Redundancies and restructures are a challenging but sometimes necessary part of running a business, involving a myriad of potential risks if not managed correctly. However, with careful planning and effective communication, redundancies and restructures can be rolled out with minimal disruption to the business and its workforce.

What is restructuring?

When a business makes significant changes to its financial or operational structure or roles, this is typically known as restructuring. This could be due to financial pressures, changed organisational needs, or a changed operating environment. Businesses may also restructure when preparing for a sale, merger, new strategic direction, or transfer of ownership. The goal? Business operations that are more economical, sustainable, and productive.

The restructuring process examines and reviews business operations and requirements, specifically staffing resources including whether there is the right number of employees allocated to the right areas and, if not, why not. Employers will consider if there are more employees than are needed or can be afforded, and whether any current roles should be reorganised. If, after careful consideration, it is determined that the existing number of positions is not sustainable, then redundancies are the likely next steps.

It is essential that employers identify the positions excess to requirements, the employees that will be affected, and alternative options for these employees.

What are the risks?

Redundancies and restructures can, understandably, negatively impact employee attitude and morale, especially those who are affected by the changes. An aggrieved employee may seek to challenge a redundancy by way of an unfair dismissal claim on the basis that it is not a ‘genuine redundancy.’ A genuine redundancy is defined as a redundancy where:

  • The employer no longer requires the person’s job to be performed by anyone because of changes in the operational requirements of the employer’s enterprise; and
  • The employer had complied with any obligation imposed by an applicable modern award or enterprise agreement to consult about the redundancy.

An unfair dismissal claim may also arise on the basis that the employer has not provided the appropriate notice or payment for notice, or for reasons of discrimination.

Whilst a business cannot prevent an employee from lodging an unfair or unlawful dismissal claim, employers can minimise the likelihood that any claim made will succeed by having a clear, strategically sound, and transparent process. This includes having accurate records of the process taken, documenting all communication and consultation with employees, and the basis upon which selection for redundancy was made.

When is a position redundant?

An employer may make a position redundant only when that role is no longer required to be done by anyone, regardless of the person who occupies that role. The employer must be able to demonstrate that the position no longer exists, is in excess to business requirements, and will not be filled by another employee. However, parts of a redundant position’s duties may nonetheless be allocated to exiting employees.

A redundancy cannot be used to terminate an employee due to performance or suitability for the role. Employers who make an employee redundant where the job is still available and/or will be filled by another employee may be open to unfair dismissal claims.

What is redeployment in redundancy?

Redeployment involves identifying another position that the employee may be able to be assigned to, and it is a requirement by the Fair Work Act that redeployment options are explored. This could be an existing vacant position, a newly created position, or a position within an employer’s ‘associated entity.’

Top tips for minimising unfair dismissal claims

Is the redundancy solely based on the role? Ensure the redundancy relates to the role and not the individual attributes, performance, attitude or conduct of the employee in that role.

Have you consulted with employees? Comply with any obligations under the applicable modern award or enterprise agreement to consult with employees. Even of no modern award or enterprise agreement applies, employers should still consult with the employee performing the role before confirming the decision to make that role redundant as they have valuable insight that could avoid risk or poor decisions.

Have you been transparent? Share information about the process and the number of employees affected. Transparency and clear communication about the decision and process can help nip any accusations of unfairly targeting specific employees in the bud, and quickly.

Do you have detailed records? Clearly establish and document the actual and financial reasons for the restructure leading to the redundancies.

The restructuring and redundancy process is quite complex as it has many moving parts and risks to be aware of. Legal considerations aside, it can also be a stressful and emotionally demanding task for businesses to navigate.

Want more information? We can provide support to ensure the restructuring and redundancy process is as smooth as possible. Ensure your business is compliant, get in touch with our team for an obligation free chat.

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