Managing redundancies – what you can do to smooth the process
In the corporate world, restructures and consequential redundancies are often required, but come with an emotional human cost.
Therefore, it’s vital that companies plan changes carefully in order to support the workers who are losing their jobs, avoid any unfair dismissal claims and minimise the potential of negative publicity.
Make sure redundancies are genuine
Everyone involved in making decisions on redundancies must understand what they are dealing with, and a common misunderstanding lies in the very definition of redundancy.
“A classic trap for employers is to forget that it is positions that become redundant, not people. A redundancy occurs when an employer no longer desires to have a job performed by anyone”, says Jenny Inness, Executive Counsel at Harmers Workplace Lawyers. “A dismissal for redundancy is not a dismissal on account of any personal act or default on the part of the employee dismissed”, Ms Inness explains.
Employers often run into difficulties when they attempt to make a person ‘redundant’, when the underlying reason for the termination is poor performance or misconduct.
If an employee does have poor performance or misconduct issues they need to be addressed as such, because the Fair Work Commission will allow an employee to make an unfair dismissal application if the Commission determines that the so called ‘redundancy’ is not genuine.
In an unfair dismissal context, section 389 of the Fair Work Act 2009 (Cth) provides that a person’s dismissal will be considered to be a ‘genuine’ redundancy if the employer has made a decision that it no longer requires the person’s job to be performed by anyone, due to changes in the operational requirements of the employer’s enterprise.
In addition, to be a ‘genuine’ redundancy under section 389, the employer must comply with any applicable consultation obligations in a modern award or enterprise agreement.
Finally, a person’s dismissal will not be considered to be ‘genuine’ for the purposes of section 389 of the Fair Work Act 2009 (Cth) if it would have been reasonable in all the circumstances for the person to be redeployed within another part of the employer’s enterprise, or within any part of the enterprise of an associated entity of the employer.
Understand your obligations
Prior to embarking on any change management process where there is the potential for redundancies, it’s imperative that employers understand their obligations. Start with an audit of the terms and conditions of employment of all the impacted employees.
These obligations may arise from a range of sources such as legislation, industrial agreements, modern awards, employment contracts and company policies and practices.
Once these minimum legal obligations are understood, the company must ensure full compliance with them.
From the outset, companies should also have a plan in place to ensure employees have adequate support mechanisms available to assist during the redundancy process, which is a time when employees are often feeling vulnerable and uncertain about their future. External providers may need to be engaged if internal support services are not available.
And, as with any major company decision, companies should risk manage the entire process by identifying if there is any prospect for adverse media attention, adverse commercial implications, or for adverse industrial action during the redundancy process. If these are potential risks, companies can take proactive steps as part of the initial planning process to minimise those risks, and plan for their potential impact.
Managing the process well
In order to manage the process as well as possible, strong communication is key.
Companies must carefully plan and implement a communication strategy to ensure clear and effective communication with its employees. They need to avoid issuing mixed messages to staff, and avoid inaccurate information circulating, as this can be highly damaging and derail the redundancy process.
Of course, companies must also comply with any applicable consultation obligations with employees and their representatives.
Consultation requirements in modern awards, for example, require the employer to notify affected employees about the proposed changes, provide those employees with information about the changes and the expected effects, and discuss steps to avoid and minimise negative effects on the employee, including considering ideas or suggestions that the employees themselves may have.
Supporting the individual
If an employee’s role is likely to be declared redundant, best practice is for an employer to consult with them before the redundancy takes effect, to give the employee the opportunity to discuss any measures that may assist in mitigating against the impact of redundancy.
This may include, and in some instances may require, the employer giving consideration to any redeployment opportunities within the business.
If, following such consultation, it is determined that the employee’s employment will terminate due to redundancy, then there are a range of support options that employers should consider making available.
For example, the employer could offer the employee a reference and offer to provide outplacement services. Employers could also offer employees access to financial advice and/or pay for the employee to obtain independent legal advice to ensure they understand their legal rights and entitlements, and the financial implications arising from the redundancy.
Importantly, employers should give serious consideration to providing staff access to counselling and health support services on a confidential basis.
The managers and leaders on the ground will have the most regular contact with the impacted employees during a redundancy process, and it is vital they make themselves available to answer questions and discuss the change process with employees as the need arises.
To ensure information is delivered consistently, managers should receive training so the communication strategy is aligned across the organisation.
This post is intended to provide general information in relation to a legal topic from a qualified legal practitioner external to SEEK. It does not constitute legal advice and should not be relied upon as such. Formal legal advice should be sought in particular matters.