What do I do if I restructure my business and make a position redundant?

When a business undertakes a strategic restructure, some positions that are filled by current employees may no longer be required. This type of loss of position is called being terminated via redundancy. Hence, since the job will no longer need to be performed by anyone, the position is eliminated. But before a business owner or a corporation eliminates a job due to redundancy, they must be sure to meet the legal qualifications for categorizing the position as redundant. If they do not, the employee could bring a wrongful termination suit which could have very costly consequences for the employer.

Definition of Redundancy

First, it is important to understand the definition of a redundant position. Redundancy is about the work being performed, not about the individual performing the work. Therefore, an employer should never use the excuse of redundancy to get rid of a difficult employee. There are other legal options available for that situation that should be properly used by an employer.

Legal Factors of Genuine Redundancy

For a position to be considered “genuinely redundant” the following factors must be met in accordance with the Fair Work Ombudsman Act;

1. The job that is being eliminated must not need to be done by anyone
2. If the employer goes bankrupt or is insolvent

These criteria can be met when the employer’s workforce needs change due to a variety of different circumstances such as;

• Merging with another business
• Closing the business
• Relocation of the business
• Production and Sales slowdowns
• Technology makes the position obsolete
• The employer will have no substantially similar job available
• A project is completed
• The position is being outsourced

As a general rule these options do not qualify as designating a job redundant;

1. The employee is difficult and the employer wants to be rid of them
2. The job is going to be given to a different employee
3. The duties performed by a single person are going to be given to a couple of different people
4. The responsibilities of the job will remain relatively intact; meaning there will be a new job with a majority of the same tasks

Consultation Requirement

Once an employer realizes that a job is going to become redundant they are obligated to hold a consultation with the employee. The consultation must occur at the point that the employer becomes aware that a redundancy decision is possible. As such, waiting until the decision to designate the position as redundant is too late to meet the legal requirements of properly designating a position redundant.

The consultation that the employer must hold with the employee has particular requirements that must be met. These include;

• Gathering ideas and possible alternatives from the employees affected by the change
• Sharing with the employee the situation that caused the redundancy to become a possibility
• Explain the framework of the changes that will cause the redundancy
• Redeployment; A discussion of suitable alternatives available to the employee for remaining employed with the company
  • Provide a list of other positions available
  • Include all options even if the responsibilities or rate of pay is lesser than their current position
  • Discuss with the employee their skill set that is applicable to the new position
  • Review the pay structure and benefits that will be available
  • Point out the differences between their old role and the new position
  • Give the employee time to consider the option
  • Be open to any suggestions the employee may have with regard to transitioning to the new position

Redundancy Remediation

The last step to consider, if the employee will not be remaining with the company, is redundancy pay. If the employee has a contract that specifically addresses this issue, the employer should follow the contractual specifications. If not, the employer should do the following;

1. Give the employee formal written notice of their position becoming redundant
2. Include the details regarding the last day of work, the policy for returning company-owned items, health insurance information, date of the last paycheck
3. Explanation of ongoing redundancy pay if applicable
4. Payout of vacation and/or sick time if applicable

While no employer plans on restricting in a manner that causes an employee’s position to become redundant, it does happen. Therefore, once an employer realizes that this is likely a position is going to be eliminated due to redundancy, it is important for them to be fully informed as to the proper way to handle the inevitable.

In the event that you find yourself in need of assistance regarding redundancy or any employment law related enquiry, please contact the offices of Owen Hodge Lawyers. At Owen Hodge, we are always happy to assist clients in understanding the full ramifications of any and all of your legal needs. Please feel free to call us at your earliest convenience to schedule a consultation at 1800 780 770.