30/09/2010

Since the introduction of the Fair Work Act we have been instructed on a number of occasions to advise on possible redundancies and what an employer should consider.

Section 119(1) of the Fair Work Act provides as follows:

“An employee is entitled to be paid redundancy pay by the employer if the employee’s employment is terminated:
(a)    at the employer’s initiative because the employer no longer requires the job done by the employee to be done by anyone, except where this is due to the ordinary and customary turnover of labour; or
(b)    because of insolvency or bankruptcy of the employer.”

Sub-section 119(2) of the Act then provides a table of redundancy pay that is to be paid depending on the employee’s years of continuous service by the employee.  For example, an employee with more than 1 but less than 2 years service is entitled to 4 weeks redundancy pay, where an employee of more than 9 but less than 10 years is entitled to 16 weeks.

The Act also contains general exclusions for employers from paying redundancy pay to employees:

• who have been employed for less than 12 months;
• terminated for serious misconduct;
• who have been employed for a specified time (seasonal); or
• if the employer is a Small Business Employer (currently less than 15 full-time equivalent employees).

The key considerations for an employer in deciding to make an employee redundant are therefore:

• the job must be no longer required to be performed for operational requirements;
• any additional obligations under an agreement or relevant Modern Award should be considered on top of the Fair Work Act requirements;
• reasonable efforts need to be made by the employer to consider if the employee could be redeployed elsewhere within the employer group; and
• if redundancy is to be offered, then what entitlements need to be paid.
  

The reasonable efforts to be made by an employer for redeployment are not defined but an employer should look to other areas of the business and make an offer to the employee for a new position and give the employee the option of declining the offer.  This will limit the possibility of any unfair dismissal claim or further action by the employee if they feel they have not been consulted about the redundancy process.

If you have any questions in regard to this article, please contact TOWNSENDS BUSINESS & CORPORATE LAWYERS on (02) 8296 6222.