The new requirements will have a significant effect on businesses’ human resources strategies.
This is especially important due to the change in unfair dismissal rules under the Fair Work Act, which removes the exception to unfair dismissal claims for companies with less than 100 employees and replaces it with the concept of a small business employing less than 15 employees.
Companies need to think about incorporating the National Employment Standards (NES) into employment contracts and policy documents (which came into effect on January 1, 2010).
Companies will need legal guidance to assist them, particularly while the parameters of the legislation are still being mapped out in test cases before Fair Work Australia.
Importantly, companies should be mindful about amending policies or employment contracts to provide for an entitlement to redundancy where no such entitlement existed before January 1, 2010.
This is because before January 1, 2010 service only counted towards calculating the amount of redundancy pay under the NES where an employee had a right to redundancy pay before January 1, 2010.
One of the major effects of the global financial crisis (GFC) has been the ongoing reduction of staff across most industry sectors.
While Australian economic commentators are now predicting the worst is over, recent surveys of HR managers have indicated that employers are still acting cautiously and have not ruled out further workforce cuts.
Parts of the new Fair Work Act came into effect on July 1, 2009, with the redundancy provisions coming into effect from January 1, 2010 in line with the NES.
For those companies looking to further reduce their workforce, the redeployment requirement will have a major effect.
While the extent to which an employer must go to redeploy an individual before making them redundant is still unclear, one thing that is as clear as crystal is there is a positive obligation on the part of employers to look for other opportunities within the company’s broader structure (including associated entities) to redeploy the employee. It should be noted that the requirement to redeploy must be "reasonable in all the circumstances".
Although no specific guidance has been provided to date, factors that may contribute to reasonableness include the qualifications and experience of the employee in relation to the other roles available within the company’s broader structure.
For medium to large entities, this requirement makes the process of redundancy more complex and time-consuming. Yet it may in fact deliver significant benefits too.
When a business is faced with falling revenues, downsizing can be seen as a rapid way to reduce costs.
However, some employers fail to recognise the long-term effect it can have on reputation, staff engagement or business performance. Redeployment, on the other hand can help to balance these negative effects.
It may not be practical for a business to redeploy all employees, but it can be an effective way to retain loyal people who know the business well.
Reinvesting the money that would be spent on redundancy payouts into education and training will also help protect the company’s reputation and staff morale.
It’s important to recognise that what is seen as a ‘reasonable’ redeployment option will vary for each individual — and employers should avoid making that determination unilaterally.
If there are redeployment options available that would require the employee to relocate or take a pay cut, the employer should still present the option, rather than making assumptions that this would not be palatable.
Any decision to put forward a relocation or pay cut offer to an employee should be considered in the context of two further considerations:
Under the old WorkChoices legislation, the regulatory watchdog heard several cases where businesses failed to offer employees a reasonable redeployment option for which they were duly qualified and which the employee would have accepted.
If this type of consideration arose from legislation that did not contain a redeployment requirement, it will not be surprising to find the same — if not weightier — consideration being applied by Fair Work Australia.
This issue may be particularly pertinent in the context of the GFC; numerous studies have shown that employees are often willing to accept fewer hours and potential pay cuts in order to keep a job during the downturn.
In times like these, redundancy is a word that is whispered in office hallways in conspiratorial tones. To some employees, it can seem as if redundancy is no longer an ‘if’ but a ‘when’. This is not a culture that businesses should be tolerating in their workforce.
Companies can be assured that insecure employees will take the time to understand how redundancy programs should be implemented, and will be prepared to take action against the company if they suspect foul play.
Open and honest communication is essential when implementing a redundancy program. A thorough and open ‘exit strategy’ can help to restrict the number of disgruntled employees who make unfair dismissal claims.
Lisa Berton is an employment lawyer at Kemp Strang Lawyers.
