Genuine redundancy, employer obligations and contractors

An employer cannot rely upon the jurisdictional defence of genuine redundancy to an unfair dismissal claim if it would have been reasonable for the employer to have redeployed the employee within the employer’s enterprise or the enterprise of an associated entity of the employer; Fair Work Act 2009; sec 389. Here is a lengthy extract from a recent decision of the Fair Work Commission in such a case which is an excellent analysis of whether an employer is required to consider the provision of preference in retention to employees rather than contractors in this context.

“Consideration

“[21] The Respondent says that the issue of whether work performed by contractors is work within the enterprise was not an argument advanced below and was expressly disavowed by the applicant below and that the Appellant should be held to the case advanced below. It says that the Appellant should not be allowed to rely on material not before the Commissioner.

[22] We reject this submission of the Respondent. In our view a determination of whether it is reasonable to redeploy employees into work currently performed by contractors entails a consideration of whether the work performed by the contractors is work in which it is capable to redeploy employees.

[23] Further, the Commissioner certainly proceeded on the basis that “the primary issue for determination is whether the Respondent had an obligation to redeploy the Applicants into roles that were being performed by contractors.” 22 This does not appear to exclude a consideration of whether the work of contractors is work within the employer’s enterprise.

[24] In Maritime Union of Australia v Toll Energy Logistics Pty Ltd 23  the Full Bench said:

[99] At the hearing we determined that we should permit the parties to adduce evidence and both parties did so.

[100] In Reihana v Mastercare Highrise Cleaning Services Pty Ltd, 24 the Full Bench endorsed the following approach to the admission of new evidence:

“The majority in J.J. Richards 25 recognised that s.607(2) confers a discretion on a Full Bench hearing on appeal to ‘admit further evidence’ and ‘take into account any other information or evidence’ and that the principles governing the admission of fresh evidence on appeal in the courts provide a useful guide to the exercise of the discretion. In that regard, in Akins v National Australia Bank,26 Clarke JA said:

‘The Court is empowered to receive further evidence upon the hearing of an appeal (s.75A(7) of the Supreme Court Act 1970) but pursuant to subs (8) of that section may not receive further evidence after a trial on the merits ‘except on special grounds’. Although it is not possible to formulate a test which should be applied in every case to determine whether or not special grounds exist there are well understood general principles upon which a determination is made. These principles require that, in general, three conditions need be met before fresh evidence can be admitted. These are: (1) It must be shown that the evidence could not have been obtained without reasonable diligence for use at the trial; (2) The evidence must be such that there must be a high degree of probability that there would be a different verdict; (3) The evidence must be credible.’” (Endnotes omitted)

[25] The material sought to be relied upon by the Appellant on appeal goes to the proper construction of the term “enterprise” as it appears in s.389 of the FW Act. We are satisfied, in this instance, that the determination of that matter goes to the public interest. While we accept that the Appellant could have led such evidence in the proceedings before the Commissioner on this question, and that its reasons for failure to do so are opaque, we are satisfied that further material in relation to this question should be admitted in the interests of resolving the matter before this Full Bench.

……………………………………….

Consideration

[45] “Enterprise” is defined in s.12 of the FW Act as follows:

enterprise means a business, activity, project or undertaking

[46] Section 389 of the FW Act uses the term “enterprise” in two contexts. Firstly, in s.389(1) in relation to the requirements of the enterprise and then s.389(2) of the FW Act in relation to redeployment. We agree that the meaning of “enterprise” should be consistent over both subsections.

[47] The Explanatory Memorandum to the Far Work Bill 2009 in relation to what is now s.389 of the FW Act states (underlining added):

  1. This clause sets out what will and will not constitute a genuine redundancy.  If a dismissal is a genuine redundancy it will not be an unfair dismissal.
  2. Paragraph 389(1)(a) provides that a person’s dismissal will be a case of genuine redundancy if his or her job was no longer required to be performed by anyone because of changes in the operational requirements of the employer’s enterprise.  Enterprise is defined in clause 12 to mean a business, activity, project or undertaking.

  1. It is intended that a dismissal will be a case of genuine redundancy even if the changes in the employer’s operational requirements relate only to a part of the employer’s enterprise, as this will still constitute a change to the employer’s enterprise.
  2. Subclause 389(2) provides that 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 within the enterprise of an associated entity of the employer (as defined in clause 12).”

[48] That is, the meaning of “enterprise” as used in s.389 of the FW Act is given effect through the definition in s.12 of the FW Act. This suggests that no other limitation should be placed on the word “enterprise” than the meaning given to it in s.12.

[49] Further, and in particular given the Explanatory Memorandum, we do not consider there is anything to be gained in considering the term as used in the context of enterprise agreements made pursuant to Part 2-4 of the FW Act. Section 172 of the FW Act (in Part 2-4) sets out the types of enterprise agreement that may be made and the scope of such agreement with the scope being limited by the employer and not by the definition of enterprise in s.12 of the FW Act. Section 172(2) of the FW Act states, for example that “An employer…may make an enterprise agreement”. The enterprise does not make the enterprise agreement but rather the employer. There is no suggestion that an employer and an enterprise are necessarily synonymous. To seek to limit the term “enterprise” as used in s.389 of the FW Act (which is in Part 3-2) by a limitation on the scope of an enterprise agreement that is permitted by s.172(2) of the FW Act is therefore rejected.

[50] We would also observe that the consideration within s.389(2) is to whether there may be redeployment within “the employer’s enterprise” or “the enterprise of an associated entity of the employer”. The consideration is not to whether there may be redeployment by “the employer” or associated entity.

[51] We do not consider there to be any basis to suggest that the reasoning in Suridge will lead to two different meanings of the word “enterprise” in s.389 of the FW Act.

[52] In Suridge Commissioner Hampton was considering, firstly, if the applicant was, in fact, redundant in circumstances where the respondent in that matter has determined to outsource the maintenance function performed by the applicant. As we read the decision in Suridge the matter being considered was if the employer had changed its operational requirements such that the employer no longer required the job of the employee performed within the business, hence giving rise to a redundancy (entitlement). The observation of the Commissioner went to the absurdity of an outcome if it was that outsourcing did not result in a redundancy entitlement – that is an employee’s work could be outsourced, but, because it was being performed by a contractor, would not result in an entitlement to redundancy pay to the displaced employee. Further, the decision in Suridge is in line with para. 1549 of the Explanatory Memorandum set out above at [47]. Suridge does not, on our view, disturb the Explanatory Memorandum reference to s.12 of the FW Act.

[53] The issues confronting this Full Bench and the submissions in relation to the scope of an enterprise were not before the Commission in Suridge and it would be wrong to seek to limit the meaning of “enterprise” based on that decision.

[54] We would also observe that the Decision under appeal does not suggest that employees of the Appellant should be redeployed such that they would be employed by the contractors. Rather, it concluded that the work of the contractors should be insourced by the Appellant and the affected employees redeployed to that work as continuing employees of the Appellant. To the extent the Decision might be read to suggest that the Appellant could or should redeploy its own employees to a contractor (we do not consider it can be so read) for the reasons articulated by the Appellant we agree that this is not possible. The work to which an employee might be redeployed must, ultimately, be work over which the employer has control. The operative question raised by this appeal is if the employer can be required to insource work so that the work is within the scope discussed in Pettet.

[55] In Teterin Deputy President Lawrence concluded that:

[102] In my view, the decision in Pykett means that “work within the employer’s enterprise” would include work carried out by employees of contractors engaged by the Respondent and working within RUM.

[56] In dismissing the arguments of the Respondent in Teterin that the work of the contractors’ employees should be excluded from consideration of work available for redeployment, the Deputy President said:

[110] I do not think that this is correct if it means that consideration of the work being done by contractors is excluded from consideration as to whether a job, position or other work is ‘available’ as required by Pykett .

[111] The real difficulty is an evidentiary and practical one. The Applicants were unable to provide enough evidence that work could be made available through the displacement of contractors or put forward a practical proposal as to how this could be done.

[112] This is particularly because the Commission has said, in the cases quoted in this decision, and I accept that:

  • positions cannot be created where there are none
  • displacing existing occupants of positions is not appropriate
  • a requirement that there be a complete change in the employer’s employment strategy is not appropriate

[57] The reference to Pykett in Teterin is to the following passage:

[36] We have earlier set out the submissions of the appellant and the respondent as to the proper construction of s.389(2) (see paragraphs [15] to [18] above). We accept the respondent’s submissions. For the purposes of s.389(2) the Commission must find, on the balance of probabilities, that there was a job or a position or other work within the employer’s enterprise (or that of an associated entity) to which it would have been reasonable in all the circumstances to redeploy the dismissed employee. There must also be an appropriate evidentiary basis for such a finding. Such an interpretation is consistent with the ordinary and natural meaning of the words in the subsection; the Explanatory Memorandum and Full Bench authority. We acknowledge that the facts relevant to such a finding will usually be peculiarly within the knowledge of the employer respondent, not the dismissed employee. If an employer wishes to rely on the ‘genuine redundancy’ exclusion then it would ordinarily be expected to adduce evidence as to the following matters:

(i) that the employer no longer required the dismissed employee’s job to be performed by anyone because of changes in the operational requirements of the employer’s enterprise;

(ii) whether there was any obligation in an applicable modern award or enterprise agreement to consult about the redundancy and whether the employer complied with that obligation; and

(iii) whether there was a job or a position or other work within the employer’s enterprise (or that of an associated entity) to which it would have been reasonable in all the circumstances to redeploy the dismissed employer.

[58] It is apparent that Deputy President Lawrence took the expression “a job, position or other work” as not excluding work within the employer’s enterprise that may be undertaken by contractors.

[59] On appeal of the decision in Teterin the Full Bench of the Commission said:

[35] We accept the appellants’ submission that the propositions stated in paragraph [112] of the Decision cannot be treated as binding principles applicable to every case under s.389(2). We did not understand the respondent to have submitted otherwise. Section 389(2) requires the reasonableness of redeployment to be assessed “in all the circumstances”, meaning that it is not possible to establish binding rules concerning the application of s.389(2) in all cases irrespective of the circumstances of each particular case. However, there is nothing in the Decision to suggest that the Deputy President’s “acceptance” of these propositions affected the outcome of the matter before him. He did not accept that work performed by contractors was excluded from consideration under s.389(2), and reached his determination on the basis of the evidence before him about that matter. 39

[60] The conclusion reached by the Deputy President in Teterin (that the work of contractors was not excluded from consideration of ‘available’ work) was not overturned on appeal. The Full Bench observed, without criticism, that the Deputy President “did not accept that work performed by contractors was excluded from consideration”. What is to be taken from that Full Bench, regardless of the view that might be had of the approach of the Deputy President, is that there are no binding rules in the application of s.389(2) and the reasonableness of redeployment must be determined “in all the circumstances” taking into account the available work.

[61] Likewise, the Full Bench in the Kestral appeal said of the decision under appeal in that matter:

[15] In our view, the considerations leading to the ultimate conclusion regarding the work of the contractor’s employees were all properly considered and taken into account. We are not persuaded that the discretion was improperly exercised or that there were any significant errors in the findings of fact. The facts and circumstances were considered by the Commissioner to be relevant circumstances in making the requisite overall judgment. The decision does not apply a binding principle that s.389(2)(a) has no application in relation to the work of contractors. 40

[62] To the extent that each of these appeal decisions has considered the question of redeployment to the work of contractors, neither establishes any rule and both state, correctly in our view, that there is no binding principle established in relation to the consideration of the work of contractors.

[63] To the extent that the Appellant seeks that we do so, we decline to conclude that the decisions in the Teterin appeal or Kestral appeal are wrong.

[64] We do not consider that any of the single member decisions referred to by the Appellant suggest any other approach. As the Full Bench in the Kestral appeal said:

[14] In this passage the Commissioner was applying the relevant element of the definition. The language used to summarise the requirement varied from the language in the section. In no case was there any ‘obligation’ in a legal sense to employ employees in roles filled by employees of the contractor. However, this passage must be considered in the context of the decision as a whole. Properly understood, in our view, the Commissioner was expressing a conclusion in relation to the reasonableness of continuing to employ persons to perform the work that had become work of contractors. The Commissioner did not state that work being performed by contractors was irrelevant to that process. Indeed the Commissioner expressly considered those circumstances.

[15] In our view, the considerations leading to the ultimate conclusion regarding the work of the contractor’s employees were all properly considered and taken into account…

[65] To the extent that Deputy President Bull in Cocoran did not consider redeployment to the work undertaken by the contractor (that of an owner-driver) he would appear to have been in error in that he did not consider if redeployment was reasonable “in all of the circumstances” but rather dismissed the option because the work was carried out by a contractor. The brevity of that decision does not allow any greater conclusion to be drawn.

[66] In the decision in Brown it is apparent that Vice President Catanzariti did consider whether redeployment to positions occupied by contractors was reasonable in all of the circumstances. At [64] he set out the circumstances at the Collinsville Open Cut Mine and the deliberate decision to restrict direct labour until an enterprise agreement was secured. At [65] the Vice President noted the rationale for this as set out in evidence and then at [66] accepted that evidence. Having found no permanent vacancies at Collinsville the Vice President concluded that

[67] I do not find that in these circumstances it was reasonable for the Respondent’s associated entity to create positions where there were none, or to displace existing contractors or completely change its employment strategy in order to accommodate the Applicants.

[67] Likewise, in Pettet and Forgacs a range of redeployment “options” were considered, including work carried out by a labour hire employee and that of a contractor. A conclusion was reached in each that redeployment was not reasonable “in all of the circumstances”.

[68] It follows from the above that we agree that there are no binding principles that attach to a consideration of whether redeployment within the enterprise is “reasonable in all of the circumstances”. It also follows that we do not consider that redeployment to the work conducted by contractors is automatically excluded from such a consideration.

[69] We would observe however that it would generally be the case that a range of matters would need to be considered in determining if redeployment to work undertaken by a contractor would be reasonable in all of the circumstances including the degree of control over the work of the contractor by the employer, the length of the contract and period left to run, any requirement to change the employer’s business strategy (e.g. to have all maintenance work performed by a contractor etc), the history of contracting the work in question, the rights of third parties, to name but a few. It may also be that consideration should be given to the issues identified by Deputy President Lawrence in Teterin: that positions cannot be created where there are none and that displacing existing occupants of positions may not be appropriate. The difficulty, as was observed in Pykett, is that the knowledge of the circumstances pertaining to the contractors will often be held by the employer and not by an employee who may consider the redundancy not to be genuine. Matters of procedural fairness may also require an opportunity being given to an affected contractor to be heard on these issues. But these are matters to be considered by a Member in dealing with an application where redeployment to the work of a contractor is being pursued. They do not form binding principles but rather may be relevant matters to consider.

[70] Further, we do not consider it reasonable to establish a rule, as suggested by the Appellant, as to what contracted work it might be feasible to consider and what should be automatically discounted in considering the reasonableness or otherwise of redeployment. The broad discretion afforded to the decision maker in determining if redeployment is “reasonable in all of the circumstances” should not be circumscribed in such a manner.

[71] As was observed in Ulan Coal Mines Ltd v Honeysett 41:

[26] First, s.389(2) must be seen in its full context. It only applies when there has been a dismissal. An employee seeking a remedy for unfair dismissal cannot succeed if the dismissal was a genuine redundancy. In other words, if the dismissal is a case of genuine redundancy the employer has a complete defence to the application. Section 389(2) places a limitation on the employer’s capacity to mount such a defence. The defence is not available if it would have been reasonable to redeploy the employee. The exclusion poses a hypothetical question which must be answered by reference to all of the relevant circumstances.

[72] It follows that we do not consider the work of contractors is automatically excluded from consideration. This ground of appeal is therefore not made out.

……………………………………………

Consideration

[84] In Gelagotis v Esso Australia Pty Ltd T/A Esso (Esso) 42 the Full Bench said:

[48] We would also observe that the Decision which is the subject of the appeal before us must be read fairly and as a whole and not with an eye attuned to detect error. As Kirby J observed in Minister for Immigration and Ethnic Affairs v Wu Shan Liang: 43

‘The reasons under challenge must be read as a whole. They must be considered fairly. It is erroneous to adopt a narrow approach, combing through the words of the decision maker with a fine appellate tooth-comb, against the prospect that a verbal slip will be found warranting the inference of an error of law.’

[85] We have been mindful of this in determining the matter before us. However, the approach as set out in Esso does not mean that matters subject to appeal should not be properly considered in the appeal process.

[86] In determining if it was reasonable in all of the circumstances for the employees to be redeployed into work performed by contractors the Commissioner would, by necessity, need to consider if the work performed by contractors could be performed by employees – in this regard the Commissioner would need to have regard to the skills and training of the employees concerned and consider this in some appropriate manner against the skills required in the work of the contractors. In this respect whether the contractor work was “specialist work” is a relevant consideration to the extent of such a skills assessment. Further, a relevant consideration in determining if redeployment was reasonable in the circumstances is a consideration of the reasonableness or practicality of the employer insourcing the work performed by contractors. We consider that in making the assessment he did the Commissioner was required to consider and balance, in addition to the nature of the work, the feasibility of insourcing that work from the employer’s perspective.

[87] There is no question in our minds that, in determining if it was reasonable in all of the circumstances to redeploy employees into work currently performed by contractors, issues associated with the practicality of insourcing the work is highly relevant and must be determined. We have, at [69], outlined some relevant matters to consider in this respect although again emphasise that there are no binding principles. All of the circumstances need to be considered.

[88] In reaching his conclusion that the Appellant was open to insourcing the work of contractors the Commissioner said:

[37] Based on my knowledge from my recent decision in Construction, Forestry, Maritime, Mining and Energy Union v Peabody CHPP Pty Ltd [2020] FWC 6287, which involved the same or similar industrial parties and advocates/representatives, I am aware that the Respondent is not philosophically opposed to “insource” work by removing contractors from the Mine. The “insourcing” of the CHPP shows that the current management of the Respondent are open to the concept of employees taking over the roles, duties and responsibilities of contractors. I note that the CHPP was operated by contractors for at least the last 20 years. I have taken this into account.

[89] On review of the decision in Construction, Forestry, Maritime, Mining and Energy Union v Peabody CHPP Pty Ltd (CHPP) 44 referenced by the Commissioner we can find no grounds on which it could reasonably be concluded that the Appellant is not “philosophically opposed” to insourcing work by removing contractors from the site. The decision in CHPP was in relation to a dispute over the recognition of service. The Commissioner in CHPP said:

[3] In June 2019, the Respondent decided to insource the operation of the CHPP from a contractor called SADA Pty Ltd (SADA). Its employees were working under the SADA Metropolitan Coal Processing Plant Enterprise Agreement 2018 (the Agreement).

[90] There is nothing else in CHPP that references any consideration of, or reason for, the insourcing of work by the Respondent in that case or how that decision might be referable to the circumstances being considered in the Decision now under appeal. The reference to the decision in CHPP does not provide grounds for the conclusion reached by the Commissioner in the Decision. The insourcing of the Menster work was critical in the reasoning for determining that it was reasonable in all of the circumstances to redeploy employees to the work performed by Menster. To the extent the Commissioner relied on the decision in CHPP as evidence that insourcing was not an unreasonable step for the Appellant to make we do not consider that he had an evidentiary basis to reach that conclusion and on this matter the Commissioner reached a conclusion that was not available to him and was in error.

[91] We would conclude that the reasonableness or otherwise of the Appellant insourcing work of Menster and Nexus is not the inquiry required of the Commission. As mentioned above, whether work could or should be insourced is, in our opinion, a necessary matter to decide as part of the inquiry as to whether it is reasonable, in all of the circumstances, to redeploy the employees to that work. The reasonableness of insourcing is not, in our view, the correct question and is certainly not determinative of the matter and in this respect the Commissioner fell into error.

[92] As to the Appellant’s contention that findings were required for each individual employee, it is not the role of the Commission to determine who should or should not be offered redeployment opportunities that might arise from a decision to insource work being performed by contractors. This is a decision for the Appellant. We would observe however that it is not apparent that any evidence was put before the Commissioner in relation to the specific skills and knowledge of each applicant below. For this reason alone the task the Appellant says was not undertaken with respect to each employee could not have been undertaken. This lack of specificity may have an impact as to the determination of whether redeployment of each Applicant was reasonable in all of the circumstances. Given our finding above we do not need to consider if this was an appealable error on the part of the Commissioner. We do consider however that, unless the skills and training of each of the employees is the same, if it is determined that some or all of the contracted work is to be insourced a determination is required of each employee as to whether it was reasonable, in the circumstances for the individual to be redeployed. Ultimately, this decision having been made, the employer is then aware of the pool of employees to be considered for redeployment. The application for unfair dismissal of any employee who it is found it is not reasonable in the circumstances to redeploy would fail on the grounds of the genuineness of the redundancy (other consideration being as they were found by the Commissioner) and would not need to be further considered by the employer.

[93] This is not to suggest that the obligation is on the Commission to determine who should be redeployed but to determine to whom it was reasonable in the circumstances to redeploy had the work been insourced.

[94] Having found as we have it is not necessary to consider the further grounds of appeal. We would observe however that the Commissioner reached the decisions in relation to supervision, the economic situation confronting the Appellant, training and skills based on the evidence before him. We would not, in any case, find appealable error in relation to those matters given the case run below.”

Helensburgh Coal Pty Ltd v Bartley and Ors (2021) FWCFB delivered 19 May 2021 per Catanzariti VP, Bissett C and Wilson C