Who can use this checklist?

This checklist can be used by all employers throughout Australia, except the following excluded employers:

• Non-constitutional corporation employers in Western Australia;
• State public sector employees (ie employees of a Minister, the Governor, or the Crown); and
• Local Government employers — except in Tasmania and Victoria.

Excluded employers may however, wish to use this document, but they should first obtain legal advice.

Commentary
 

What is a redundancy?

Termination of employment due to redundancy is a form of dismissal by the employer.  It carries with it the concept of involuntary termination of the employee’s employment.  However, rather than being a fault based dismissal, redundancy is usually caused by factors such as economic conditions, business efficiency, or technological development.

Generally speaking, termination of employment due to redundancy occurs where:

• an employer has made a definite decision that the employer no longer wishes the job the employee has been doing to be done by anyone;
• that decision leads to the termination of the employee's employment; and
• there are no reasonable redeployment opportunities (including within the employer's associated entities).

 

Under the Fair Work Act 2009 (Cth) ('Act') a dismissal will not be unfair where the person’s dismissal was a case of a genuine redundancy. Under the Act a redundancy will be genuine if:

• the job will no longer be required to be performed by anyone because of the changes in the operational requirements of the employer’s enterprise; and
• the employer has complied with any obligation to consult contained in an applicable modern award or enterprise agreement.

Possible redeployment

Ensuring that any redundancy is a genuine redundancy and exploring redeployment opportunities will assist employers in defending an unfair dismissal claim brought by an employee on the basis that the redundancy was not genuine and the terminiation of employment was harsh, unjust or unreasonable.

Accordingly, employers must consider, prior to terminating an employee due to redundancy, whether it would reasonable in all the circumstances for the person to be redeployed within:
 

• the employer’s enterprise; or
• the enterprise of an associated entity of the employer.

Record keeping

Employers should keep records of attempts made to re-deploy employees. Records of employer attempts to search for alternate jobs and the reasons why redundancy was necessary should also be retained (in the event a claim is made). Additionally records should be kept of the discussions with employees in connection with these matters. Employers should update the personnel file to note termination was due to redundancy.

Legal advice

You should seek legal advice if you are unsure when terminating an employee whether the circumstances constitute a redundancy. If the termination of an employee's employment is incorrectly classified as a redundancy and a redundancy payment is made, there may be taxation consequences for both the employer and employee. You should obtain taxation and legal advice about these issues if you are unclear as to the true nature of the termination.

Additional obligations apply when you are terminating the employment of 15 or more employees. Before carrying out a redundancy employers should consult their enterprise agreements and awards to ensure they comply with any relevant requirements.

Mandatory severance pay

National system employers should be aware that the Act introduces mandatory severance pay for employees made redundant in workplaces that are not a 'small business employer' as defined by the Act.

An obligation to provide severance pay under the Act applies from 1 January 2010. Importantly, continuous service (relevant to the calculation of severance pay) under the Act will only start to accrue from 1 January 2010 where an employee previously had no entitlement to severance pay as at 31 December 2009. Advice should be sought in relation to severance payments if you are unsure of your obligations under the Act.

Further considerations

Where 15 or more employees will be terminated due to redundancy, employers must notify Centrelink of the redundancies prior to any termination. If any of the employees are union members, employers must also notify the relevant unions prior to the termination of the employees. A form of that notification is available at this website.

Appropriate care needs to be taken in selecting employees for redundancy in order to avoid unlawful discrimination claims.

If you are unable to meet all the requirements in the checklist, you should seek legal advice.