When a genuine redundancy leads to an unfair dismissal claim
Published on September 23, 2026 by Jessica Duan and Tim Grellman
Redundancy is governed by the Fair Work Act 2009 (Cth) (Fair Work Act) and the National Employment Standards. A redundancy occurs when an employer no longer requires a job to be performed by anyone because of the changes in the operational requirements of the business. A redundancy must be genuine and cannot be used simply as a mechanism of terminating an employee’s employment.
The recent Full Bench decision of the Fair Work Commission, Orientile Pty Ltd v Zhang [2026] FWCFB 162, provides an important reminder that a genuine business reason for reducing staff numbers does not automatically protect an employer from an unfair dismissal claim. The decision reinforces the critical role of consultation in redundancy processes and confirms that employers, including small businesses, must comply with their obligations under modern awards and the Fair Work Act.
Background
Mr Zhang had been employed by Orientile Pty Ltd as a sales representative for almost 15 years. Facing declining sales, the business decided to reduce its sales team from three representatives to two. Mr Zhang was called into a meeting and informed that his employment was being terminated because his position was redundant. The decision had already been made and implemented.
There was no prior consultation with Mr Zhang about the proposed restructuring, the potential impact on his role, or any alternatives to termination. Orientile argued that the redundancy was genuine because there was a legitimate operational reason for reducing employee numbers and that as a small business greater allowance should be made for its failure to comply with the consultation process.
The Full Bench rejected those arguments and upheld the finding that the dismissal was unfair and that the company’s size does not excuse an employer from fulfilling the requirements imposed by a modern award or enterprise agreement.
A genuine redundancy does not automatically defeat an unfair dismissal claim
Many employers assume that if a position is no longer required because of business restructuring, declining work or economic pressures, the redundancy will necessarily be protected from challenge. The Full Bench confirmed that this is not the case.
Section 389 of the Fair Work Act provides that a dismissal will only be a “genuine redundancy” if:
- the employer no longer requires the job to be performed by anyone because of operational changes;
- any applicable consultation obligations have been complied with; and
- redeployment would not have been reasonable.
Orientile was able to establish that there were genuine operational reasons for reducing the size of its sales team. However, satisfying that requirement alone was not enough. Because the company failed to comply with its consultation obligations, it could not rely on the statutory genuine redundancy defence.
Consultation is not a mere formality
One of the most significant aspects of the decision is the Full Bench’s emphasis on meaningful consultation.
The applicable modern award required consultation where a definite decision had been made to introduce major workplace change likely to have significant effects on employees. The Commission found that consultation requires more than simply informing an employee that a decision has already been made. Rather, affected employees must be given a genuine opportunity to understand the proposal, provide feedback, raise concerns and suggest alternatives before an irreversible decision is implemented.
The Full Bench rejected arguments that there had been sufficient “substantive” compliance or that consultation would not have changed the result. It held that employers must comply with the consultation obligations imposed by industrial instruments and that there is no discretion to excuse non-compliance because a redundancy appears commercially justified.
The decision serves as a warning that consultation should be built into the redundancy process from the outset rather than treated as a procedural afterthought.
Compensation may still be payable even where the role genuinely disappears
The decision is also notable because compensation was awarded despite the Commission accepting that the business genuinely needed to reduce staff numbers.
Mr Zhang was awarded compensation of more than $31,000. The Commission considered that part of the compensation represented the period during which a proper consultation process should have occurred. The Commission also took into account factors including Mr Zhang’s lengthy service, his contribution to the business and the likely impact of the dismissal on his financial circumstances and future employment prospects.
The outcome demonstrates that employers may face substantial financial exposure even where the underlying business decision is entirely legitimate. A failure to follow the required process can turn what would otherwise have been a defensible redundancy into an unfair dismissal.
Small businesses are not exempt
Orientile also argued that greater allowance should be made because it was a small business. The Full Bench was unequivocal in rejecting that proposition. It confirmed that consultation obligations contained in modern awards apply equally to employers of all sizes. There is no exemption simply because an employer is a small business or has limited human resources expertise or administrative resources.
The decision highlights an important distinction between the Small Business Fair Dismissal Code and redundancy obligations under the Fair Work Act. While small businesses may benefit from certain protections when dealing with dismissals for conduct or performance, those protections do not remove the requirement to comply with consultation obligations associated with workplace restructuring and redundancy.
Key lessons
The Full Bench’s decision is a timely reminder that redundancy is both a substantive and procedural exercise. Employers contemplating workforce reductions should:
- identify and document the operational reasons for the proposed change;
- carefully review any applicable modern award or enterprise agreement;
- undertake genuine consultation before final decisions are made;
- consider redeployment opportunities where available; and
- maintain clear records of the consultation process.
The decision in Orientile Pty Ltd v Zhang confirms that a genuine business reason for reducing staff numbers will not, by itself, protect an employer from an unfair dismissal claim. Employers must also comply with any applicable consultation and redeployment obligations. For businesses of all sizes, redundancy is both a substantive and procedural exercise and failure to follow the required process can result in significant financial consequences.
Disclosure and important note: This article is based on our own legal research and thinking. Some of its content has been drafted with the assistance of artificial intelligence. The authors have checked and approved this article, including the AI generated content, for publication.
This article was published on 23 September by Carroll & O’Dea Lawyers and is based on the relevant state of the law (legislation, regulations and case law) at that date for the jurisdiction in which it is published. Please note this article does not constitute legal advice. If you ever need legal advice or want to discuss a legal problem, please contact us to see if we can help. You can reach us on 1800 059 278 or via the Contact us page on our website. (www.codea.com.au).
