Redundancy; consultation requirements

For an employer to be able to rely upon the jurisdictional defence of genuine redundancy to an unfair dismissal claim, the employer must amongst other things be able to demonstrate compliance with the consultation provisions of any applicable modern award or enterprise agreement covering the employee. And that consultation must be meaningful, as is evident from the following statement of the law on the issue, taken from a recent Fair Work Commission case.

“23. Termination by Employer

23.1 Redundancy

It is the aim and intention of the parties to retain permanent workers in employment in preference to making positions or people redundant.

From time to time the Employer will experience an unexpected and / or significant downturn. Alternatively, the Employer may make a structural change which means some positions are no longer required. In such circumstances Consultation will commence in accordance with Clause 3.

At these times all available options will be considered prior to making any positions redundant. The options to mitigate or avert the impact of redundancies will include, but will not be limited to:

  • The likely duration of the downturn / anticipated time of increased workloads;
  • The rate of natural attrition of Employees;
  • The potential for redeployment within or outside the Employer for a short time or permanently;
  • The ability to have some or all Employees undertake work on a part time basis for a period of time;
  • The potential for Employees to take annual leave or long service leave.

Following consultation as per the above, the Employer will make its decisions based on its known requirements.”

[17] It is uncontroversial that the Agreement required Varley to consult with employees about the redundancies likely to result from the reduction in work on the MHC Project (clauses 3 and 23.1 of the Agreement). The Agreement required Varley to consult about those circumstances with the “relevant employees” (who are defined by the Agreement to be the employees who may be affected by a change referred to in clause 3.6, being a major change likely to have a “significant effect” on employees). In this case the relevant major change was the reduction in work on the MHC Project (clause 3.1(a)) with the likely significant effect being termination of employment (clause 3.6(a)). In relation to the relevant employees, the Agreement required:

(a) Varley to notify the relevant employees of the decision to introduce the major change,

(b) Varley to discuss the introduction of the change, the effect of the change, and the measures Varley was taking to avert or mitigate against the adverse effect of the change on employees,

(c) for the purposes of those discussions Varley to provide, in writing, all relevant information about the change including its nature, information about the expected effects of the change on the employees; and any other matters likely to affect the employees,

(d) Varley to invite the relevant employees to give their views about the impact of the change including any impact in relation to their family or caring responsibilities,

(e) Varley to give prompt and genuine consideration to matters raised about the change by the relevant employees,

(f) Varley to consider options to mitigate or avert the impact of redundancies including the anticipated time of increased workloads; rate of natural attrition; the potential for redeployment within or outside Varley for a short time or permanently; the ability to employees undertake work on a part time basis for a period of time; and the potential for employees to take annual or long service leave,

(g) the process to be undertaken in good faith, without prejudice, in a manner that allows for fair consideration of the matters at hand while moving to resolve the matter as quickly as practical, but does not require that consensus must be reached,

(h) the process must appropriately inform and engage employees, inviting and considering their response and requires more than a mere exchange of information, it requires that employees must be contributing to the decision-making process, and

(i) following consultation as above, Varley will make its decisions based on its known requirements.

[18] In relation to the obligation to consult, Logan J in Construction, Forestry, Mining and Energy Union v BHP Coal Pty Ltd [2016] FCA 1009 (CFMEU v BHP Coal) relevantly said at [59] to [60]:

“59.While cl 47 of the Enterprise Agreement, set out above, gives “Consult” or “Consultation” a particular meaning for the purposes of that agreement, that meaning is not, in my view, at variance with a meaning which one might have given those words in any event, having regard to prior authority. I had occasion to consider that meaning in Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v QR Limited (2010) 198 IR 382 in which, at 395, [44] – [45], I observed:

44 … A key element of that content is that the party to be consulted be given notice of the subject upon which that party’s views are being sought before any final decision is made or course of action embarked upon. Another is that while the word always carries with it a consequential requirement for the affording of a meaningful opportunity to that party to present those views. What will constitute such an opportunity will vary according the nature and circumstances of the case. In other words, what will amount to “consultation” has about it an inherent flexibility. Finally, a right to be consulted, though a valuable right, is not a right of veto.

45 To elaborate further on the ordinary meaning and import of a requirement to “consult” may be to create an impression that it admits of difficulties of interpretation and understanding. It does not. Everything that it carries with it might be summed up in this way. There is a difference between saying to someone who may be affected by a proposed decision or course of action, even, perhaps, with detailed elaboration, “this is what is going to be done” and saying to that person “I’m thinking of doing this; what have you got to say about that ?”. Only in the latter case is there “consultation”. …

An appeal from this judgment was subsequently dismissed by the Full Court.

  1. In the present case, it is necessary not just to remind oneself that a person’s right to be consulted does not confer any right of veto. It is also necessary to understand that the cl 47 definition affirms what an ordinary understanding of the word, “consult” would in any event suggest, which is that the obligation to consult does not carry with it any obligation either to seek or to reach agreement on the subject for consultation. Consultation is not an exercise in collaborative decision-making. All that is necessary is that a genuine opportunity to be heard about the nominated subjects be extended to those required to be consulted before any final decision is made. And it bears repeating in this case that that final decision is not the existence of the particular surplus. That genuine opportunity entails furnishing such information about the occasion for consultation as is reasonably necessary for the making of suggestions in respect of the subject for consultation and being receptive to any resultant suggestions. It does not mean that one cannot approach consultation with a particular outcome in mind, only that one’s mind not be unduly fixed.”

[19] In his written submissions, the Applicant rightly conceded that Varley undertook some consultation leading up to his redundancy, that he was notified in accordance with the Agreement, and that he was invited to make suggestions, ask questions or apply for a voluntary redundancy. However, he argued that the process was superficial and not carried out in the spirit of or in accordance with the Agreement. He said the process was more “a mere exchange of information” rather than “Employees… contributing to the decision making process.” In support of his submissions he relied on the proposition that “consultation is providing the individual, or other relevant persons, with a bona fide opportunity to influence the decision maker.” 12

[20] The Respondent contended that it embarked on a genuine process of consultation comprised of the following steps:

(a) On 8 April 2020, Varley notified Mr Nickle (AMWU Organiser) of its supply issues and the possibility of this resulting in the loss of jobs via both phone and email.

(b) On 16 April 2020, Varley further notified Mr Nickle of these matters via email, and sought to arrange a meeting with him to discuss them.

(c) On 21 April 2020, Varley met with Mr Nickle via phone and discussed its supply issues and the upcoming scheduled ramp down, and its expectation that these issues would result in the loss of jobs.

(d) On 23 April 2020, Varley met with Mr Nickle (via phone) and Mr Brett Fogarty (AMWU site delegate) and discussed its supply issues and the upcoming scheduled ramp down, its expectation that these matters would result in job losses, and measures being considered in order to avert or mitigate this outcome.

(e) On 4 May 2020, Varley left a voicemail message for Mr Nickle to further discuss these matters and emailed Mr Nickle stating that it intended to consult about these matters with affected employees and implement redundancies that week.

(g) On 6 May 2020, Varley met with Mr Nickle and Mr Fogarty and indicated that they would: (i) meet with employees on the MHC Project to consult about these matters that afternoon; and (ii) then implement any redundancies. Mr Nickle and Mr Fogarty accepted this course, and it was agreed that Mr Fogarty would attend the meetings with employees.

(h) On 6 May 2020, Varley met with employees on the MHC Project in the presence of Mr Fogarty and consulted with them about its supply issues and the upcoming scheduled ramp down, its expectation that these matters would result in the loss of jobs, and measures being considered in order to avert or mitigate this outcome. Employees were also given the opportunity to apply for voluntary redundancy, or otherwise raise any matters they wished for Varley’s consideration.

(i) Varley actively considered all the matters raised by the AMWU and employees in the course of its consultation process and concluded eight jobs on the MHC project were in excess of its needs and made those positions redundant.

[21] Varley argued that the consultation process described in the previous paragraph was consistent with an “accepted practice” at Varley in which Varley first consulted with the AMWU to thoroughly explore mitigation options before further consulting with employees directly in a more limited manner. The Respondent sought to rely upon the “accepted practice” in combination with its consideration of measures to avert or mitigate the need for redundancies, the meeting with the MHC Project employees including the invitation to provide any suggestions or ask questions, and that employees working on the MHC Project would be anticipating a reduction of work due to scheduled ramp downs, to establish that Varley had achieved “general compliance” with the consultation requirements of the Agreement. On this point they relied upon the decision of a Full Bench of Fair Work Australia upholding Commissioner Foggo’s decision in Tyszka v Sun Health Foods Pty Ltd [2010] FWA 1781. 13

Consideration – consultation

[22] Although some content of the discussions between Varley, Mr Nickle and Mr Fogarty were contentious, it was not challenged, and I accept, that from 8 April 2020 until the redundancies were made on 7 May 2020, Varley undertook significant consultation with the AMWU through Mr Nickle and Mr Fogarty. That aspect of Varley’s consultation with the union and its site delegate should be commended. I also accept that Varley gave detailed consideration, in conjunction with the AMWU, to a range of measures to mitigate or avert the need for redundancies including whether Varley could qualify for JobKeeper, whether employees could take leave, redeployment opportunities, natural attrition, part-time work, and voluntary redundancies – both on the MHC Project and site wide; but having considered those measures, Varley concluded that no measures could mitigate or avert the need for redundancies. 14 Further, I accept Mr Moy’s evidence that employees, including Mr Crozier, would have been aware of and anticipating that scheduled ramp downs as part of the MHC Project would result in a reduction of available work on that project at some point in the future, particularly because Varley had displayed, and the employees would often refer to, the project schedules displayed near to their work area.

[23] In relation to the “accepted practice”, Varley adduced evidence that over a period of years leading up to Mr Crozier’s redundancy an “accepted practice” had developed between the AMWU and Varley whereby Varley initially consulted with the AMWU about issues such as redundancy before consulting in a more limited way with the affected employees. 15 In her witness statement, Ms Dobbie provided one specific example of the “accepted practice” in which two electricians were made redundant in a process which aligned with the “accepted practice”, and attested that no issue was raised by Mr Wright, who was the notified of the redundancies. Mr Wright accepted that Varley and the AMWU usually consulted about issues such as redundancies prior to going to the workforce but rejected the assertion that consultation with the employees would or should then be limited or not in compliance with the requirements set out in the Agreement. Mr Wright also gave evidence that he had raised concerns with Ms Dobbie in relation to his perception regarding a lack of consultation at another Varley site. In response to the example provided by Ms Dobbie, Mr Wright explained that no issue was raised in relation to the redundancy of the two electricians because he was not notified until after the redundancies had been made and the employees had left site, neither employee was a member of the AMWU, and he did not see it as the union’s role to intervene in the redundancy of non-union members. Mr Wright’s rejection of any agreement or acceptance of Varley’s “accepted practice” and his explanation as to why the AMWU conducted itself as it did in relation to the electricians made redundant by Varley was convincing. This is particularly so in light of his evidence, which I accept, that he, and the AMWU, seek to ensure meaningful consultation occurs between employers and employees by negotiating robust consultation clauses. Thus, on the evidence before me I am not persuaded by the Respondent’s contention that an “accepted practice” had developed between Varley and the AMWU by which Varley would initially consult with the AMWU before consulting in a more limited way with the affected employees, although I do accept that Varley often undertook consultation in that manner.

[24] I accept Ms Dobbie’s and Mr Moy’s evidence that Varley’s consultation with the MHC Project employees, including Mr Crozier, was comprised of the following steps:

  • On 6 May 2020, Mr Moy and Ms Dobbie met with a group of employees on the MHC Project (including Mr Crozier) in the presence of Mr Fogarty and orally delivered information to the relevant employees about Varley’s COVID-19 related supply issues and the upcoming scheduled ramp down, its expectation that these matters would result in the loss of jobs, measures being considered in order to avert or mitigate this outcome (including voluntary redundancies), and in general terms the criteria used to select individuals for redundancy.
  • At the meeting on 6 May 2020, both Mr Moy and Ms Dobbie invited the employees present to approach Mr Moy, Ms Dobbie or Mr Fogarty with any questions or suggestions about the redundancies, whether they would like to take voluntary redundancy and/or whether they would like more information about what a voluntary redundancy would look like (for example, the amount of redundancy pay). Employees were not told on 6 May 2020 who had been selected for redundancy.
  • Mr Moy and Ms Dobbie made it clear in the 6 May 2020 meeting that Varley had decided to move quickly so any suggestions or questions should be brought to their attention promptly.

[25] I also accept Ms Dobbie’s evidence that Varley chose to conduct the consultation with the relevant employees as quickly as practical “not only because we do not want to contribute to employee anxiety, but also because we do not want to introduce any risk on our safety-critical projects by having employees distracted from their work”. 16 Further, I accept Ms Dobbie’s evidence that, after consultation with the AMWU, Varley decided not to raise the option of employees taking leave instead of being made redundant because she formed the view that it would not be effective as the relevant employees had limited supplies of annual and long service leave.17 And, I accept Ms Dobbie’s evidence that Varley chose not to raise the possibility of employees reducing their hours of work because Varley came to the conclusion that not enough employees would take up the option to have the desired effect.18 Finally, I accept that these considerations were discussed with the AMWU before Varley commenced their consultation with the MHC Project employees on 6 May 2020.

[26] With respect to the meeting between Varley and the employees on the MHC Project on 6 May 2020, Mr Crozier gave evidence, which I accept, that he was standing around the back of about 20 other employees during the meeting and although there was an invitation to employees to ask questions or give suggestions he did not do so because he was trying to take in and understand what he was being told. In relation to the period between the meeting in which Mr Crozier was notified of the possibility that eight employees on the MHC Project would be made redundant (about midday on 6 May 2020) and when the redundancies were made (about 4pm the next day) I accept Mr Crozier’s evidence that he did not approach Mr Moy or Ms Dobbie about the redundancies because he anticipated there being further meetings, he felt secure in his position and did not think that he was going to be made redundant as he believed he was in permanent employment and that he had a good skill set which would be useful to Varley on other projects. He also gave evidence, which I accept, that in the relevant period, he completed his day’s work and returned to work the next morning and worked up until when his employment was terminated. I also accept Mr Crozier’s unchallenged evidence that he was not made aware that he was specifically being considered for, or had been selected for, redundancy until he was told so in the meeting at about 4pm on 7 May 2020, at which time his employment was terminated with immediate effect.

Conclusion – consultation

[27] For the following reasons, Varley failed to comply with its obligations in the Agreement to consult about the redundancies with Mr Crozier.

[28] First, Varley did not provide any written information to the relevant employees (as required by clause 3.4(b) of the Agreement). This is important because not only does it not comply with the explicit requirements of the Agreement, but it undermines the quality of the discussions which follow the provision of written information to employees, 19 which is why clause 3.4(b) makes it clear that the written information is “for the purposes of the discussions”.

[29] Secondly, Varley’s obligation to invite Mr Crozier’s views about the redundancies and their impact on his family and caring responsibilities brought with it a “consequential requirement for the affording of a meaningful opportunity to that party to present those views”. 20 Of course, to present his views Mr Crozier would have required sufficient time and information to form a view on those matters. In relation to the consultation conducted between Varley and the AMWU, I accept Varley’s contention that those discussions could have made consultation with the relevant employees more efficient and less time consuming than may otherwise have been the case. However, those discussions could not abdicate Varley’s obligation to properly consult with the relevant employees in accordance with the Agreement. The circumstances and very short period of time between Mr Crozier being invited to give his views about the redundancies on the MHC Project and his position actually being made redundant undermined any real opportunity for Mr Crozier to engage with Varley. The relevant period was about 28 hours and included finishing his work on 6 May 2020 and working a full day on 7 May 2020. As Mr Crozier put it, that was a period “which isn’t long to make decisions on your life and your family”. Further, Mr Crozier was not even aware of nor did he suspect that he specifically would be chosen for redundancy until the meeting in which his employment was terminated on 7 May 2020. On no view of those circumstances could it be said that Mr Crozier was given a meaningful opportunity to present his views or to contribute to the decision making process in any real way. For example, because Mr Crozier was not told until about 4pm on 7 May 2020 that he had been selected for redundancy and was to be terminated that afternoon, he did not have any real opportunity to speak to his work colleagues to see if any of them may be interested in working part time and job sharing with him. Although it may not have been possible, as Mr Dobbie believed, for enough employees to volunteer for job sharing to save all eight positions to be made redundant, it may have been possible to save Mr Crozier’s job. In my view, the circumstances and period of time available did not allow for consultation to be undertaken in a manner that allowed for fair consideration of the matters at hand as required by the Agreement.

[30] Although I did not understand the Respondent to put its case in this way, I will also deal with the possibility that the evidence could establish that the “accepted practice” was a manifestation of a commonly understood meaning of the requirements of the consultation clause, and therefore Varley’s compliance with the “accepted practice” meant that it complied with the Agreement. Relevantly, Gray ACJ in Shop Distributive and Allied Employees’ Association v Woolworths Ltd [2006] FCA 616; (2006) 151 FCR 513 (SDA v Woolworths), 520 at [31] explained:

“There is authority that, if a provision has appeared in a series of agreements between the same parties, and if they can be shown to have conducted themselves according to a common understanding of the meaning of that provision, then it can be taken that they have agreed that the term should continue to have the commonly understood meaning in the current agreement. See Merchant Service Guild of Australia v Sydney Steam Collier Owners & Coal Stevedores Association (1958) 1 FLR 248 at 251 per Spicer CJ, 254 per Dunphy J and 257 per Morgan J, and Printing & Kindred Industries Union v Davies Bros Ltd (1986) 18 IR 444 at 452–453. It is necessary to take great care in the application of this limited principle, to avoid infringing the general principle that the conduct of parties to an agreement cannot be taken into account in construing the agreement. For the limited principle to operate, there must be clear evidence that the parties have acted upon a common understanding as to the meaning of the relevant provision and not for other reasons, such as common inadvertence as to its true meaning. See Australian Liquor, Hospitality and Miscellaneous Workers Union v Prestige Property Services Pty Ltd [2006] FCA 11 at [44].”

[31] There is no “clear evidence” in this case that the parties have acted upon a common understanding as to the meaning of the consultation provisions in the Agreement. I accept Varley’s evidence that the redundancy process has been conducted in line with the “accepted practice” in the past, however, that is a long way from establishing that there was an understanding common to the AMWU, the employees and Varley that the consultation clause in the Agreement would be satisfied by such a process. This is particularly so in light of Mr Wright’s explicit rejection of any common understanding and his compelling evidence in reply to the Respondent’s evidence and submissions in relation to the redundancies of the two electricians earlier in 2020, which I have accepted above.

[32] For completeness, and although I have doubts about the correctness of the decision of the Full Bench in Tyszka, Varley’s significant failures in relation to consulting with Mr Crozier establish that Varley did not achieve any “general compliance” with the consultation obligations under the Agreement.

Whether reasonable in all the circumstances for the person to be redeployed (s 389(2))

[33] For the purposes of section 389(2) of the Act, the Commission must consider 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 employee. There must be an appropriate evidentiary basis for such a finding. 21 The word “redeployed” in section 389(2) of the Act should be given its ordinary and natural meaning, which is to “transfer to another job, task or function”.22

[34] If an employer wishes to rely on the “genuine redundancy” exclusion in section 389 of the Act, then it would ordinarily be expected to adduce evidence, on the question of redeployment, as to 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 employee. Such evidence would usually include the steps taken by the employer to identify other jobs, positions or work which could be performed by the dismissed employee. 23

[35] Whether it would have been reasonable in all the circumstances for the person to be redeployed, directs attention to the circumstances which pertained when the person was dismissed. 24 However, the circumstances leading up to the time the employee was dismissed may, in particular cases (such as where there has been a redeployment period for an employee prior to their dismissal), be relevant to a determination of whether it would have been reasonable in all the circumstances for the employee to have been redeployed.25

[36] In determining whether redeployment would have been reasonable a number of matters may be relevant, including:

(a) whether there exists a job or position or other work to which the employee can be redeployed; 26

(b) the nature of any available position; 27

(c) qualifications required to perform the job; 28

(d) the employee’s skills, qualifications and experience. The employee should have the skills and competence required to perform the role to the required standard either immediately or within a reasonable period of retraining; 29 and

(e) the location of the job in relation to the employee’s residence and the remuneration which is offered. 30

[37] Where an employer decides that, rather than fill a vacancy by redeploying an employee into a suitable job in its own enterprise, it will advertise the vacancy and require the employee to compete with other applicants, it might subsequently be found that the resulting dismissal is not a case of genuine redundancy. 31

[38] It is important, however, to appreciate that, because there is a requirement to assess the reasonableness of redeployment “in all the circumstances”, it is not possible to establish binding or decision rules concerning the application of section 389(2) of the Act in all cases; the circumstances of each particular case must be considered. 32”

Crozier v G H Varley Pty Ltd (2020) FWC 5432 delivered 12 October 2020 per Saunders DP