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Legal steps for redundancy in the workplace

8 June 2016

Shane Wescott, Principal

Tightening budgets and revenue capping measures mean that many employers are looking at reducing expenditure and are considering instituting redundancies.

In this three part series we break down the redundancy process into the decision and consultation stage, the implementation stage, and the payout stage, covering some of the key points to consider for effectively implementing genuine redundancies.

Decision
The decision stage is arguably the most important and problematic part of the redundancy process. Failing to follow correct procedures can have significant consequences in the workplace, including increased employee dissatisfaction, disruption in workflow and productivity, and costly legal action.

When deciding to make staff redundant, the following points should be addressed:

  • Demonstrate a need for redundancies to be made. Undertaking a thorough analysis of workplace roles can determine whether a role is indeed required. A role becomes redundant when it is found that it is no longer required to be performed by anyone, or if it can be subsumed by existing employees’ roles. Informed and reasonable decisions based on good analysis can smooth the redundancy process.

  • Remember that redundancy refers to a role being no longer required, not an employee.

  • Employers need to be able to demonstrate that redundancies were an option of last resort and that other options, such as asking employees to take accrued leave or encouraging early retirements, were first explored.

  • Carefully manage and document the redundancy process from the earliest discussions regarding even potential redundancies. This can both substantiate a decision and assist in subsequent consultations with affected employees.

  • Make a decision about the method by which the redundancies will be implemented. Some employers may wish to offer voluntary redundancies as a first step. If this is the case, then details of any packages offered should be prepared and provided to employees.

Consultation


Once a decision to make employees redundant has been reached, relevant parties should be consulted. Failure to properly consult is one of the main reasons that a redundancy process can lead to unfavourable legal outcomes, such as an unfair dismissal claim.

Effective consultations consider:

  • The obligation to consult requires genuine discussion, not simply an announcement by an employer that redundancies will be implemented, however, the ultimate decision over whether a role will be made redundant does remain the employer’s.

  • Employers should take into account the Award or Enterprise Agreement covering their employees. Most modern Awards require employers to consult with employees once a decision has been made to initiate major workplace changes.

  • Discussions with employees. Employers should explain the organisation’s situation and its potential impact with employees, exploring different options, including any alternatives to redundancy that employees may suggest, such as voluntary redundancy, redeployment within the employer’s enterprise, or early retirement.

  • Employees should be consulted about the redundancy process generally. This consultation should include, but not necessarily be limited to, the timing of the process, the method of implementation, and any job seeking or financial counselling assistance that is on offer to affected employees.

  • There is no one way to consult employees. The nature of the business and workplace should be considered and the most appropriate consultation method be used, whether that be a one on one discussion with potentially affected employees, or a meeting with some or all staff members, or unions.

When considering redundancies in the workplace, employers should remember that the nature of a business will determine how a redundancy is decided, how it is discussed with employees, and how it will be implemented. It is always recommended that employers consult legal practitioners before making any concrete decisions to help minimise workplace disruption and potential future legal action.

Questions? Contact us below.