Last month, the Fair Work Commission found a COVID-19-related redundancy to be harsh and unreasonable because the employer failed to meets its consultation obligations under a modern award.
Had the employer conducted a proper consultation, the employee would likely have remained employed and become entitled to JobKeeper payments.
The employee was a part-time administrative assistant in the employer’s financial services firm. Her employment was covered by the Clerks – Private Sector Award 2020.
In March 2020, as a result of the COVID-19 pandemic, the employer was required to examine its business and consider ways of ensuring its ongoing viability.
On March 18, an all staff meeting was held during which employees were informed that the employer was considering ways to sure up its future and some employees may be directly impacted.
On March 25, the partners of the firm met to discuss the impact of the COVID-19 pandemic on their business and the options available to them. In that meeting the partners decided to reduce the hours of administrative staff.
That afternoon, one of the partners met with the employee to discuss the impact of the pandemic. During that meeting, the partner informed the employee that all administrative staff would be impacted by changes that the business needed to make, primarily by way of a reduction in their hours.
The partner then showed the employee some calculations he had done which demonstrated that the employee would be financially better off if her employment ended and she claimed JobSeeker payments. The partner went on to explain that, for this reason, her position had been selected for redundancy. The partner asked the employee if she had any questions, comments or suggestions. She said that she did not.
The partner then made the decision to terminate the employee’s employment as the result of redundancy and provided her with a letter.
The employee subsequently submitted an application to the Fair Work Commission (FWC) alleging her dismissal was unfair.
The employer raised a jurisdictional objection to the application, arguing the termination of employment was a genuine redundancy and the employee was jurisdictionally barred from bring her claim.
Fair Work Commission decision
The FWC considered the meaning of a genuine redundancy under the Fair Work Act 2009 (Cth) and specifically the consideration found in s389(1)(b) – whether an employer “has complied with any obligation in a modern award or enterprise agreement that applied to the employment to consult about the redundancy”.
The Clerks Award contains consultation obligations under clause 38. It requires that if an employer has made a definite decision to make major changes, the employer must, amongst other things:
give, in writing, notice of the changes to all employees who may be affected including all relevant information about the changes;
discuss with affected employees the introduction of the changes, the likely effect of the changes, and any measures to avoid or reduce the adverse effects of the changes on employees; and
promptly consider any matters raised by employees about the changes.
The FWC held that the employer had failed to comply with its consultation obligations under the Clerks Award because:
it did not give the employee notice in writing of the changes it would be introducing. On this point, the FWC commented:
“The obvious purpose in providing such information, in writing, to employees is to give them an opportunity to understand the changes and to enable them to make sensible suggestions and ask relevant questions about the changes in the discussions with their employer.”
it did not discuss any measures to avoid or reduce the effects of the changes on the employee. On this finding, the FWC said:
“This obligation is not met by merely asking employees whether they have any questions, comments or suggestions. Nor is it met by informing an employee, as happened in this case, that the employee will be marginally better off financially by being dismissed and in receipt of JobSeeker payments than by remaining in employment on reduced hours.”
Having failed in its consultation obligations, the employer failed to secure the genuine redundancy exemption. Accordingly, the FWC dismissed the employer’s jurisdictional objection and moved to consider whether the dismissal was unfair.
The FWC held that there were sound, defensible and well-founded reasons for the employee’s dismissal, namely that the employer no longer required her role to be performed by anyone.
In the FWC’s view, that conclusion was rational and justified in an environment where the employer was genuinely trying to reduce its costs, having suffered a significant reduction in revenue as the result of the impact of COVID-19 on its clients.
However, the failures in consultation rendered the dismissal harsh and unreasonable.
The FWC found that, had proper and meaningful consultation taken place, either the employee or the employer would have suggested the option of the employee reducing her days of work from three to two per week, and that suggestion would have been accepted.
Further, the FWC held that a proper consultation period would have extended the employee’s employment to at least the end of March 2020, at which time the JobKeeper scheme was announced, and the employee would therefore have remained employed and supported by JobKeeper.
The FWC held that an award of compensation to the employee was appropriate in the circumstances. The FWC took into account that, had the employee remained employed, she would have received a higher rate of pay under the JobKeeper scheme and it should therefore calculate any loss that she suffered based on that amount.
The employer argued that, had it not made the employee’s position redundant at the time that it did, her position would have been made redundant shortly thereafter due to the imminent closure of one of its offices at which the employee worked for a portion of her time.
Taking into account the JobKeeper rate of pay and wages paid to the employee between the termination of her employment, and the anticipated redundancy of her position due to the office closure, the FWC calculated the employee’s loss at $3,189.01 and made an order for the employer to pay compensation in that amount to the employee.
What can your business learn from this decision?
The consultation obligations in enterprise agreements and modern awards are critically important in any redundancy situation involving agreement or award covered employees.
Employers should fully understand their consultation obligations before commencing a redundancy process to not only ensure that they meet the requirements of a genuine redundancy, but also to afford employees the opportunity to think about the situation and offer suggestions or ask meaningful questions during what can be an emotionally difficult time.