Redundancy; when is consultation required?

Where an employer seeks to rely upon the genuine redundancy defence to an unfair dismissal case, it must demonstrate to the Fair Work Commission that it complied with the consultation obligations of an applicable award or enterprise agreement. However, many of such instruments strictly only require consultation when there is about to be “major change”. Is an individual redundancy such a change? The answer is yes.

“Was there an obligation upon the respondent to consult?

[21] Clause 8 of the Award sets out consultation obligations as follows:

“8.1 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, the employer must:

(a) give notice of the changes to all employees who may be affected by them and their representatives (if any); and

(b) discuss with affected employees and their representatives (if any):

(i) the introduction of the changes; and

(ii) their likely effect on employees; and

(iii) measures to avoid or reduce the adverse effects of the changes on employees; and

(c) commence discussions as soon as practicable after a definite decision has been made.

8.2 For the purposes of the discussion under clause 8.1(b), the employer must give in writing to the affected employees and their representatives (if any) all relevant information about the changes including:

(a) their nature; and

(b) their expected effect on employees; and

(c) any other matters likely to affect employees.

8.3 Clause 8.2 does not require an employer to disclose any confidential information if its disclosure would be contrary to the employer’s interests.

8.4 The employer must promptly consider any matters raised by the employees or their representatives about the changes in the course of the discussion under clause 8.1(b).

8.5 In clause 8:

significant effects, on employees, includes any of the following:

(a) termination of employment; or

(b) major changes in the composition, operation or size of the employer’s workforce or in the skills required; or

(c) loss of, or reduction in, job or promotion opportunities; or

(d) loss of, or reduction in, job tenure; or

(e) alteration of hours of work; or

(f) the need for employees to be retrained or transferred to other work or locations; or

(g) job restructuring.

8.6 Where this award makes provision for alteration of any of the matters defined at clause 8.5, such alteration is taken not to have significant effect.”

[22] Ms Laguda contends that the respondent did not consult her prior to the redundancy decision. 33 However, the respondent submits that Ms Laguda’s redundancy did not amount to a major change for the purposes of clause 8 of the Award and therefore an obligation to consult in accordance with the provisions of the Award did not arise. In the alternative, the respondent says that if clause 8 of the Award was engaged:

(a) it complied with the consultation obligations; or

(b) if it was determined that it did not comply, this would not ultimately change the outcome as it related to Ms Laguda’s ongoing employment.

[23] In respect of its primary contention, the respondent relies upon the decision in Port Kembla Coal Terminal Ltd v CFMEU (Port Kembla) 34 in which Jessup J observed that “the forced redundancy of three employees out of a workforce of about 98 did not of itself constitute a major change within the meaning of cl 7.1.”35 The respondent says that the mere fact of Ms Laguda’s redundancy is not a major change giving rise to an obligation to consult in accordance with the Award.

[24] However, as White J noted in Port Kembla, a simple comparison between the number of employees to be dismissed and the number of employees in the workforce overall is not conclusive of whether there are major changes. 36 Much depends upon the circumstances of a case. In the present application, the evidence discloses that:

(a) Prior to the onset of COVID-19, the Centre had two employees engaged as Head of Community. However, by around April 2020 the Centre determined that it would no longer offer enhanced training and education programs, and it would instead revert to the government mandated minimum training requirements. 37

(b) As a consequence of government-imposed lockdown measures, the number of children attending the Centre declined, and therefore the Centre’s general staffing needs were affected leading to a reduction in staff working hours and days, and the stand down of staff. 38 The Centre’s financial circumstances also had a bearing upon these matters.39

(c) The support provided to staff by the Heads of Community had altered such that a single Head of Community was sufficient to provide guidance and leadership to both Canopy and Forrest Floor staff.

(d) The Area Manager, Ms O’Keeffe assumed the role of Centre Manager. 40

(e) In addition to Ms Laguda, two employees were also made redundant on 31 July 2020, 41 and another employee was made redundant approximately three weeks prior.42

(f) Vacant positions including a gardener, cleaner and room leaders were left unfilled. 43

[25] Ms Laguda was one of two Heads of Community with responsibility for managing the staff and education program at the Centre. 44 Ms Papaleo’s evidence, which I accept, is that a definite decision was made to terminate Ms Laguda’s employment by way of redundancy on 31 July 2020.45 In the result, a single Head of Community would provide leadership and mentoring to educators.46 At or about this time, Ms O’Keefe absorbed the role of Centre Manager as the respondent did not consider it to be financially viable to fill this position. I accept that these operational decisions were a consequence of a reduction in child attendance at the Centre occasioned by COVID-19. In addition, the composition of the Centre’s educator workforce had altered in response to the Centre’s business needs, resulting in the Centre effecting other staff redundancies. This occurred during a period of increasing government-imposed restrictions in Victoria, which were the subject of ongoing changes. I find that the definite decision made in respect of Ms Laguda amounts to a major change in the Centre’s program, organisation or structure. This had a significant effect on employees, including by reducing the training and education programs delivered by the Centre’s Head of Community and, in the case of Ms Laguda, the termination of her employment.

[26] It follows that the respondent was required to comply with the consultation obligations in clause 8 of the Award. Having reached this conclusion, I turn to consider whether there was compliance with the Award.

Did the respondent comply with the consultation obligations of the Award?

[27] The respondent made a definite decision on 31 July 2020 to terminate Ms Laguda’s employment by reason of redundancy. The respondent relies upon correspondence sent to staff on 30 June 2020, 9 and 14 July 2020 in addition to verbal advice provided during staff meetings convened prior to 31 July 2020 to demonstrate compliance with clause 8 of the Award. 47 However, I do not consider that these steps satisfy the Award consultation obligations. Clause 8.1 requires consultation to occur as soon as practicable after a definite decision is made.48 In the case of Ms Laguda, a definite decision was not made until 31 July 2020, which is also the date that her employment ended. There is no evidence before the Commission of the respondent having engaged in consultation with Ms Laguda after the definite decision was made. There was no opportunity afforded to Ms Laguda to consult with the respondent about the definite decision, and therefore the respondent was not in a position to consider any matters raised by Ms Laguda in compliance with clause 8.4 of the Award. So much is clear from the content of the termination letter itself, which refers to the immediate termination of Ms Laguda’s employment.

[28] Further, and in any case, the written material relied upon by the respondent does not address the matters required by clause 8 of the Award. Rather, it comprises of communication with Centre staff more broadly about interim changes to existing work arrangements, and an invitation to specific members of the leadership team, including Ms Laguda, to review an article and share ideas on building resilient leaders in responding to COVID-19. The verbal communications said to have occurred prior to the definite decision are also insufficient to satisfy the express requirement in clause 8.2 of the Award.

[29] Having regard to these findings, I am not satisfied that the respondent complied with the consultation obligations prescribed by the Award. Accordingly, I am not satisfied that the cessation of Ms Laguda’s employment was a genuine redundancy within the meaning of s 389 of the Act. In light of the conclusion reached, it is unnecessary to consider s 389(2), being whether it would have been reasonable in all the circumstances for Ms Laguda to have been redeployed within the Centre, or an associated entity. However, I note the following.

[30] Whether redeployment of an employee is considered reasonable will depend on the circumstances that exist at the time of the dismissal. 49 An alternative job, position, or work must be identified.50 Ms Laguda contends that on 29 June and 10 July 2020, the respondent employed several new staff including two qualified educators.51 Further Ms Laguda says that subsequent to her dismissal, the respondent employed a casual educator and, on 16 September and 12 October 2020, advertised the role of educational leader and early childhood educator (respectively) on seek.com.au.52

[31] The respondent submits that at the time the definite decision was made to make Ms Laguda’s role redundant it was not reasonable for Ms Laguda to be redeployed. It contends that at such time there was no available position, and the need for the advertised roles could not have been foreseen. 53 It says that further government-imposed lockdown measures and a decline in child attendance appeared to be imminent.54

[32] The material before the Commission does not support Ms Laguda’s contention that redeployment would have been reasonable in all the circumstances. The commencement of the two educators to which Ms Laguda refers predates the respondent’s definite decision to terminate her employment. 55 I note that one of these educators was also made redundant on the same date as Ms Laguda.56 Further, there is no evidence that the role of educational leader and early childhood educator existed prior to their respective advertisements on 16 September and 12 October 2020. Accordingly, it was not reasonable for Ms Laguda to have been redeployed into these positions at time of her dismissal on 31 July 2020. Further, other than contending that the respondent filled a casual educator role after 31 July 2020,57 Ms Laguda has not led any evidence in support of her contention, and it is denied by the respondent.58”

Laguda v The Trustee for The Fitzroy Childcare Trust – [2021] FWC 503 – 2 February 2021 – Millhouse DP