Redundancy Isn’t Just About The Business Case
A commercially justified redundancy may still expose your business to unfair dismissal risk. Learn why genuine consultation, redeployment and process matter.
A recent Fair Work Commission decision is a timely reminder that even when a redundancy is commercially justified, employers can still get into trouble if they fail to consult properly.
When organisations face economic pressure, changing client demands, technological advances or business restructuring, difficult workforce decisions sometimes need to be made. Most business owners understand that genuine operational changes can result in positions no longer being required.
What is often overlooked, however, is that having a sound business reason for a redundancy is only part of the equation. In many cases, the greater risk lies not in the decision itself. It lies in the process used to reach it.
A recent Fair Work Commission Full Bench decision has reinforced an important lesson for Australian employers: where consultation obligations apply under a modern award or enterprise agreement, employers must comply with them, even when a redundancy is commercially justified.
The decision is also a timely reminder that small businesses are not exempt from those obligations simply because they have fewer employees or limited resources.
At Akyra, we’ve seen redundancy processes generate significant unfair dismissal and employee relations risks when they are not managed carefully.
More often than not, the issue isn’t whether there was a valid business rationale. The issue is whether the employer followed the right process.
The case that has employers talking
The decision, Orientile Pty Ltd v Zhang [2026] FWCFB 162, involved a small business employing only nine people. The business was experiencing declining sales and determined it could no longer sustain all three of its sales representative positions.
One employee, who had almost 15 years of service, was called into a meeting and informed that his employment was ending due to redundancy. By the time that meeting occurred, the decision had already been made.
The employer subsequently argued that the discussion constituted consultation.
The Fair Work Commission disagreed.
The Full Bench upheld the earlier finding that consultation had not occurred because the employee was informed of a final decision rather than consulted about a proposed workplace change. The employee had not been given a genuine opportunity to provide input, raise concerns, suggest alternatives or otherwise influence the outcome before the decision became irreversible.
As a result, the employer failed to comply with the applicable award consultation provisions. This meant the dismissal did not satisfy one of the requirements necessary for a genuine redundancy under section 389 of the Fair Work Act 2009 (Cth).
The biggest misconception: We’re only a small business
One of the comments I hear regularly from business owners is… Surely the rules are different for small businesses?
In some areas of workplace relations, different provisions do apply to small business employers. However, this case confirms that, where an employee is covered by a modern award or enterprise agreement containing consultation obligations, those obligations apply regardless of business size.
The Full Bench specifically rejected the argument that being a small business reduced the employer’s obligation to consult. The Commission noted that consultation can be particularly important in smaller workplaces because the loss of one role may have a significant impact on both the affected employee and the employees who remain.
Importantly, the Full Bench also confirmed that reliance on the Small Business Fair Dismissal Code does not remove an employer’s obligation to comply with applicable award consultation provisions.
That is a message worth paying attention to!
Consultation is not a meeting where you announce the outcome
This is where many employers inadvertently get themselves into trouble.
Consultation is not telling someone their role is redundant nor is it presenting a final decision and asking if they have any questions… and it definitely isn’t providing paperwork after everything has already been decided.
Meaningful consultation occurs before a final decision is made. It requires:
- employees to be informed about the proposed change,
- understand its likely impact,
- have an opportunity to provide feedback, and
- have that feedback genuinely considered before the final decision is reached.
Will employee feedback always change the outcome? No… but the opportunity to contribute must be genuine.
Why consultation is more than a legal requirement
While many discussions focus on compliance, I think there’s a broader lesson here.
The best consultation processes shouldn’t be conducted because employers are worried about legal risk. They should be conducted because they often lead to better business decisions.
When employees are engaged early, employers frequently uncover options they hadn’t considered, including:
- reduced hours arrangements
- job redesign opportunities
- voluntary redundancies
- redeployment possibilities
- alternative cost-saving measures
- temporary workforce adjustments instead of permanent role removal.
I’ve seen businesses enter a consultation process convinced redundancy is the only answer… only to discover more effective and less disruptive alternatives once employees become part of the conversation.
Consultation does not remove management’s right to make business decisions. Employers should have and retain the right to determine how their business operates.
What consultation requires is that employers genuinely consider employee input before finalising the outcome.
The three questions EVERY employer should ask
Before proceeding with a redundancy, employers should be able to confidently answer three questions.
- Is the role genuinely no longer required because of operational changes? Under section 389 of the Fair Work Act, a genuine redundancy requires that the employer no longer requires the job to be performed by anyone because of operational changes within the business. In some circumstances, aspects of the work may be redistributed amongst remaining employees as part of those operational changes.
- Have all applicable consultation obligations been met? If a modern award or enterprise agreement applies and contains consultation requirements, those obligations must be followed. Failure to comply may mean the dismissal cannot be characterised as a genuine redundancy under the legislation.
- Have redeployment opportunities been properly considered? The legislation requires employers to consider whether it would have been reasonable in all of the circumstances to redeploy the employee within the employer’s enterprise or an associated entity. This assessment should be genuine and documented.
Too often employers focus almost exclusively on the first question and overlook the other two.
Practical steps to reduce risk
For employers contemplating organisational change, several practical steps can make a significant difference:
- Check whether a modern award or enterprise agreement applies before commencing any process.
- Begin consultation while the proposal is still capable of changing.
- Provide employees with information about the proposed changes and likely impacts.
- Allow sufficient time for employees to respond and raise alternatives.
- Genuinely assess redeployment opportunities and other alternatives to termination.
- Keep thorough records of meetings, correspondence, employee feedback and decision-making.
Remember the human impact
While legislation and process are critical, we should never lose sight of the people affected.
For an employee, redundancy is rarely just about losing a job. It can affect financial security, confidence, family circumstances and future career opportunities. The manner in which employers manage these conversations often shapes how the experience is remembered long after the employment relationship ends.
Employees may not always agree with the outcome. However, they are far more likely to accept difficult decisions when they believe they have been treated fairly, given an opportunity to be heard and treated with dignity throughout the process.
That’s not simply good HR practice. It’s good leadership.
The Takeaway
The key takeaway from Orientile Pty Ltd v Zhang is simple… there are no shortcuts when it comes to consultation. A sound business rationale alone is not enough. Where consultation obligations apply under a modern award or enterprise agreement, employers must ensure they are met and that employees are given a genuine opportunity to participate before final decisions are made.
For me, the broader lesson is this… good workforce management is rarely about rushing to an outcome. It’s about taking the time to engage openly, explore alternatives, manage risk appropriately and treat people with respect.
When redundancy becomes necessary, the process matters just as much as the decision itself. And sometimes, genuine consultation doesn’t just protect the business from legal risk. It helps uncover a better path forward for everyone involved.
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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 concerning your specific situation.
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