Termination – A Shortcut to Redundancy?
Published on June 23, 2015
1. A genuine redundancy is when the employer no longer requires the role to be performed by the employee or by anyone else, due to operational requirements of an organisation as a National System Employer (which are most employers excluding the public sector).
2. The National Employment Standards (NES) under the Fair Work Act 2009 (Cth) set out minimum redundancy entitlements and the processes for National System Employees.
3. Employers must meet any obligations regarding consultation and decision making and job search entitlements in an Award, Enterprise Agreement and/or Contracts of Employment.
4. If a redundancy is not a genuine redundancy, the employer risks a claim for:
– unfair dismissal;
– breach of contract;
– breach of industrial instrument (Award or Enterprise Agreement);
– or other claims under the Act.
5. Redundancy attracts redundancy pay which is also known as severance pay. Severance pay to be paid in addition to any payment made in lieu of notice.
6. Careful consideration must be given to selection of the position(s) and consequentially the employee(s) to be made redundant especially in circumstances where more than one position is redundant. Employers should be mindful of using a fair and definitive process to minimise the risk of an adverse action claim.
7. There are some exemptions to payment of redundancy or severance payment, including:
(a) employees whose period of service is less than 12 months;
(b) casual employees and employees employed for a specific period, task or season;
(c) apprentices and employees employed for a specific duration under a trainee agreement;
(d) employees covered by a specific industrial scheme, enterprise agreement or modern award;
(e) small business employers;
(f) where the employee rejects an offer of employment made by another employer which is substantially on the same terms and conditions as the previous employment where the employer finds the employee alternative suitable employment;
(g) where the employer cannot pay the amount of severance pay.
8. Where a position is redundant and an employer fails to make payment of minimum severance payment as set out in the NES, Award or Enterprise Agreement, the employer risks being ordered to pay a civil penalty for the breach of that instrument.
9. If redundancy entitlements in an employment contract exceed the minimum statutory entitlement, the entitlements in the contract must be paid by Employers. Employers risk claims for breach of contract if they fail to comply the contractual terms.
10. In answer to the question posed; No, redundancy should not be used as a means to avoid claims. If a redundancy is not genuine it gives rise to potential claims and civil penalties.