As a result of COVID19, the Australian government has provided significant financial support to employers through the subsidy known as JobKeeper (‘JK’). The JK program commenced in March 2020 and will cease at the end of March 2021.
The JK subsidy is being progressively wound back, commencing in September 2020, and many employers are faced again with having to review their business in the context of a new business environment, which may not be able to support the same staff levels, and the need to change the mix of staff and possibly engage cheaper – and probably younger – staff members.
There are legal issues that can get in the way of meeting this objective, and to make an employee redundant due to their age is very likely to be a breach of age discrimination laws.
Under the law, a redundancy must also be a “genuine redundancy” (see explanation below) in order that it not be considered an ‘unfair dismissal’.
What is redundancy and what triggers it?
Redundancy is termination of an employee’s employment by their employer, due to changes in the operational requirements of the employer’s business, resulting in jobs being no longer required to be performed by the employee or employees concerned, or by anyone else for that matter.
General factors which may trigger a redundancy could include –
- technological advances meaning that the position has disappeared;
- financial constraints on the business forcing a reduction of employees;
- insolvency or bankruptcy of the employer; and/or
- a restructure of the business.
What is “genuine redundancy”?
Under section 361 of the Fair Work Act 2009 (Cth), an employee cannot lodge an unfair dismissal claim if the termination of the employment was a result of a “genuine redundancy”. This is based on 3 factors:
- the employer no longer requires the job to be performed by anyone due to the operational requirements of the business,
- the business has complied with the consultation requirements under an award or enterprise agreement, and
- there are no redeployment opportunities.
If the business simply stated that “due to JK being wound back, we need to reduce our headcount and hire cheaper labour”, this will probably not be a “genuine redundancy”. There needs to be a legitimate objective basis for the termination not necessarily related to the age of the employee in order to avoid the employee succeeding with either an unfair dismissal case, a general protections case, or alternatively, an age discrimination claim.
For example, where the business is genuinely suffering from financial constraints due to continued downturn in sales and/or the employer genuinely needs to restructure the business to continue its survival, then the business may consider redundancy as an option. A reduction in higher paid staff numbers will be legitimate, for example, where their roles are shared amongst other senior employees and for good financial or other reasons, rather than just replacing an older employee with a younger, cheaper staff member.
Unfair dismissal, general protections, and remedies
An employee may lodge a claim for unfair dismissal under s385 of the Fair Work Act 2009, if their redundancy was not genuine (e.g. “because JK is being wound back and we want to hire cheaper staff”). A second option is for the employee to file a general protections (GP) claim and claim age discrimination. Note – ERS published an article recently regarding the increasing statistics of people making GP claims.
Under the Fair Work Act 2009, the Commission may provide remedies to a successful unfair dismissal claim, including reinstatement and/or compensation of up to 26 weeks of pay. Note here that there is no cap to compensation in GP cases that can be awarded.
What should I do?
If the business was paying employees under JK provisions but is no longer eligible to receive the JK subsidy, the business is classified as a ‘Legacy’ employer if the business is still suffering a minimum 10% decline in turnover. There are still some flexibilities available to legacy employers under the Fair Work Act, which could be utilised by the employer to reduce hours or make employees work in different locations or from home.
Where there is a need to make employees redundant, the employer must firstly meet the consultation requirements contained in any relevant award or enterprise agreement. It boils down to these three vital steps, which the employer must take –
1. Once the business has decided to make major changes to the business, it will need to put all employees who may be affected on notice of its intention to make changes;
2. Commence discussions with employees and their representatives about the changes, their likely effects on employees and measures to avoid or reduce the adverse effects on employees. The discussions should commence as soon as practicable after the decision has been made to make the changes;
3. For the purposes of the discussions, provide details in writing to the employees and their representatives all relevant information about the changes.
As illustrated above, the redundancy requirements are quite complicated and it is important to get the steps right. ERS recommends that employers seek our professional advice prior to initiating the redundancy process to avoid unfair dismissals or GP claims. Redundancy should be viewed as a last resort and utilising continuing JK flexibilities and voluntary redundancy could be considered.
Getting Our Help
If you have any questions or need assistance with any employee claims or complaints, we encourage you to call ER Strategies on 1300 55 66 37.