Navigating Redundancy: What Employers Need to Know in the Current Economy

KEY TAKE-OUTS:

• Woolworths has made 489 jobs redundant in March 2023 following the closure of a majority of its in-store butcher shops.
• Given the state of our current economy, the future may see a downturn in numbers for businesses leading to increased redundancies and unemployment rates.
• Redundancy is a means of terminating employment and is pursued when the work no longer needs to be performed, there has been a downturn in business or operation changes, or because the business has become bankrupt or insolvent.
• Employers need to follow the correct redundancy procedure to minimise the potential risks of an unfair dismissal or general protection claim.

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Woolworths has Closed 250 Instore Butchers

In late January 2023, Woolworths announced that it was closing 250 in-store butcher shops within its supermarkets around Australia as a result of increased customer demand for pre-packaged meats.

As a result, a total of 489 jobs were made redundant in March 2023, when the butcher counters were closed including 420 trade-qualified butchers and 69 non-trade workers.

The change in the businesses decision and resulting redundancies have affected not only the individuals who have lost their jobs, but also the loyal customers of the butcher shops.

In making this change in business decision, Woolworths has had many considerations to factor in, including assisting employees to be re-deployed in other positions where available and ensuring that all entitlements are paid out to those employees who took the redundancy.

Current Climate

It is not surprising given the enormous cost of living pressures that households are under and the fact that the policy response to soaring inflation is raising interest rates that we are seeing a huge impact on the economy. As people begin to tighten their spending budgets, businesses are bracing for a downturn in numbers. With this comes the growing concern that Australia may see itself enter a recession. The painful problem associated with a recession is the need for businesses to make difficult decisions such as redundancy leading to increased unemployment rates.

Genuine redundancy

Employers need to ensure that when making a decision to let staff go by way of redundancy that it is genuine and that they follow the correct process.

A genuine redundancy occurs when an employer:

• No longer requires the job to be performed by anyone (i.e due to a downturn in the business or operational changes);
• Becomes insolvent or bankrupt.

A redundancy is not genuine when:

• The employee’s job needs to be performed by someone else;
• The employer has not followed the correct procedure including the requirements to consult with the employee prior to redundancy being made (depending on the award/enterprise agreement);
• The employer could have given the employee an alternative job (re-deployment).

Employer requirements and procedure

In most cases, prior to redundancy being made effective, the employer must proceed with a consultation process (depending on if the employee is covered by an award or enterprise agreement). The consultation process sets out the requirements for the employer to complete prior to making any changes to the business that may result in redundancy of employees. This includes:

• Notifying the employees of the proposed change
• Providing information to the employees about these changes
• Taking precautionary steps to avoid and minimise any negative impacts because of the changes.
• Considering employee ideas about the workplace changes.

The consultation process can lead to an alternative resolution, rather than making an employee’s role redundant. Alternatively, employers can reduce wages, reducing or eliminating bonuses or encourage employees to take annual leave. If an alternative solution has been established, then the terms must be in writing.

During the process of consultation, the employer must also consider whether there is an alternative job within the business or a related business that is suitable to the employee. If there is a suitable alternative, the employer should offer the employee the re-deployment opportunity. If it would be reasonable to redeploy a person within the organisation and you decide not to offer that then it is likely to be found that the dismissal is not a case of genuine redundancy.

If you are considering making staff redundant, you should seek legal assistance to ensure that you are following the correct process and requirements. Coutts’ employment law team can assist you every step of the way to make the process as smooth as possible during a difficult time for your business.

Larger redundancies

In cases where 15 or more employees are made redundant at one time, for ‘Reasons of an economic, technological, structural or similar nature, or for reasons including such reasons.’, the Fair Work Act (2009) states that the employer must, prior to dismissal and as soon as possible after making the decision, take the following steps:

• Under section 531(2) of the Fair Work Act, the employer must consult with the relevant union about the reasons, timing, number, and categories of employees to be impacted by the redundancy.
• Under section 531(3)(b) of the Fair Work Act, the employer must consult with the union to ‘avert or minimise the proposed dismissals and measures which might include finding alternative employment. ‘

Employees that are not entitled to a redundancy payment

The Fair Work Act (2009) provides that:

• Where an employee is engaged by a ‘small business employer’ defined as one employing ‘fewer than 15 employees.’, the employee is not entitled to redundancy pay.
• There are also special provisions for the transfer of employees. In the instance where a company transfers its business to another company, and the second business offers employment opportunities to the employees from the first business, if the employee decides to reject the offer, then the employee is not entitled to a redundancy payment.

Other exceptions to redundancy payment include:

• Employees employed less than 12 months
• Fixed term employees
• Employees engaged for a specified job
• Employees engaged for a season
• Casual employees
• Apprentices
• Employees completing training programs or employed for a limited duration

Redundancy payment

If your employee has been made redundant and is eligible for redundancy pay, then the payment must be in addition to any other payment the employee is entitled to upon termination of their employment including any outstanding wages/salary, accumulated annual or long service (if applicable) and payment in lieu of notice (if applicable). The amount paid to the employee is based on their period of continuous service, excluding any unpaid leave. The payment must be paid within 7 days of the employee’s employment concluding.

Coutts’ employment law team can assist you to determine the correct redundancy payment you are required to make to your employee upon making them redundant. It is important to get the figure correct to minimise any potential claims.

Risks of Not Getting it Right

If you fail to make an employee genuinely redundant including following the correct process and requirements, then you risk a claim being brought against your business including an unfair dismissal claim or general protections claim.

We have discussed in detail previously, the possible claims available to employees after employment termination. Please refer to our previous blog titled The Possible Claims available after employment termination to find out more information about the types of claims that a disgruntled employee could bring against your business.

At Coutts, our friendly Employment Law team have ample experience in drafting responses to applications in the Fair Work Commission, assisting clients in preparation for conciliations as well as appearing at conciliation to provide support and legal expertise and preparing for and attending final hearings/arbitrations if the matter cannot be resolved before that time. Should a claim be made against your business, don’t hesitate to reach out to our Employment Law Team.

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