Building the right team is crucial to enhancing business productivity. But this often relies on the need to restructure, prioritise skills and, consequently introduce workforce redundancies. When contemplating changes of this nature, it is critically important to consider the potential legal pitfalls and the significant financial costs that can flow from getting this wrong. In this episode, we offer a helpful guide for employers as we discuss this thorny issue with our resident expert in employment law, Jayne Qorraj.
- It’s not as simple as employers might think
- Risks in considering redundancy
- The Fuji Xerox case
- Dealing with particular problem employees
- Takeaway tips for employers
Joanna: Hi, it’s Joanna Oakey here and welcome back to Talking Law, a podcast proudly brought to you by our commercial legal practice Aspect Legal.
Now today we have back the fabulous Jayne Qorraj from Aspect Legal talking to us about this thorny issue of redundancy and restructuring workforces in general.
Jayne, hello! Welcome on board!
Jayne: Hi Joanna. Thanks for having me.
Joanna: Great. Okay. All right, so let’s kick it off. We’re talking about this area of redundancy and dealing with reductions in the workforce. What’s the issue? Why are we talking about it?
It’s not as simple as employers might think
Jayne: The issue is that often employers who need to reduce their workforce will think of redundancy as the answer without sort of properly considering what’s involved.
Joanna: Yeah. Absolutely. Because I think the mentality goes, there’s issues in business and there’s a bit of a downturn or they have a little bit of a problem with a particular staff member. Redundancies look like the easy option, the easy way out sometimes. But that’s not always the case. Is that your thoughts Jayne?
Jayne: Yeah, that’s right. Look it’s not as simple as employers might think.
Firstly, obviously we need to consider the nature of the business and then look at the different risks and of course the possible consequences that come with those risks.
Joanna: Okay great. All right, so I guess maybe it might be helpful to our listeners if we step out what the risks are where we’re looking at redundancy. Let’s start with redundancy and maybe then we might also talk a little bit about other methods of approaching termination. But just talking about redundancy at the moment, what are the risks that our listeners should be considering?
Risks in considering redundancy
Jayne: Yes. I guess the main one is that the redundancy has to be for legitimate reasons. Otherwise, the risk is that an employee could end up bringing an unfair dismissal claim.
Joanna: Let’s talk a little bit about that because I guess genuineness can be quite difficult to prove. What are the sort of issues that you see here businesses grapple with in making sure they’re in a position to be able to demonstrate that?
Jayne: Yeah. Look I mean certain processes need to be followed and again it will depend on the nature of the business that’s involved. But employers will need to consider a number of factors so the provisions in the Fair Work Act and any sort of workplace policies they might have in place, whether there’s any relevant enterprise agreements or awards and of course any provisions that are in their own employment agreements.
Joanna: So there’s quite a lot to consider. Maybe if we come back as well to the risk. One of the risks is obviously that the employee claims that it’s not actually a genuine redundancy. If that happens, what are the consequences?
Maybe we should step out just so our listeners understand what that can mean in reality.
Jayne: Yes, so in reality that can mean, as we touched on earlier, an unfair dismissal claim. But the consequence of that can be either an order that the employee is reinstated or compensation or of course there may be some penalties against the employer as well.
Joanna: So it can be quite an expensive area to get wrong.
Jayne: Yes, that’s right.
The Fuji Xerox case
Joanna: That’s probably true to say. I guess we’ve seen some interesting cases in this area recently. Maybe it might be useful, I think listeners would love to hear about the Fuji Xerox case because I think it’s a really good example don’t you think of the way in which even an approach to genuine redundancies can end up creating issues.
Jayne: Yeah, that’s right. In that instance, the employer being Fuji Xerox took steps to reduce its headcount and that was due to a genuine downturn in business. In that case, the employee actually challenged the dismissal and argued the redundancy wasn’t genuine. That was on the basis that there was a failure to properly consult with him.
In that case, the Fair Work Commission agreed with the employee and Fuji was ordered to pay a substantial sum to the employee. It was a total of the equivalent of 89 weeks’ pay plus an additional five weeks’ notice. On top of that, there was also a requirement for them to offer a three-month outplacement program as well.
Joanna: Wow. Okay. They were hit quite hard. I mean obviously Fuji is a sizable business. But this doesn’t just hit large businesses. We see examples all the time of smaller businesses who have just not understood the sorts of considerations they need to give before they’re implementing redundancies and gearing themselves up to be able to implement redundancies even in a smaller business environment.
Jayne: Yeah, that’s right. There’s a lot involved with respect to the consultation process and again it will depend on the nature of the business and also the size of the business. There are different considerations for small businesses. But employers need to make sure that they understand all of the legalities before commencing this type of process.
Joanna: I guess the point is to look out for businesses. Well, the first thing, if we’re talking about issues relating to a downturn in business and then triggering a genuine redundancy type of environment, you need to get advice quickly. I think that’s the first step. Before you’re communicating anything to your staff members or indeed making any decisions about what it’s going to look like, I think the first step is to understand what the legal implications are and what your options are and the path forward for you as a business.
I guess that’s the one side in terms of the action tips for businesses that maybe are suffering an event where they have to consider redundancy on a general scale to reduce the size of their workforce.
What about the businesses Jayne that just have a particular issue with a staff member? What do you think about redundancy for them? I think it’s time for us to throw some caution out to our listeners here so they’re aware of some of the risks.
Dealing with particular problem employees
Jayne: Yeah, that’s right. I mean obviously, if you’re having issues with a particular employee it’s going to be about their performance and obviously poor performance is not a basis for a genuine redundancy. It really needs to be about the operating needs of the business as opposed to any single particular employee’s performance.
Joanna: So the point is if you were a business owner are having difficulties with particular staff members, before you even consider thinking about redundancy, you really need to get advice quickly to understand how you’ll go through performance management approach if redundancy really isn’t the right avenue to be using in this particular instance to save yourself a lot of time money and effort and energy. That’s the outcome at the end of the day that we’re trying to save our listeners here by talking about this.
So Jayne, do you have any sort of parting advice for our listeners about how to prepare themselves from an organizational perspective in relation to dealing with staff? Say there they have an idea that the business might perhaps have some troubles into the future. What sort of things do you recommend to them more generally as an action plan?
Takeaway tips for employers
Jayne: One of the things that’s really important is forward planning for businesses. This means that they’re able to catch issues in time to properly consider the best approach rather than sort of being boxed into a corner and having to make a rash decision.
Joanna: I think that’s a really good point. I think part of the issue for businesses in this particular area we’re talking about is when they make quick decisions, or they’re forced into fast decisions that they’ve not been able to adequately plan for. You’re absolutely right. I think forecasting and being on top of seeing where a trend is going so that you can get in advance of needing to have to make a snap decision really assists in this area.
Jayne: Yeah, and look the other thing is the importance of just general documentation with respect to all the employees just means that if you start to have an issue with an employee, you’ve got the documentation there if you need to move to that sort of performance management type process.
Joanna: Yeah. You’re not feeling like redundancy is really the only area that you can move to. Because of course the issue with making a position redundant is also that you then can’t just go and fill that position afterwards so I think you know businesses need to be really careful about this, about using redundancy in an area where they think they then might in the future or the near future create that position again and fill it.
Jayne: That’s right, and also the consideration of any sort of redundancy pay out that needs to be made with respect to the position.
Joanna: Yeah. Absolutely. Okay alright. Well look, I think we’ve touched on a lot of important issues here Jayne. Thank you so much for coming in to talk to us all about this area today of redundancy and how it works in relation to restructuring your business and some of the risks that you may not have considered before that really you can plan in advance.
I think the end piece of advice here is to make sure you get advice early, because the earlier you get advice and can implement a process the more protected your organization is going to be.
All right. Well look, Jayne thank you so much for coming along to join us today. We loved having you.
Jayne: Thanks for having me.
Joanna: Great. Okay. And look, you the listener, if you’d like more information about this topic, just head over to our website at www.talkinglaw.com.au where you can get a free download of the transcript of everything, we’ve talked about today just in case you want to pore over the details.
But look, if you do want the detail or you want a little bit of advice in relation to how this applies to your business or the business of your clients, pop over to our website at aspectlegal.com.au. There you can set up a free call with one of our legal eagles back at Aspect Legal to talk through issues that you might be experience in your business or your clients might be experiencing in this area, and we can give you a bit of a roadmap as to what you should be thinking about and the path that you should be looking at following.
Well look, I hope you enjoyed what you heard today. If you did, I encourage you to please pop over to Apple Podcasts or your other favorite player and hit subscribe. And if you feel so inclined it maybe you might also leave us a review. Well look that’s it. Thanks again for listening in. You have been listening to Joanna Oakey and talking law brought to you by our commercial legal practice aspect legal. See you next time.
Are you enjoying the podcast? Listen to the episode here and leave us a review:
Our General Legal Services
Are you looking for a top quality legal team to assist you in your organisation?
Aspect Legal is an innovative commercial legal practice that specialises in providing fast and professional services for their clients. Our commercial legal services cover a wide spectrum of disciplines – contract law, dispute resolution, business sales and acquisitions, brand protection and IP.
We work with clients both large and small, and we’re all about helping you grow while protecting you from the unexpected storms of business. If you’d like to chat about how we might be able to assist you, simply head over to our website at aspectlegal.com.au to book in time for a free discussion with one of our lawyers. So get in touch today!
Disclaimer: The material contained on this website is provided for general information purposes only and does not constitute legal advice. You should not depend upon any information appearing on this website without seeking legal advice. We do not guarantee that the contents of this website will be accurate, complete or up-to-date. Liability limited by a scheme approved under Professional Standards Legislation.