Understanding Genuine Redundancy: Insights from Helensburgh Coal v Bartley

Don’t panic! Your restructure plans are still manageable.

A recent decision of the High Court of Australia has attracted a lot of commentary in legal and human resources circles, with some commentators expressing the view that the case represents a major shift in the way genuine redundancies will be assessed by the Fair Work Commission (FWC). While a new High Court decision inevitably leads to some concern as practitioners assess whether it represents a significant change in the law, in this case, the law has remained more the same than perhaps was first thought.

What happened?

In 2020 Helensburgh Coal began a restructure of its operations in response to a downturn in demand for coal as a result of the COVID-19 pandemic. Helensburgh had three different sources of labour in its operations, being two contractor workforces and its own direct employees. Without getting too much into the factual details of the case, the employer’s plan was to restructure its business so that both the contractor and employee workforces were reduced, with a greater reduction in employees than contractors.

The employees’ union argued in the FWC that the redundancies resulting from the restructure were not genuine redundancies because the employer could have redeployed the affected employees to work being performed by contractors. As such, the union argued that the employees had been unfairly dismissed and should be reinstated.

In response, Helensburgh argued that the work done by the contractors was specialised work such that employees could not be redeployed into those roles, and that it would have been “operationally impractical” to redeploy the employees and would represent a “fundamental change” to its business.

This matter had a convoluted history, being subject to a first instance decision in the FWC in favour of the employees and an appeal to the Full Bench of the FWC which found in favour of Helensburgh. The matter was then remitted back to a single Commissioner who again decided the matter in favour of the employees, leading to a second appeal to the Full Bench of the FWC which upheld the Commissioner’s second decision. A further appeal to the Full Court of the Federal Court upheld the FWC’s final position again.

The Full Court of the High Court agreed with the Federal Court and declined to disturb the FWC’s decision that the dismissals were not genuine redundancies.

Analysis

The question before the High Court was not one of whether the employees or the employer were right or wrong in respect of their arguments in the Commission. The question was whether the Court should disturb the FWC’s decision that it has the capacity to make enquiries into an employer’s enterprise for the purposes of assessing whether at the time of the dismissal the employees could reasonably have been redeployed to a position to perform work being performed by contractors. Furthermore, whether this may include consideration of whether at the time of their dismissal “it was reasonable in all the circumstances” for a new position to have been created for the employee to be redeployed to.

The genuine redundancy test is found in section 389 of the Fair Work Act 2009 (Cth). The test contains two primary components, an initial test which defines a genuine redundancy, and then a second test which allows for hypothetical scenarios to be considered which would allow for the redeployment of redundant employees.

The Court considered the text of section 389 and made the following observations:

• firstly, that in considering the employer’s enterprise, the FWC cannot look beyond the nature of the business or enterprise, but it can consider the manner in which its workforce is used;
• secondly, the FWC must consider whether at the time of the dismissal it was reasonable in all the circumstances for the employees to be redeployed, which is not restricted to jobs vacant at the time;
• thirdly, that the redeployment is a hypothetical scenario as to where the employee can perform their work;
• fourthly, that the redeployment must be reasonable in the context of the employer’s enterprise; and
• fifthly, that the redeployment must have been reasonable in “all the circumstances”, which the Court pointed out is very broad.

The Court did not determine that employers must consider whether a contractor workforce should be reduced instead of employees being made redundant. Rather, the decision reinforces the existing statutory test, being that the employer must consider a hypothetical scenario where it would be reasonable in all the circumstances to redeploy its redundant employees, including in roles not currently open, to which they can be transferred to perform their work.

The High Court notes by analogy the primary remedy in unfair dismissal cases where employees are successful is reinstatement, in which case the employer is required to reinstate them whether their former position, or another equivalent position, exists or not.

Each case will turn on its own facts but this might mean that, for example, had Helensburgh engaged the contractor labour on long term commercial terms that it could not reasonably disturb (which the FWC found that it didn’t) or the contractor labour were exercising specialist skill that its employees did not have (which the FWC found was not the case), then it would not have been reasonable in all the circumstances and in the context of their enterprise to redeploy redundant employees to positions to perform work being performed by contractors.

How will this affect you?

The effect of the High Court’s decision in this case does not represent an expansion of the FWC’s power with respect to assessing whether a dismissal is a genuine redundancy. Rather, it is a reinforcement of the broad scope available to the FWC to make enquiries when considering whether a redundancy is genuine or not in all the circumstances in the context of the employer’s enterprise.

Therefore, the circumstances and context that must be considered will vary considerably from case to case, and both the High Court and the Full Bench of the FWC noted that it is not open to the tribunal or court to limit the FWC in assessing whether a dismissal is a genuine redundancy in a way not contemplated by the language of the legislation.

What should you do now?

You should continue to manage your business in the most efficient and competitive way necessary. In circumstances where you decide to undertake a restructure that will result in redundancies, you should continue to comply with all legal requirements including the need to consult with affected employees and identify any opportunities for redeployment that are “reasonable in all the circumstances” in the context of your enterprise.

This will mean assessing each restructure on a case-by-case basis. Taking a cookie-cutter approach to the redeployment of employees who would otherwise be made redundant and failing to take into account what is reasonable in all the circumstances exposes the business to the risk that the FWC will order the reinstatement of the employees because they are not genuinely redundant.