Genuine redundancy defence to unfair dismissal

An employer will not succeed in defending an unfair dismissal case on the basis that the termination of employment arose as a genuine redundancy unless the employer can satify the Fair Work Comission that it complied with the consultation obligations of an applicable modern award or enterprise agreementy, thus

“Failure to consult under the Award
[17] A dismissal will not be a genuine redundancy for the purposes of the Act unless MSY
CDC complied with its redundancy-related consultation obligations under the Award.2
[18] Clause 34 of the Award applies if an employer makes a definite decision to make major
changes in production, program, organisation, structure or technology that are likely to have
significant effects on employees. Clause 34 applied to the sale of the business to Umart, because
it was likely to mean the end of employment with MSY CDC for all of its employees.
[19] Under clause 34 of the Award, as soon as practicable after the decision to sell the
business was made, MSY CDC was required to:
(a) give notice of the changes it had decided to make to all employees who may be
affected by them and any of their representatives;
(b) discuss with affected employees the introduction of the changes, their likely effect
on employees; and measures to avoid or reduce the adverse effects of proposed changes;
and
(c) give affected employees written relevant information about the changes.
[20] I find that MSY CDC did not comply with its obligations to consult about the
redundancy with Mr Yuen and Ms Jor under clause 34 of the Award. It did not give them notice
of the changes it had decided to make as soon as practicable after the decision to sell was made
and it did not give them any relevant information in writing. MSY CDC only sought to discuss
the effect of the changes on Mr Yuen and Ms Jor some weeks later when contacted for
information directly by Mr Yuen and Ms Jor. While it is not clear precisely when the decision
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to sell the business was made, it must have been on or before 18 November 2022 when MSY
CDC began taking steps towards the transition from MSY CDC to Umart. This began with a
stock take and store audit. It must also have involved discussions behind the scenes between
the two companies, which led to Umart sending the email to MSY CDC employees about the
impending business “partnership” and the subsequent email about “onboarding” them to the
new entity. To the extent that efforts were made to communicate about the sale of business with
employees, for the most part these were made by Umart rather than MSY CDC.
Reasonable redeployment
[21] A dismissal is not a case of genuine redundancy if it would have been reasonable in all
the circumstances for the person to be redeployed within the employer’s enterprise or that of
one of its associated entities. In this case, I do not find that it would have been reasonable to
redeploy Mr Yuen and Ms Jor within MSY CDC to another position in circumstances where
MSY CDC ceased trading upon the transfer of its business to Umart. While alternative offers
of employment were made to Mr Yuen and Ms Jor by Umart, there is no evidence that Umart
is an associated entity of MSY CDC.
Not a case of genuine redundancy
[22] As MSY CDC did not comply with its obligations to consult with Mr Yuen and Ms Jor
under the Award about the sale of its business, and the related significant effect on opportunities
for employment within the business, the dismissals were not genuine redundancies for the
purposes of the Act.
Were the dismissals harsh, unjust or unreasonable?
[23] Whether a dismissal was harsh, unjust or unreasonable depends on an assessment of all
the relevant facts and circumstances, including those set out in section 387 of the Act. Those
are considered in turn.
Was there a valid reason for the dismissal related to capacity or conduct, and was it notified to
Mr Yuen and Ms Jor?
[24] I find that there was a valid reason for the dismissal of Mr Yuen and Ms Jor on the basis
that MSY CDC no longer required their roles to be performed by anyone, for the reasons given
above. The reason was only notified to Mr Yuen and Ms Jor on 7 and 8 December 2022 when
they were told that their employment would terminate upon sale of the business with effect
from 10 December 2022. While the reason given by MSY CDC was that they would be deemed
to have ‘resigned’ on this date, this was a wrong statement of the legal position.
Was there an opportunity to respond to any capacity or conduct related reason?
[25] The reasons for dismissal did not relate to the capacity or conduct of Mr Yuen and Ms
Jor.
Was there any unreasonable refusal to allow a support person to be present to assist at any
discussions relating to dismissal?
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[26] There was no unreasonable refusal to allow Mr Yuen and Ms Jor to have a support
person assist in discussions about the dismissal.
Was Mr Yuen and Ms Jor warned about relevant unsatisfactory performance?
[27] The dismissals of Mr Yuen and Ms Jor were not related to unsatisfactory performance.
Degree to which the size of the employer’s business and any absence of dedicated human
resources management specialists or expertise in the business would be likely to impact on
procedures followed in effecting the dismissal
[28] MSY CDC is not a small business employer, but there is no evidence that it had relevant
human resources or other specialist expertise to assist with the process of making an employee
redundant. Its misunderstanding as to the legal position in relation to redundancy suggests that
either it did not have access to, or did not seek, relevant advice and support in connection with
the transfer of business. This likely contributed to obvious deficiencies in the process adopted
to make Mr Yuen and Ms Jor redundant, including the almost entire absence of any consultation
by MSY CDC about the decision to sell its business and the likely effect of this decision on
employees.
Other relevant matters
[29] Mr Yuen and Ms Jor were not given notice of termination and Mr Yuen was not paid
redundancy pay. While underpayment claims are beyond the scope of the unfair dismissal
jurisdiction, failure to provide termination-related employment entitlements on termination in
accordance with the Act is relevant to the fairness or otherwise of the dismissals.
Conclusion on the merits
[30] I find that Mr Yuen and Ms Jor were unfairly dismissed. While there was a valid reason
for dismissal, the dismissals were unjust because of the failure to recognise and provide the
entitlement to notice of termination (and in relation to Mr Yuen, redundancy pay). The
dismissals were also unreasonable because of the failure to engage in meaningful consultation
with Mr Yuen and Ms Jor about the effect of the sale of the business on their employment. I
cannot exclude the possibility that suitable alternative employment would have been accepted
by Mr Yuen and Ms Jor had their concerns been addressed by MSY CDC in an open and timely
way.
Compensation
[31] Reinstatement is not an appropriate remedy in this case because MSY CDC is not
currently trading. Compensation is the appropriate remedy for both Mr Yuen and Ms Jor.
[32] Section 392(2) of the Act deals with how compensation is to be assessed in connection
with an unfair dismissal. The established methodology is elaborated on in Bowden v Ottrey
Homes Cobram and District Retirement Villages Inc.
3
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Viability (s.392(2)(a))
[33] There is no evidence that an order for compensation will materially affect the viability
of MSY CDC. While it has ceased trading, MSY CDC appears to have access to funds to pay
at least the employment entitlements of Mr Yuen and Ms Jor. No reduction in the amount of
compensation is made because of any effect on the viability of MSY CDC.
Remuneration Mr Yuen and Ms Jor would have received, or would have been likely to receive,
if they had not been dismissed (s.392(2)(c))
[34] It is unlikely that Mr Yuen and Ms Jor would have remained in employment with MSY
CDC for any longer than they did, as their dismissals coincided with the transfer of business
from MSY CDC to Umart. The only additional remuneration they would have received but for
their dismissals was payment instead of notice of termination. While Mr Yuen is separately
entitled to redundancy pay, that is beyond the scope of this decision. Ms Jor has no entitlement
to redundancy pay because her period of employment was less than 12 months.
[35] Mr Yuen’s fortnightly pay was $1,857.00 gross. Ms Jor’s fortnightly pay was $1,753.50
gross. I find that Mr Yuen would have earned $3,077.97 gross (the equivalent of 3 week’s pay
plus superannuation) had he not been dismissed without notice. Ms Jor would have earned
$968.81 gross (the equivalent of 1 week’s pay plus superannuation).
Remuneration earned (s.392(2)(e)) and income reasonably likely to be earned (s.392(2)(f))
[36] Mr Yuen and Ms Jor have not earned any remuneration in the period since dismissal.
Length of service (s.392(2)(b))
[37] Mr Yuen’s period of service was more than 3 years, while Ms Jor’s period of service
was slightly less than one year. No adjustment is made in relation to the assessment of
compensation on this account.
Mitigation efforts (s.392(2)(d))
[38] Mr Yuen and Ms Jor were both offered alternative employment with Umart, on terms
and conditions that were substantially similar to their terms and conditions of employment with
MSY CDC. I accept that in some respects the proposed terms and conditions of employment
were less beneficial and this is why Mr Yuen and Ms Jor decided not to accept the offers. I do
not accept the evidence of Mr Yiap that casual employment was also offered to Mr Yuen and
Ms Jor by Umart, as the evidence is hearsay and is denied by Mr Yuen and Ms Jor.
[39] Since the dismissal, Mr Yuen and Ms Jor have applied for 3-4 jobs without success. Mr
Yuen has undertaken a short course of study in computer skills to improve his chances of
finding another job. In the meantime, they are relying on their savings. On balance, no
adjustment of the compensation amount will be made on this account.
Other matters (s.392(2)(g))
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[40] No adjustment of the amount of compensation is made for contingencies because of the
known period since dismissal and the likelihood that little will change in the circumstances of
Mr Yuen and Ms Jor between the date of hearing and decision.
Misconduct (s.392(3))
[41] There is no evidence that misconduct was a contributing factor to the dismissal. No
reduction in the amount of compensation is appropriate under section 392 of the Act.
Shock, Distress (s.392(4))
[42] The amount of compensation does not include a component for shock, humiliation or
distress.
Compensation cap (s.392(5)&(6))
[43] The amounts of $3,077.97 gross and $968.81 gross are less than the compensation cap
of 26 weeks’ pay in each case. No further adjustment of the amount is necessary.
Instalments (s.393)
[44] No application was made by MSY CDC to pay any compensation awarded by
instalments, and no such order will be made.
Conclusion on remedy
[45] In my view, the compensation amounts of $3,077.97 gross for Mr Yuen and $968.81
gross for Ms Jor are neither excessive nor inadequate in the circumstances of this case.
[46] For the reasons set out above, I am satisfied that a remedy of compensation in the
respective amounts of $3,077.97 gross and $968.81 gross is appropriate in the circumstances of
these cases. Orders [PR761056] and [PR761057] will issue to that effect.”

Passages from Jor and another v MSY Computer Discount Centre Pty Ltd [2023] FWC 872 delivered 14 April 2023 per McKinnon C