Redundancy update: case law and legislation

With cost of living and economic pressures taking their toll on many businesses, we’ve been noticing a growing number of redundancies taking place in 2024. 

If your business finds itself in the position where it needs to make certain roles redundant, there are important rules and regulations you need to comply with – some of which have recently changed due to recent case law and updates to legislation.

Here are some recent(ish) developments every business needs to know about redundancy in 2024.

1. Courts rule redundancy should be a last resort 

Redundancies are only legal when they’re ‘genuine’. That means you can’t generally claim an employee’s role is redundant but sack them for another reason, such as poor performance.

In Helensburgh Coal v Bartley (2024), the full court of the Federal Court found that terminating someone’s employment due to redundancy should only be used as a last resort. 

That’s because a dismissal could only be a ‘genuine redundancy’ when all other options were first considered, including: 

• Redeployment to a role performed by an independent contractor or labour-hire worker
• Retraining them so they had the skills to carry out a different role
• Keeping them on staff for a short period where another position was likely to become available.

It’s also worth considering here, Turnbull v Symantec (Australia) Pty Ltd, a case decided a decade ago in the context of a worker returning from parental leave. While this case related to the parental leave provisions of the Fair Work Act, it was found an employer even needed to consider redeployment with a related entity based in Singapore before terminating a worker’s employment after her role was made redundant.

2. No “small business entity” exemption for insolvent businesses

Small businesses (i.e. those employing fewer than 15 people) are generally exempt from having to make redundancy payments under the National Employment Standards.

Previously, this was exploited by some larger businesses, who would gradually shed staff in the lead up to a larger round of redundancies so that they fell under the 15 employee threshold. 

The Fair Work Legislation Amendment (Closing Loopholes) Act 2023 changed the way the small business redundancy exemption applies in the context of insolvency.

Now, employers must still make redundancy payments even when they’re bankrupt or in liquidation, if they only became a small business employer by dismissing staff in the six months previously. 

Employers should also remember that some employees are likely to have redundancy entitlements under Awards or Agreements. These continue to apply regardless of the Small Business Exemption under the NES. 

3. Duty to consult must be genuine too

Speaking of which, it’s always worth remembering that Awards and Agreements often contain a ‘duty to consult’ over redundancies. These clauses usually make it incumbent on the employer to consult with any impacted employees “as soon as practicable” within the decision-making process. 

In one 2020 case, Freebairn v Dandiee, an employee was purportedly made redundant in the wake of the COVID pandemic. At the redundancy meeting, the worker’s supervisor told her she would be “better off” claiming JobSeeker payments, and asked if she had any questions or comments. She was then told her role was redundant.

The FWC found this didn’t meet the award’s consultation provisions, and that – if genuine discussion had taken place – it was likely the worker would have reduced her hours to two or three days a week. This also would have let her stay until JobKeeper payment began.

The FWC then ordered the employer to pay the difference between what she would have earned if she had stayed on and what it had already paid.

4. Increases to redundancy entitlements

Finally, the NES provisions on redundancy pay are just a minimum. If there are any contract, Award or Agreement provisions that contemplate redundancy, their provisions also need to apply.

These entitlements can vary and some may have recently been increased so it’s crucial to check the specific instruments that apply to your employees.

You should also keep in mind that the FWC and courts can sometimes award employees more than the statutory minimums, particularly in cases where employers have failed to follow proper procedures or have acted unfairly.

Again, that’s another reason to keep up with any changes to redundancy laws and to apply them fairly and transparently. 

In short…

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