Restructuring: The risks of overlooking redeployment opportunities

On 5 April 2024, the full Federal Court handed down a decision on an employer’s obligation to explore reasonable redeployment opportunities when effecting redundancies within their organisation.

 

This is a notable decision for all sectors and industries, including the early childhood sector, where employers often rely on contract workers to address staff shortages and meet the required educator to child ratio.

 

In this article, we unpack the findings of this decision and explore its implications for employers looking to implement organisational change within their early childhood centre.

 

What happened in this case?

 

Helensburgh Coal Pty Ltd (Helensburgh) is a large mining company that employs workers to operate a coal mine in Helensburgh, NSW. Helensburgh also relied on contract workers to supplement its permanent employee workforce at the mine.

 

In response to the COVID-19 pandemic, Helensburgh reduced its operations at the mine, transitioning from a seven-day work week (with five crew) to a six-day work week (with four crew).

 

While Helensburgh insourced some of the contractors’ work to existing employees, they proceeded to dismiss 90 employees and reduced the number of contractors working at the mine by 40 per cent. Despite these mass redundancies, Helensburgh continued to outsource work to contractors.

 

On 10 July 2020, 22 of the employees challenged their dismissal in the Fair Work Commission (FWC), contending that their dismissal was not a “case of genuine redundancy” as Helensburgh could have redeployed them to other roles occupied by contractors.

 

After a series of appeals, the Full Bench of the FWC ultimately ruled in favour of the employees, finding that the dismissals were not a “genuine redundancy” as the work being performed by contractors was capable of being performed by Helensburgh’s permanent employee workforce. 

 

In reaching this conclusion, the Full Bench found it was appropriate to consider:

 

• the skills of the employees seeking redeployment 
• whether the contractors were performing “specialist work” 
• any training employees would require to carry out the work being performed by contractors 
• the employees’ capacity to undertake the work being performed by contractors 
• the practicality of insourcing the work currently being performed by contractors to employees 
• the implications of terminating Helensburgh’s existing arrangement with its contract workers 
• the impact that insourcing contract work to employees may have on contract workers themselves.

 

Helensburgh commenced judicial review proceedings in the full Federal Court seeking to overturn the decision.

 

When will a dismissal be a “genuine redundancy” under the Fair Work Act?

 

In considering whether a dismissal in an early childhood centre is a “genuine redundancy” under section 389 of the Fair Work Act, the Fair Work Commission must be satisfied that:

 

• the employee’s role is no longer required due to changes in the operational requirements of the centre 
• the employer has complied with its obligation to consult with affected employees under any applicable modern award or enterprise agreement 
• it was not “reasonable in all the circumstances” to redeploy the employee to another role within the centre or an associated entity of the employer.

 

The decision in Helensburgh Coal ultimately turned on the last of these criteria, being whether it was reasonable for Helensburgh to reduce its reliance on contractors and redeploy its affected employees to positions held by contractors.

 

Proceedings before the full Federal Court

 

The full Federal Court dismissed the judicial review application, finding that it was “reasonable in all the circumstances” for Helensburgh to reduce its reliance on external service providers and redeploy its affected employees to positions currently occupied by contractors. The Court held that “reasonable in all the circumstances” requires analysis of what an employer could have done apart from dismissing the employee. The fact that redeployment was made more difficult by the need to retrain employees did not act as a barrier to redeployment.

 

Key takeaways for employers in the early childhood sector

 

This decision serves as a stark warning for employers in the early childhood sector, and those in similar industries that use contractors, that termination of employment due to redundancy should be viewed as a “last resort”. 

 

The FWC will only be satisfied that a dismissal is a “genuine redundancy” when an employer has considered all options short of dismissing an employee. In an early childhood centre, these options include:

 

• redeploying an employee to a role occupied by a contractor or a position occupied by a labour hire employee in order to meet the educator to child ratio 
• retraining an employee for a different position in the centre, such as a different age room 
• retaining an employee for a short period in circumstances where a redeployment position is expected to become available in the centre.

 

The case discussed in this article is Helensburgh Coal Pty Ltd v Bartley [2024] FCAFC 45 (5 April 2024).

 

If you have any questions or need assistance with reviewing your business’ employment contracts and termination clauses, please get in touch with Holding Redlich Special Counsel Jennifer van Bronswijk at [email protected]

 

Disclaimer:

 

The information in this article is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this article is accurate at the date it is received or that it will continue to be accurate in the future.

 

About Holding Redlich

 

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We provide solutions tailored to our clients’ needs, underpinned by the very best legal thinking and expert industry knowledge.

 

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