The Fair Work Commission has recently revisited the extent of an employer’s obligation to redeploy its workers to an associated entity in the context of determining whether the dismissal constitutes a “genuine redundancy”. Where a dismissal is by reason of a genuine redundancy, the employee is exempt from bringing an unfair dismissal claim against the employer. The redeployment of redundant workers is part of what needs to be considered to fall within the exemption.
In four separate unfair dismissal cases against Kestrel Coal Pty Ltd 1 (Kestrel) which were heard jointly, four mine workers employed by Kestrel at its underground coal mine were found to have been terminated due to “genuine redundancy” within the meaning of section 389 of the FW Act. Accordingly, their unfair dismissal claims were dismissed on the basis that the jurisdictional objection was upheld.
On behalf of the mine workers, the CFMEU had argued that their dismissals were not cases of genuine redundancy as their jobs were still required to be performed and it would have been reasonable to redeploy them within an associated entity of Kestrel, Rio Tinto Coal Australia Pty Limited (RTCA), of which Kestrel is a subsidiary company, or within the Rio Tinto Ltd (Rio Tinto) group. In addition to Kestrel, RTCA had 3 other subsidiary companies that operated coal mines. Rio Tinto also had other associated entities outside of the RTCA group of companies (RTCA Group). However, Kestrel maintained that the jobs were redundant and that it had canvassed all redeployment opportunities within Kestrel and the RTCA Group prior to the mine workers being made redundant. Kestrel also submitted that it did not have the managerial authority to redeploy the mine workers to entities within the Rio Tinto group.
In relation to whether the work was still required to be performed, Commissioner Spencer held that this was not demonstrated simply because the work was being performed on a contract basis by contractors. Although performance of work by contractors is a consideration, this work was a short-term engagement (three months).
As for redeployment, Commissioner Spencer did not accept that Kestrel had an obligation to redeploy the mine workers into “backfill positions” filled by the contractors, saying that the “timing of the project and the short term engagement of the project are relevant considerations, as is [Kestrel’s] prerogative to structure their workforce on the optimum, operational and flexible basis for their business“.
Commissioner Spencer also confirmed that Kestrel had an obligation to consider the redeployment of the mine workers to associated entities, where it would have been reasonable in all the circumstances to do so. Whilst three roles had been identified by the CFMEU within the RTCA Group as being available, Commissioner Spencer was satisfied that those roles were not available at the time they were made redundant. In respect of redeployment to an associated entity of Rio Tinto, she confirmed the Full Bench’s view that “whether redeployment to an associated entity is reasonable will depend on the circumstances and managerial integration is likely to be a relevant consideration.” In this case, Commissioner Spencer found that Kestrel was not subject to overall managerial control from one member of the group outside of RTCA and there was a lack of managerial integration between Kestrel or RTCA and non RTCA entities because:
- whilst there were shared support services between entities, the recruitment decisions were made by the separate entities themselves and each entity made the final recruitment decision;
- Kestrel did not have power to influence the recruitment decisions of other entities; and
- many of Rio Tinto’s subsidiaries or associated entities had structured their companies as autonomous business units.
Accordingly, it was not reasonable for Kestrel to be redeployed within the enterprise of a non RTCA entity. Given all of the above findings, Commissioner Spencer concluded that Kestrel had established that the dismissals were cases of genuine redundancy.
How to make sure a redundant person is exempt from bringing an unfair dismissal claim
If an employer makes a person redundant, it is important to ensure that the redundancy is genuine and therefore exempt under the unfair dismissal laws. The redundancy will only be genuine if:
- the employer no longer wants the job to be performed by anyone due to changed operational requirements – for example, due to a restructure, closing down part of the business, outsourcing, selling the business, downsizing;
- the employer has complied with any consultation obligations in an enterprise agreement or modern award – many industrial instruments require employers to meet with and consult with employees about major workplace changes and the measures that can be taken to avert or minimise redundancies; and
- it was not reasonable in all the circumstances for the employer to redeploy the employee within their own enterprise or that of an associated entity.
It will be reasonable at the time of the dismissal to redeploy a redundant employee if the job is suitable by reference to:
- whether the employee has the skills and competence required to perform the job to the required standard either immediately or with a reasonable period of retraining;
- the location of the job;
- the remuneration that the employee will receive;
- whether the employee is required to compete for the advertised job with other applicants.
The Kestrel case also shows that the above considerations will only be relevant where the employer is part of a group of associated entities which are all subject to overall managerial control by one member of the group and there is managerial integration between them. If not, there is no obligation to redeploy the employee into the associated entity.
1 Stickely v Kestrel Coal Pty Ltd  FWC 2884 (28 April 2015); McDonnell v Kestrel Coal Pty Ltd  FWC 2866 (28 April 2015); Logovik v Kestrel Coal Pty Ltd  FWC 2883 (28 April 2015); Cochrane v Kestrel Coal Pty Ltd  FWC 2885 (28 April 2015)