Earlier this month, the High Court of Australia released a significant decision that clarified the scope of the Fair Work Commission’s (FWC) inquiry when considering whether it would have been reasonable to redeploy an employee dismissed by reason of redundancy for the purposes of the unfair dismissal provisions under the Fair Work Act 2009 (Cth) (FW Act).
The Court confirmed that the FWC should undertake a broad inquiry. This may include considering whether the employer could reasonably adjust its workforce, including by altering existing arrangements with contractors or labour hire workers, to facilitate redeployment of an otherwise redundant employee.
Background
Helensburgh Coal Pty Ltd (Helensburgh) operates a coal mine in the Illawarra region of New South Wales. In 2020, Helensburgh reduced its employee workforce following a decision to decrease coal production during the COVID-19 pandemic. With no vacancies available, 90 employees were dismissed.
Despite the redundancies, Helensburgh continued to engage a reduced pool of contractors under existing contracts. The contractors were engaged to undertake a range of ongoing work on an as-needed basis.
Twenty-two of the redundant employees (Employees) challenged their dismissals by bringing unfair dismissal claims in the FWC. While Helensburgh argued the dismissals were cases of genuine redundancy, the Employees argued that they had been unfairly dismissed because it would have been reasonable for Helensburgh to redeploy them into roles performed by contractors.
The FWC, through a series of decisions and appeals, ultimately found that the dismissals were not cases of genuine redundancy because it would have been reasonable to redeploy the Employees into the contractor roles. Helensburgh subsequently appealed to the Federal Court and then the High Court.
Key issue
The central issue before the High Court was whether it was reasonable in all the circumstances for the Employees to be redeployed within Helensburgh’s enterprise for the purposes of s 389(2) of the FW Act. This question was relevant to whether the dismissals were cases of genuine redundancy and whether the Employees were in fact eligible to bring their unfair dismissal claims.
High Court’s findings
The High Court considered the scope of the FWC’s inquiry into this central question. It found that the scope of the FWC’s inquiry is extremely broad and held that:
The inquiry under s 389(2) is not limited to considering opportunities for redeployment to existing vacancies. The term ‘redeploy’ encompasses the possibility of reorganising or rearranging the employer’s workforce, which includes insourcing work from existing contractors.
The FWC may consider whether, at the time of dismissal, it would have been reasonable for the employer to ‘free up’ work for its employees by making changes to how it uses its workforce to facilitate redeployment.
The inquiry is objective and must consider whether redeployment would have been reasonable in “all the circumstances,” including the employer’s policies, business choices, contractual arrangements and practical considerations such as training requirements.
However, the FWC cannot disregard the essential nature of the employer’s enterprise or require changes that would fundamentally alter the business.
Implications and key takeaways for employers
This decision may have significant implications for employers when planning and implementing organisational restructures, particularly where the workforce is comprised of both employees and external contractors or where labour hire arrangements are in place.
In addition to being able to justify the operational reasons for employee redundancies, employers must carefully consider redeployment options within their enterprises (and any associated entities) and their broader workforce strategies, beyond options for redeployment to existing job vacancies. This should involve a detailed and documented consideration of whether:
There is work or a demand for work that could be performed by the otherwise redundant employees.
It would be reasonable to make changes to existing arrangements, including with contractors or labour hire workers to make positions available for the otherwise redundant employees.
If you have any questions about how this decision may impact your organisation, please get in touch with us.