Are you doing redundancy “for the right reasons”?
Much like a contestant on The Bachelor, redundancy needs to be genuine in order to stand up to scrutiny.
If you need to make a position redundant due perhaps to restructuring, a business downturn, the introduction of technology or for some other reason, you need to make sure you understand what is required. Failing to get the redundancy process right could result in the business being a statistic in a line of non-genuine redundancy cases.
Before you begin the process, make sure you are not retrenching staff or making a position redundant because of the employee’s performance. If the decision to make the role redundant is heavily influenced by the employee’s personal attributes rather than the role, you will expose the company and yourself to a claim for unfair dismissal.
Ask yourself this question: ‘Are we willing to re-deploy the individual to a suitable vacant position within the organisation in which they have the skills and experience to perform?’ If the answer is no, you need to re-evaluate whether the redundancy is in fact genuine.
Employers should be particularly careful that employees are not targeted (whether consciously or unconsciously) for redundancy because of their race, sex, age or any disability. This can expose the company to a discrimination claim, which can be far more damaging financially and reputationally than an unfair dismissal claim.
Communication is key in managing redundancy
Employers should carefully plan how they will manage the flow of information during a redundancy process.
When notifying an employee of a decision to make their position redundant, you should ensure that you are as clear and unambiguous as possible about:
- When their employment with the company will end;
- When they will receive information about their final pay and entitlements, and when they will receive their pay;
- Their options for redeployment within your organisation (or a related entity) and how any redeployment process is to be managed; and
- Any support services you will be offering to the affected employee(s) and how they can access these services.
You should also ensure the information conveyed to the employee at the meeting is set out in a letter. The news of redundancy may come as a shock, and so it is important that they have a letter they can consult later. The letter should also designate an individual who can be contacted if the employee has any questions.
Treat employees with respect during the redundancy process to avoid legal risk
In our experience, employees who feel disrespected during the redundancy process are more likely to consider filing a claim against their former employer.
In addition to planning out what you will communicate to employees whose positions are being made redundant, you should consider when and how you will inform employees.
A face to face meeting should be held in a private area, and away from other employees or the public. A meeting room in your offices might not be suitable if one or more of the walls are glass, and employees are able to walk past freely and observe the meeting. This will not only protect the employee from embarrassment but also prevent gossip from spreading in the workplace. Such gossip can potentially affect morale in the office and can pose a risk to the employee’s professional reputation.
While employers have a legitimate interest in securing any company property and confidential information when terminating employment, you need to manage this carefully.
If you are escorting the employee from the premises, ensure that it is done as respectfully as possible. Escorting an employee from the office in full view of colleagues should be avoided, as it has the potential to damage the individual’s reputation and may cause resentment.
You should also consider arranging and paying for transport homes for the employee, such as a taxi or Uber. You may also like to consider offering counselling.
Working their Notice Period
Making an employee’s position redundant and then requiring them to work out their whole notice period may not be ideal for many reasons.
If the employee is required to keep their redundancy confidential, this can be very isolating and stressful for the individual. It also affects their ability to accept the termination of their employment and to search for a job. While some award employees will be entitled to one paid day off work per week to search for a new job, their absence from the office may result in questions from co-workers that they are not able to answer due to confidentiality.
The employee may also be exposed to confidential and sensitive information during the notice period that the business would prefer they did not see, and they may have the opportunity (and now a reason) to make copies of confidential information to take with them. The risk of this occurring can be mitigated by paying them in lieu of notice. The employee may also (understandably) be withdrawn, distracted, and stressed during their notice period, which may have an effect on their standard of work and office morale.
To be clear, save any provision of a contract or award stating otherwise, requiring the employee to work all or part of their notice period is allowed. It may be desirable for the business to have the employee prepare a handover for employees who will be taking on some of their duties
However, if you need the employee to work their notice period in circumstances where (for example) the notice period does not match the date of a restructure or the end of a contract, you should be careful that you do not do so in a manner that undermines the position that the employee’s role is redundant and/or that they could not be redeployed within your organisation. For example:
- An employee is made redundant because a key business contract that they performed work for has not been renewed. The key business contract end date is before the end of their notice period, however, the employer requires them to work out their full notice period by having them perform other work for the business. This may damage an argument by the employer that the employee could not have been re-deployed to another role.
- An employer owning multiple restaurants closes one site, and employees at that location are made redundant instead of redeployed. The notice period for employees extends beyond the closure date of the restaurant, however, the employer requires the employees to perform work at other locations for the duration of their notice period. This may damage an argument by the employer that the employee could not have been re-deployed to another role in one of those locations.
Provide redundancy support for employees
Consider providing access to support services for your employees such as health and well-being support, resume advice, outplace services or an EAP service. It’s a nice way to help a staff member exit their position within the business, and it may reduce the risk of a claim being made for unfair dismissal.
Employment law advice in Australia
When you make a position redundant or retrench someone in Australia, there are certain legalities you need to be aware of. This article is not meant to provide a comprehensive overview of the redundancy process. Rather it covers some key things to consider when going through the redundancy process.
You can also find some further general guidance on the Fair Work Ombudsman website, but if you need legal advice, we can help guide you through the process and ensure that everything is done correctly.
If you require employment law advice on this or any other issue or have a general question about your obligations that you are not sure about, schedule your free consultation now on 1300 80 67 80.