Author: Lehanne Bleumink, Gold Seal HR Services Manager.

Redundancy happens when employees are terminated through no fault of their own when a role is no longer required to be done by anyone. It forms part of the National Employment Standards (NES). The Fair Work Act 2009 (FW Act) provides that an employee will not be unfairly dismissed where they were dismissed as a result of ‘genuine redundancy’. To obtain the ‘genuine redundancy’ exemption a redundancy must meet certain criteria under section 389 of the FW Act, which are:

  • The employer no longer requires the role to be performed by anyone because of changes in the operational requirements of the business;
  • The employer complied with any obligation in a modern award, or enterprise agreement to consult about the redundancy; and
  • It would not have been reasonable in all the circumstances for the employee to be redeployed within the business or an associated entity.

The Fair Work Commission (FWC) will consider the above criteria to determine if the redundancy is genuine in the event of a claim for unfair dismissal following a redundancy. As part of this process, it will consider whether the operational reasons were genuine. If an employee is terminated due to genuine operational reasons they are unable to claim unfair dismissal. Operational reasons can be economic, technological or structural.

The FWC will also consider whether the consultation obligations have been followed as per an enterprise agreement or modern award. If the consultation obligations have not been followed, the redundancy could be judged as not genuine. The Banking Finance & Insurance Award 2010 contains consultation obligations at clause 8.

Whether a failure to consult will cause an applicant to succeed in an unfair dismissal claim or not, will be determined on its own facts. Sometimes a failure to consult will not make a termination on the grounds of redundancy unfair, while on other occasions it will. Employers should endeavour to treat all employees fairly and equally in the consultation process and be in a position to explain their decision in relation to selecting particular employees for retrenchment. This process may sometimes be known as the “business case” for a redundancy.

Redeployment opportunities must also be investigated for the employee affected as an alternative to retrenchment as part of the redundancy process. An employer only needs to redeploy an employee if it is reasonable to do so. They don’t have to offer the employee a new role if there isn’t a suitable one available. An alternative position will be considered suitable if:

  • It is vacant;
  • The position is appropriate for the employee having regard to matters such as the employee’s skills, experience, qualifications, training and any other relevant matters; and
  • The terms and conditions pertaining to the role are similar to those enjoyed by the employee in their current position.

The method of the redundancy process is critical to ensure the employee feels fairly treated. When considering whether a redundancy is genuine the FWC will consider the elements set out in section 389 of the FW Act, as set out above. A failure to meet these elements may mean an employee was not genuinely redundant and expose the employer to an unfair dismissal claim.

Further detailed information on redundancy can be found in the HR Guidance handbook available on the goldseal website.

For assistance on any of your HR/IR requirements – call Gold Seal on 03 9510 5100 or email