty Ltd [2013] FWC 7309).

A recent decision of the Fair Work Commission sheds further light on when international redeployment options will be considered reasonable.

Senior Deputy President Richards found that SNC-Lavalin Australia Pty Ltd (SNC), which is part of a multinational employer group, had complied with its obligation to consider reasonable redeployment options. This was despite the fact that the company declined to employ an employee in a position available overseas when making employees in its Brisbane office redundant.

Mr Roy is made redundant

SNC experienced a downturn in its Australian and international operations in 2012, and as a result reviewed its operations to identify, among other things, how effectively employees were being utilised across the company.

Mr Roy was employed in the Brisbane office as a “senior designer – mechanical”. The Brisbane office was particularly affected by the downturn, with utilisation levels having fallen to a five-year low.

SNC initiated a program of cost-cutting and redundancies. Between August 2012 and March 2013, its Brisbane office staff fell from 156 to 71. This included making all senior designer – mechanical staff positions redundant, including Mr Roy.

Mr Roy alleged that, at the time of his dismissal, there were a large number of overseas positions to which he could have been redeployed, including:

  • CADD designer in the USA;
  • CAD technologist in Canada;
  • project leader, mechanical and piping in New Caledonia; and
  • engineering assistant in Canada.

Further, Mr Roy alleged an employee of SNC had told him there were plenty of jobs in Canada. As a result, Mr Roy alleged that his dismissal was unfair under section 394 of the Fair Work Act 2009.

What is genuine redundancy?

A dismissal cannot be considered an “unfair dismissal” under the Fair Work Act if it is a “genuine redundancy” as defined in section 389 of the Act. This required consideration of two main tests:

  • whether the employee’s job was no longer required to be performed; and
  • whether it would have been reasonable to redeploy the employee in the employer’s business or with an entity associated with the employer.

There was no controversy that Mr Roy’s job was no longer required to be performed. All senior designer – mechanical positions had been abolished in SNC’s Brisbane office and in overall terms the Brisbane office had experienced a 50 percent decrease in staff numbers.

The real issue in this case was whether SNC could have reasonably redeployed Mr Roy, either in Australia or overseas.

Could Mr Roy have been redeployed in Australia?

Employment opportunities within Australia were very limited. SNC was going through a downturn in which it was getting no new work or contracts. In addition, there were no vacancies arising from SNC’s work under existing contracts.

SNC continued to employ people in positions more junior to Mr Roy’s former role as a senior designer – mechanical, but Richards SDP was of the view it would not have been reasonable to remove an incumbent employee to accommodate Mr Roy.

Two basic elements needed before overseas redeployment can be considered

Richards SDP started by setting out what needs to be considered in determining whether it is reasonable to redeploy an employee overseas.

First, there must be certain basic structural features in place before the employee’s suitability for particular overseas positions is considered. If they do not exist, there may be no need to compare an employee’s skills, qualifications and experience against any individual positions available overseas.

The first structural feature is an established and formal process or policy for international redeployment. It is not enough to show that employees often apply for, and meet, the requirements of an overseas office, resign from their local employment, and then relocate overseas at their own expense; nor is informal assistance from employers.

At the very least, an employee would need to be able to prove that their employer “held out” that it had a formal process or policy for effecting redeployments.

Second, it will generally not be considered reasonable to redeploy an employee overseas where the employer lacks any centralised authority over overseas offices. This is very often the case in large corporate groups where human resource functions are decentralised and vested in individual subsidiary entities in each jurisdiction. This devolution of authority means that one office cannot simply direct or compel another office located overseas to accept any individual for employment.

Where a local employer lacks any overriding central management control over overseas offices, “it is not reasonable ... to redeploy ... to an overseas location to take up a new position in such circumstances”.

In SNC’s case, neither of these two structural elements was found to be present.

Other variables which can affect the reasonableness of overseas redeployment

Even if they were present, there are a number of other variables that need to be considered in order to determine whether redeployment is a reasonable option. These include the costs of relocating the employee from one country to another, training the employee to fit relevant job requirements and any language- related training.

In this case, it was also readily apparent that none of the jobs available internationally were suitable options for the redeployment of Mr Roy. Each job had a factor rendering it unsuitable for Mr Roy, such as qualifications, language skills, or an urgent need leading to local candidates being preferred).

Key lessons for employers

At any given time, there may be a number of jobs available at overseas offices operated by entities related to or affiliated with an Australian employer. This decision establishes that it will only be necessary to consider international options for redeployment in certain circumstances.

Basic questions about structure need to be considered such as whether the employer has a formal overseas relocations policy and whether the employer has central management control over the relevant overseas office.

It is only after these matters are addressed that the task of assessing the employee’s skills, experience and qualifications against the available positions needs to be undertaken.

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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.