Genuine redundancy: how sound restructures still get lost
You have the right to restructure your business. Restructures still get challenged, and the challenge often succeeds on process rather than on the commercial reasoning. "Genuine redundancy" has a specific legal meaning, and most employers only satisfy the first part of it.
Most employers can explain why the role went. Far fewer can prove they consulted properly and that redeployment would not have been reasonable. Those two points are where restructures come apart.
What genuine redundancy requires
Under the Fair Work Act, a dismissal is a genuine redundancy only if all three of the following are met. If one fails, you lose the genuine redundancy defence. An eligible employee can then bring an unfair dismissal claim, and the Commission decides whether the dismissal was harsh, unjust or unreasonable. Losing the defence does not mean losing the claim, but it removes your strongest argument.
Requirement
What employers usually do
What you need to be able to show
The job is no longer required
Point to the financial or operational reason.
The job itself has gone because of changes in operational requirements, not that a person has been removed from it.
Consultation
Tell the employee once the decision is final.
You met any consultation obligation in the applicable award or enterprise agreement.
Redeployment
Confirm there are no vacancies.
Redeployment within the business or an associated entity would not have been reasonable in all the circumstances, including for roles the person could do with reasonable training.
The job has to be redundant, not the person
If the same duties keep being performed by a new hire, a contractor or a colleague under a different title, your position becomes very hard to defend. A role that reappears in a renamed form shortly afterwards is the first thing a challenge will look for.
Selection is the related risk. If you cut three roles to two and choose who stays, the selection becomes part of the case. Selection against clear criteria, applied consistently, is defensible. Selection that appears to track who complained, who took leave or who was already on a performance process gives the employee a very different story. It can also support a general protections claim, where there is no genuine redundancy defence and the burden shifts to you to show the reason was not a prohibited one.
Consultation is not notification
This is the most common failure, and it is avoidable.
The obligation comes from the award or enterprise agreement, so start by checking what yours says. If no consultation obligation applies to the employee, that requirement is met. If one does apply, most clauses are triggered once you have made a definite decision to introduce major changes likely to have a significant effect on employees. You have to notify them, give them the relevant information, invite their views (including on ways to reduce the impact), and genuinely consider what they say.
Two points catch employers. Consultation is triggered by the decision to make the change, not by the decision about who goes. If you consult only after the individual outcomes are locked in, it has not done its job. And genuine consideration means the outcome must still be capable of changing. Consultation where nothing could alter the result is a formality, and it will be treated as one.
A failure to consult can also be a breach of the award or agreement in its own right, which carries penalty exposure separate from any dismissal claim.
Redeployment has to be examined, and recorded
The test is objective. The Commission decides whether redeployment would have been reasonable, whatever you concluded internally. Your record is the evidence you will rely on to show it was not.
Check current vacancies across the whole group, consider roles at lower classifications and ask the employee whether they would accept one, and record what you checked and when. A dated list of vacancies considered, with reasons, is worth far more than an assertion that nothing suitable existed.
A note on business size
Some of the rules above work differently depending on how many people you employ. If you have fewer than 15 employees, you are generally a small business employer. Different unfair dismissal rules apply to you, and the redundancy pay exemption for small business may apply. Check which regime you fall under before relying on anything in this article, or call us.
How to run a restructure you can defend
Document the operational rationale before any names are attached to it. The business case is the foundation of the first requirement.
Identify the affected roles, not the individuals.
Check the award or agreement for its consultation clause and follow its terms, not a generic process.
Notify affected employees, provide the information the clause requires and give them a realistic period to respond.
Consider what comes back and record it, including where you did not adopt a suggestion and why.
Run the redeployment search across the business and associated entities, and document it.
If you have to select between employees, apply set criteria consistently and keep the assessments.
Confirm notice, redundancy pay and final pay against the award, the agreement and the NES.
Common questions
Can I make someone redundant while they are on a performance process? Yes, if the restructure is genuine. The overlap needs careful handling, because the timing invites an argument that the redundancy was a convenient way to exit them.
Do I have to offer a lower-paid role? It depends on the circumstances, but you should generally consider and offer it rather than rule it out on the employee's behalf.
What if the employee says they do not want to be consulted? Consult anyway. The obligation sits with you, so an employee's reluctance is not a reason to skip it.
Restructures are project work
A restructure covers the business case, award and agreement obligations, consultation, redeployment, selection, notice and final pay, usually across several people and on a tight timeline. Sequencing errors cannot be fixed after the fact.
IndustrialHR runs restructures and redundancy programs as scoped projects, alongside investigations, wage remediation and case management for employers facing matters that carry real exposure.
To discuss a restructure in confidence, contact Rhiannon on 0481 100 416, email [email protected] or schedule a consultation.
Employers dealing with this now can book a free 30 minute discovery call or a 60 minute case review with Rhiannon. Book a consultation. IndustrialHR does not provide legal advice.
