May 24, 2011

How to prevent a claim for Unfair Dismissal by a “redundant” employee: Ulan Coal Mines Limited in focus.

In November 2010, the Full Bench of Fair Work Australia (“FWA”) handed down the authoritative decision of Ulan Coal Mines Limited (“Ulan”) v Honeysett and others (“The Honeysett Employees”) which provide the steps an employer needs to take to redeploy a redundant employee (so as to prevent a claim for unfair dismissal under the Fair Work Act2009 (Cth)) (“FWA 2009”).

Under the Unfair Dismissal provisions of the FWA 2009, an employee cannot bring an action for unfair dismissal in the instances of genuine redundancy. A redundancy is not considered to be genuine where:

  1. The employer has not complied with any consultation obligations in a modern award agreement or enterprise agreement that applied to the employment; or
  2. It would have been reasonable (in all the circumstances) for the person to be redeployed within
    1. The employer’s enterprise; or
    2. The enterprise of an associated entity of the employer.

It was accepted between the parties that the employer had complied with point 1, and the appeal turned on the issues of:

  1. Whether the employee could have been redeployed within the employer’s enterprise or associated entity; and
  2. What constituted a reasonable attempt of redeployment under the FWA 2009.

Impact of this decision on Employers

  1. When making an employee redundant, you need to consider whether there is an available position within your company or an associated entity that the employee would be able to fill instead of being made redundant;
  2. If there is a general application process in place, consider giving the employee preference over the general pool.  Please note this may not be enough to avoid unfair dismissal.
  3. In the event that re-training would make an employee suitable for a position, this should be fully considered as an alternative to dismissal.

Please note however, that you if you are classified as a Small Business there are different rules that govern unfair dismissal and redundancy.

Factual Background

The Honeysett Employees were a group of 10 employees who were among 14 employees retrenched as a result of the restructuring of Ulan’s coal mining operations.

Ulan is a mine located in New South Wales and is part of Xstrata Coal Pty Ltd (“Xstrata”) (a number of companies within the Xstrata group operate coal mines in New South Wales are are therefore associated entities of the employer Ulan).  The other mines operated by Xstrata were not in close proximity to the Ulan mine with the nearest mine being located over 100 kilometres away.

At the time of the dismissals, there were positions available at the other mines operated by Xstrata and Ulan took steps to ascertain the availability of suitable positions for The HoneysettEmployees in these mines.  The Honeysett Employees were not, however, given any preference and had to compete against other applicants for these positions.

The Commissioner (at first instance) concluded that it would have been reasonable for most of The Honeysett Employees to be redeployed in the vacant positions at the other Xstrata mines.

Appeal

Ulan appealed the decision on the basis that the Commissioner had failed to construe the meaning and effect of the redeployment provisions under the FWA 2009. The appeal was dismissed with the FWA concluding the following:

  1. The redeployment provision places a limitation on an employer’s ability to mount an absolute defence for Unfair Dismissal in instances where there has been a genuine redundancy (explained above).  The defence of “genuine redundancy” is not available where it would have been reasonable to redeploy the employee.
  2. It is implicit in the redeployment provision that it might be reasonable for an employee to be redeployed within an associated entity of the employer.  An employer cannot submit that it would be unreasonable to redeploy merely because it would involve re-deployment to an associated entity.  Further factual circumstances will need to be established to show the unreasonableness of this redeployment, for instance, a completely different managerial structure.
  3. The time of answering the question of redeployment is at the time of the dismissal.  The employer cannot rely on a defence that the employee has, post dismissal, obtained employment at an associated entity. In fact, if this were to occur, this could assist in finding that redeployment would have been reasonable as opposed to dismissal.
  4. In determining whether the redeployment would have been reasonable, there are number of matters that will be taken into account:
    1. The nature of the position available;
    2. The qualifications required to perform the job;
    3. The employee’s skills, qualifications and experience;
    4. The amount of training required to make the employee suitable for the position;
    5. The location of the job in relation to the employee’s residence; and
    6. The remuneration that is offered.