Under the Fair Work Act 2009, an employee cannot make a claim for unfair dismissal in the case of a “genuine redundancy”.  So, that begs the question, what is the difference between a ‘redundancy’ and a ‘genuine redundancy’?

In order to make a role redundant and be a “genuine redundancy’” the following criteria must be met;

  • The employer no longer needs the employee’s job to be done by anyone
  • The employer becomes bankrupt or insolvent
  • The employer has followed any agreed upon steps to inform employees of the redundancy and the consequent job loss

Every Modern Award stipulates the steps that must be taken by an employer before the redundancy takes place, and failure to follow these steps may allow an affected employee to claim an unfair dismissal claim because the redundancy did not meet the criteria of being a ‘genuine redundancy’

Recent case law suggests that an employee whose position has been made redundant may still be able to take unfair dismissal action if their former employer has failed to follow the correct procedure in effecting the redundancy.

In a recent unfair dismissal case, Marafioti vs Gonzalez t/a Mac’s Crafts,  an employee who was a sales rep for the employer for eleven years, was dismissed after the employer decided it could not afford a full time sales rep based on her sales results.

The Commission found the dismissal to be unjust as the employer failed to fulfil its obligation to consult with the employee under the Storage Services and Wholesale Award 2010. Under the Award, consultation must be meaningful and not merely an afterthought in order to be genuine. The Employer’s failure to consult made the dismissal unreasonable even though there was valid reason for the dismissal. The employer argued that it was a small business per the FW Act and dismissal was consistent with Small Business Fair Dismissal Code. The Commission ruled the dismissal was not consistent with the Code as it was not a “genuine redundancy” and that, “the size of the business does not absolve it of responsibility in the method adopted”. The Unfair Dismissal was upheld and the Employer was ordered to pay over $7,000 in compensation.

This case demonstrates the importance of following the correct procedure when making an employee’s position redundant.

Small businesses (under 15 employees) are often exempt from paying redundancy amounts, under most Awards, however as this case clearly demonstrates, this does not mean an exemption from consultation requirements and following the redundancy process as outlined in the relevant Award. If the employer fails to properly consult with their employee, the Commission will deem it to not be a “genuine redundancy” even if the reasons are valid.

The key learning from this case is even if you have a strong and valid business case to make an employee redundant, ensure that you always follow the correct process and follow through with your obligation to properly consult with the affected employee, so that you can avoid unnecessary unfair dismissal claims.

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