When you review your business operations and realise there is a need to change the terms and conditions of employment, you will need to consult with the affected employees.
Changes could include:
- change in hours, location of work or rostered working days
- change in position
- 4-day working week
- any other significant change to the working conditions.
Consultation is not an optional extra, it is compulsory under the Fair Work Act 2009 (FWA).
Consultation will usually involve:
- providing employees with information about the proposed change;
- encouraging employees to make suggestions within a prescribed timeframe for consideration by the business when making their decision;
- genuinely considering employees’ views before making the decision;
- advising the impacted employees of your decision; and
- implementing the change.
Where you fail to follow the relevant consultation requirements, you potentially expose yourself and the business to significant financial penalties.
Case Study: Consultation did not occur and an employer assumed an employee would not change their working conditions
An employee recently questioned her redundancy before the Fair Work Commission (FWC) after finding out her former employer advertised a new role as the business was restructured. The employee argued she was unfairly dismissed as she had the skills for the position and could have adjusted her pay and working hours if consulted.
The employee sought an unfair dismissal remedy against her employer who argued the employee’s dismissal was a genuine redundancy.
The employee commenced employment as a model manager on 31 January 2022. At the time of her dismissal, she held a senior role; working part-time four days a week. The dismissal occurred on 23 July 2023, during a meeting with CEO and the Director of Operations. The employee received no prior notice of what was to be discussed at this meeting.
During this meeting, the CEO informed the employee the business was struggling, personal funds were injected to sustain it and her position was being made redundant. A written notice of termination was provided on the same day. The notice attributed the dismissal to a recent review of the business’ Sydney operations and determined the senior role held by the employee was no longer necessary.
The employer’s decision explicitly stated the redundancy was not a reflection on the employee’s performance. Compensation for redundancy and payment in lieu of notice was offered in accordance with the relevant awards.
The financial strain experienced by the related entity from 2020 (attributed to factors such as COVID-19 and the rise of artificial intelligence services) was presented as a backdrop to the decision-making process.
What Happened Next
On 29 July 2023, the now ex-employee saw an advertisement by her former employer for a managing agent. She later learned an individual had been appointed to the position; this individual was known to her and affiliated with another manager at her former employer.
In their defence to the unfair dismissal claim that the redundancy was not genuine, the CEO outlined the Company’s employment practices, emphasising the expectation for successful candidates to secure business through various means, including cold calling etc.
The CEO noted a 33% decline in sales in the NSW division during the financial year 2022/23, prompting her to inject personal funds into the business and initiate a substantial review and restructure. The CEO further clarified that discussions about financial challenges were held with employees prior to the dismissal, expressing her preference to avoid job losses. The introduction of new software, Hubspot, was mentioned as part of the restructuring process.
Ultimately, the employer reached a decision to make three positions redundant and to hire someone with specific technical skills and fashion experience for a newly created full-time position.
In her claim, the employee argued “she had the skillset to perform the new role,” adding “had she been given the opportunity, she was willing to take a pay cut to stay with the business and was willing to move back to a full-time role.”
So was there Genuine Redundancy?
Evidence showed “the employer no longer wanted the employee’s job to be performed by anyone because of changes in the operational requirements of the employer’s enterprise.”
However, the FWC also noted the employee’s relevant award, which “requires employers to consult employees about major workplace changes, including changes in structure that are likely to have significant effects on employees.”
“Significant effects include termination of employment and job restructuring,” the FWC said.
Moreover, the FWC said a clause in the employee’s award “imposed an obligation on the employer to consult affected employees about the restructure it implemented in July 2023 when it dismissed the employee who lodged the claim and two junior agents.”
The obligations included giving notice to the affected employees and discussing with them the introduction of the changes and the likely effect on them.
“Those discussions should have commenced as soon as practicable after a definite decision to restructure had been made. The clause required the employer to give affected employees information in writing about the changes. In discussions about a restructure, employees may raise matters about the changes and the employer is required to respond to those matters promptly,” the FWC said.
“The obligation to consult on workplace change is a longstanding and important one, and it is an important workplace right that ensures fairness to employees during periods of change. The employer did not comply with any of the obligations,” it added.
Therefore, the FWC said there was no genuine redundancy.
A fixed term contract can’t be for longer than 2 years, including extensions and renewals.
Was the Employee Unfairly Dismissed?
As for the question of unfair dismissal, the FWC said the decision to dismiss was made without giving the employee information about the restructure and the opportunity to provide her suggestions for consideration when the employer was making their decision about redundancy.
In their defence, the CEO said the new role would be for less remuneration and it was full-time. The employee said she would have taken a pay cut and could have changed her arrangements and worked full-time.
The failure to consult had a significant impact with the employee denied a real opportunity to keep their employment as there was the possibility of redeployment to new role that the employer created.
Consequently, the FWC found the employee was unfairly dismissed. It then ordered the employer to pay compensation to the employee.
Akyra’s Key Takeaways for Employers
If you are planning on a review of business operations that shows redundancies or changes in work conditions is a probable outcome, you must consult with the employees likely to be affected.
Contact Akyra (email@example.com or 07 3204 8830) to discuss how the business review should be undertaken and the consultation process managed
Disclaimer – Reliance on Content
The material distributed is general information only. The information supplied is not intended to be legal or other professional advice, nor should it be relied upon as such. You should seek legal or professional advice in relation to your specific situation.