Unfair dismissal and the redundancy defence

One (of several) of the essential statutory requirements for a termination of employment by an  employer to qualify as a genuine redundancy is that at the material time the employer no longer required the person’s job to be performed by anyone because of changes in the operational requirements of the employer’s enterprise. This is widely misunderstood by the community and it is very common for employees whose employment has been terminated on the ground of genuine redundancy to advise me that it could not have been a genuine redundancy because the functions of the job are still being carried out by other employees.

This of course misses the legal point which is very well explained in this extract from an unfair dismissal case decision.

“Was the Applicant’s job no longer required to be performed by anyone because of changes in the operational requirements of the Respondent’s enterprise? (s.389(1)(a))

[12] Sub-section 389(1)(a) of the Act provides that a person’s dismissal was a case of genuine redundancy if the person’s employer no longer required the person’s job to be performed by anyone because of changes in the operational requirements of the employer’s enterprise. These words have long been used and applied in industrial tribunals and courts as a practical definition of redundancy. 8

[13] The Explanatory Memorandum to the Fair Work Bill 2008 provides examples as to when a dismissal will be a case of genuine redundancy:

“1547. 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. The following are possible examples of a change in the operational requirements of an enterprise:
  • a machine is now available to do the job performed by the employee;
  • the employer’s business is experiencing a downturn and therefore the employer only needs three people to do a particular task or duty instead of five; or
  • the employer is restructuring their business to improve efficiency and the tasks done by a particular employee are distributed between several other employees and therefore the person’s job no longer exists”.

[14] The basis upon which “operational requirements” can be said to give rise to change is extremely broad. A change in operational requirements does not only arise where a business has excess labour, is running over budget, unprofitable, losing customers, or down on revenue/s. As Lee J stated in Nettlefold v Kym Smoker Pty Ltd 9, the phrase “operational requirements” encompasses change arising from both internal and external factors, including via the consideration of matters (over short, medium and/or the longer term) such as “the past and present performance of the [business], the state of the market in which [the business] operates, steps that may be taken to improve the efficiency of the [business] by installing new processes, equipment or skills, or by arranging for labour to be used more productively, and the application of good management to the undertaking”.10 Indeed, changes to operational requirements might arise because an efficient and/or profitable business proposes or desires to become even more efficient and/or profitable.

[15] It equally follows that modifications to a business that might be said to be required or necessary, because of changes to operational requirements, are extremely varied and broad. In other words, the nature and extent of any modifications to a business flowing from changes in its operational requirements are essentially matters of managerial discretion. Such discretion might be exercised to make changes that are, in the opinion of the relevant decision-maker, required or necessary. The fact that others, for example, an employee, customer, shareholder, or stakeholder affected by a decision, or an unaffected member of the public, might consider a particular decision to be bad, or wrong, or consider that another alternative and better (or more appropriate) decision ought to have been made, is not to the point. Persons in managerial roles (in the for-profit, or not-for-profit, sectors) are tasked with the responsibility to make decisions in respect of how a business is run to achieve stability and/or growth over the short, medium and/or longer terms. It is certainly not the role of the Commission to stymie or interfere with operational decisions made on a bona fide basis within the extremely broad bounds of managerial discretion. As was stated by Vice President Hatcher in Low v Menzies Group of Companies 11:

“It is not the function of the Commission, in determining whether a dismissal is a case of genuine redundancy, to form a view about the merits of the decision to make a position redundant. Whether it was objectively fair or justifiable to decide to abolish a position is beside the point, as long as the employer acted as it did because of changes in its operational requirements.” 12

[16] It has been held that a job involves “a collection of functions, duties and responsibilities entrusted, as part of the scheme of the employer’s organisation, to a particular employee”. Relevantly, the test is not whether the person’s duties or responsibilities (or some of them) survive or remain. Rather, the test is whether the whole of the job previously performed by an employee (unmodified) still exists. 13 Focus is to be placed upon the job, not the duties involved in that job, or the individual performing that job (or a new/modified job). As the Respondent in this matter correctly states, citing Dibb v Commissioner of Taxation14, an employee may still be genuinely made redundant when there are aspects of the employee’s duties still being performed by another employee, or other employees.15

[17] The Respondent is a not-for-profit organisation providing disability services in the mental health sector. In or about April 2020, as a result of the Respondent’s growth, the Respondent determined that it was appropriate to undertake an organisational review so as to understand whether it was best meeting the needs of the people it serves, as well as providing appropriate support and supervision to staff (especially front-line staff). The review took place over the months that followed, and was finalised in or about October 2020. 16 There is no issue between the parties that the reasons for the review were other than bona fides.

[18] As part of its overall undertaking, the Respondent manages the Resolve Program, being an outcomes-based program jointly funded by the New South Wales Ministry of Health, and investors (the Respondent being one of the investors). Mr O’Brien gave the following unchallenged evidence in respect of the Resolve Program:

“The premise of Resolve was to reduce hospital usage for patients with severe and persistent mental health conditions. If targets were met, this reduced hospital usage, accounting for a saving to the health system. Furthermore, if targets were met, consequential savings would be put into trust by the Ministry in order to then deliver the program fully funded (as it was not fully funded when it commenced).” 17

[19] The Respondent manages and controls the day-to-day operations (service delivery) of the Resolve Program. 18 All staff engaged in or allocated to the Resolve Program are employed by the Respondent, and ultimately report to the management of the Respondent. Whilst the funding of the Resolve Program is determined in consultation with a Joint Working Group (JWG),19 the JWG has no control or influence over the employment and staffing of the Resolve Program (i.e. these matters are the sole prerogative of the Respondent).20 No staff engaged in or allocated to the Resolve Program report to the JWG from an employment perspective.

[20] The Resolve Program was under review at the same time as the Respondent’s overall enterprise. Mr Fong gives the following evidence about the Resolve Program review:

“10. Concurrently, the Resolve Program, which was managed by the Applicant, had been reviewed by the Joint Task Group, including the Ministry of Health, the Respondent and Social Ventures Australia, a group representing private investors in the program.

  1. The review found that the program had difficulties reaching its criteria, and was required to reduce expenditure to remain viable, by 5% in the first year and 10% in the second year.
  2. If those cuts in the Resolve Program’s expenditure were not met, the program would likely be discontinued and the 20 staff involved be made redundant, in addition to clients losing a valuable resource which is intended to reduce the pressure on the public health system to manage persistent mental health crises.
  3. The review of the Resolve Program found that the Applicant’s role was paid as a relatively senior manager, but had only two direct reports, significantly less than other managers paid at her level.
  4. It was additionally found that the Regional Manager – Western NSW role, based in Bathurst, had capacity in addition to her own duties to take on the leadership duties of the Resolve Program, as well as being well placed geographically to support Resolve’s sites which are based in Cranebrook and Orange.
  5. It was therefore proposed that the Applicant’s role would be made redundant, and the duties redistributed to the existing management role of Regional Manager- Western NSW and their direct reports.
  6. The Applicant’s role was not the only management position made redundant in this restructure. Approximately 22 roles of level 5 management and up were made redundant at that time.” 21

[21] Mr O’Brien gives the following evidence about the Resolve Program review:

“15. When the Respondent established Resolve, there was a fully costed financial model which included the Applicant as Manager. However, at the time of development of the program, there were elements which were unknown including the higher level of data analysis and reporting requirements. For this reason, the management position for Resolve was pitched at a level equivalent to cluster managers.

  1. It was incumbent upon the program to do all things required of it in order to meet the results and achieve the outcome payments. The results were as follows:
  2. In the first year of Resolve, the targets were met.
  3. In the second year of Resolve, the targets were poor with a 4% outcome achieved

rather than the target of 25%.

  1. The Resolve contract conditioned that if the Resolve program did not meet its targets at a certain level, this would trigger conversations between the Ministry and its investor partners about whether the program would wind up after 3 years instead of the intended 7.5 years’ duration.

  1. In order to remain viable, and considering risk sharing between the partners, the Respondent was asked to review program expenditure. It was agreed that Resolve needed a saving of 10% in its first year and 5% in the next year to remain viable.
  2. A circulating Resolution was sent to investors in August 2020 outlining the changes to the program including the need to reduce expenses. The resolution was passed by the investors and changes were made to the necessary contracts. The Resolution and email confirming the acceptance of the Resolution is annexed and marked “AOB-1”.
  3. The Applicant was paid at a level of Cluster Manager, but with only two direct reports, one based in Orange and one based in Cranebrook. For any other program than Resolve, this type of position would have been recruited with a significantly lower salary than that of a Cluster Manager.
  4. The organisation made a purely business decision to identify target savings in order to meet these expenditure savings as detailed in the circulating resolution to investors.

  1. In or about August 2020, I met with Susan McCarthy and Tim Fong to discuss Resolve and its structure and viability resulting from the changes needed because of Resolve’s poor performance. We discussed the importance of the span of control being consistent in line with the 6 principles formulated during the organisational review across all frontline staff and the how the supervision of Resolve did not meet the design principles.
  2. As a group we decided that, based on the performance of Resolve and the findings of the Joint Working Group, a strong potential option to ensure the program would operate and twenty jobs would not be lost, was to move the management aspects of Resolve to the Cluster Manager – Western and Far Western NSW, who was under capacity.
  3. The incumbent Cluster Manager- Western and Far Western NSW was based in Bathurst and it made sense that the west/far west region would take on Resolve to ensure efficiencies in resourcing and synergies given the locations of Orange and Cranebrook (in outer western Sydney). In contrast, the Applicant was based at Sydney Olympic Park.” 22

[22] The Applicant commenced employment with the Respondent on 21 April 2016 in the role of Manager, Workplace Peer Support Projects. The Respondent, at the time of the establishment of the Resolve Program in or about August 2017, 23 offered the Applicant the role of Resolve Program Manager, which she accepted. At all relevant times prior to her dismissal, the Applicant was an employee of the Respondent.

[23] Having regard to the evidence in these proceedings, it is apparent that the funding arrangements in respect of the Resolve Program are devised, at least in part, on the basis of the funding of full time equivalent (FTE) roles. However, the funding of FTE roles should not be confused with a requirement upon the Respondent to staff the Resolve Program in any specific manner. 24 The specifics of how the Respondent may or may not utilise FTE roles (or FTE hours) is not determined by funding arrangements or contractual arrangements. Rather, it is at the discretion of the Respondent as to how it determines the Resolve Program is most appropriately staffed (and managed).

[24] In asserting that her dismissal is not a genuine redundancy because the Respondent is unable to satisfy s.389(1)(a) of the Act, the Applicant refers to the cases of R v Industrial Commission of South Australia; Ex parte Adelaide Milk Supply Co-Op Ltd 25 and Quality Bakers of Australia Ltd v Goulding26 (Quality Bakers). But neither of these cases alter the propositions of law set out in paragraph [16] of this decision, rather they are wholly consistent with them.27 Further, the determination in Quality Bakers centres around questions of consultation during a redundancy process, not the propositions being advanced by the Applicant as they concern s.389(1)(a) of the Act. For completeness, neither of the cases relied upon by the Applicant in relation to s.389(1)(a) of the Act stand for the propositions (advanced by the Applicant) that:

  1. a) positions must be reduced in number before a redundancy occurs; 28
  2. b) a role must be altered such that its functions, duties or responsibilities no longer exist for a redundancy to occur; 29
  3. c) a position (and/or its functions, duties or responsibilities) should be distributed to multiple staff before a redundancy occurs; 30
  4. d) instead of being made redundant in the full-time position as Resolve Program Manager, the Applicant should have been offered a partial redundancy and the role of Resolve Program Manager on a part-time basis; 31and/or
  5. e) an employer is required to lead evidence of costs savings flowing from a restructure, reorganisation or redundancy. Otherwise, the redundancy will not be genuine. 32

[25] In her closing written submissions, the Applicant essentially submits that her dismissal was not a genuine redundancy (within the meaning of s.389(1)(a) of the Act) because:

  1. a) her job was still being performed by another employee;
  2. b) it was still being funded by Social Ventures Australia (SVA); and
  3. c) the Respondent was not meeting its “strict and specific” contractual obligations in relation to the Resolve Program.

[26] In regard to the foregoing matters, the Applicant submits (footnotes omitted):

“13. In October 2020, the Applicant was informed that the Position would be made redundant via a videocall (the First Meeting). She was also informed in that videocall, that the Position would be performed by [name omitted] and a handover of the Position is required. In the First Meeting, the Applicant immediately considered that the Position has not been made redundant because it would still be performed by [name omitted].

  1. The Respondent has also conceded that its contractual agreement with external stakeholders, ‘the Joint Working Group’ imposed a contractual obligation on the Respondent to maintain the Position because it received funding from Social Ventures Australia to maintain the Position (not just the duties performed within the position).
  2. The Applicant submits that there has been:

(a) No reduction in the responsibility or tasks allocated to the Position;

(b) There was a strong incentive for the Respondent to maintain the Position to comply with its contractual obligations to Social Ventures Australia and the Joint Working Group; and

(c) The Position has not been abolished because [name omitted] was performing the Position, although under a different position title and the position continues to be performed by the Regional Manager, Far West.

  1. Furthermore, the Respondent is required to comply with the strict and specific contractual obligations set by the Resolve Program in relation to staffing levels and the number of staff employment. The funding for the Resolve Program was to be used strictly for the Resolve Program and not to be used at the discretion of the Respondent in other area of its business. The Respondent continued to receive full funding for the Resolve Program Manager Position for a period of approximately six month after the position was allegedly abolished. Furthermore, the Respondent continue to employ Level 5 positions as managers and there are no Team Coordinator Positions in the Resolve Program. There are also no NDIS frontline workers and therefore the restructure within other parts of the business of the Respondent did not impact on the Resolve Program. The only significant change was that the Applicant was removed from her position. The Respondent has failed to lead any evidence that the alleged redundancy created cost savings within the Respondent.” 33

[27] There are three significant difficulties with the contentions made by the Applicant, 34 and the Applicant’s submissions35:

  1. a) firstly, there was no concession by the Respondent in these proceedings that its contractual agreement with external stakeholders (involving the JWG, SVA, the Ministry, or others), or the funding arrangements underpinning the Resolve Program, imposed an obligation (contractual or otherwise) upon the Respondent to maintain the Applicant’s position (as opposed to the functions, duties or responsibilities of a managerial role with oversight of the Resolve Program). The transcript extract relied upon by the Applicant in this regard is selective in that it does not represent the evidence as a whole (let alone the whole of the transcript exchange that occurred at the point that the transcript extract has been derived). More significantly, concessions made, or opinions given, by a witness as to the terms of a contract, or the effect of those terms, do not assist (as a matter of law) in the interpretation of a contract. The Applicant has not identified any contractual term in respect of the Resolve Program that expressly requires (or required) the Respondent to maintain the Applicant’s position, pursuant to funding arrangements or otherwise. It follows that the Applicant’s submissions as to compliance (or non-compliance) by the Respondent with its purportedly “strict and specific” contractual obligations in respect of the Resolve Program, or the Respondent’s asserted “strong incentive” (pursuant to such contractual obligations) to maintain the Applicant’s position in the Resolve Program, are absent foundation and wholly unsustainable;
  2. b) secondly, the assertion that the Resolve Program Manager position was not abolished in October 2020, was still being performed (under a different position title by another person absent any change in responsibility, tasks or duties), and was fully funded, 36can only be made via complete ignorance of the evidence. In this regard, the unchallenged evidence is that from October 2020:
  3. i) the Resolve Manager position, as a standalone role, ceased to exist, and has never been replaced;
  4. ii) the funding for the Resolve Manager position halved from 1.0 FTE role to half (or 0.5) of an FTE role. In these circumstances, the Resolve Manager position either becomes a part-time role, or it is amalgamated into another role (the latter occurred in this case);

iii) the functions, duties or responsibilities of the Resolve Manager position were reallocated to another staff member, or otherwise wholly subsumed into that staff member’s existing role, and reporting lines were changed. Again, the test is not whether a person’s duties or responsibilities (or some of them) survive or remain. The test is whether the whole of the job previously performed by an employee (in an unmodified form) still exists, focusing upon the job, not the duties involved in that job, or the individual performing that job (or a new/modified job). In this case, the unmodified (full time and stand-alone) Resolve Program Manager role ceased to exist; and

  1. iv) consistent with (i) to (iii) above, Mr Fong gave the following evidence:

“5. In relation to paragraphs 21 to 22 of the Applicant’s Statement, I note the following:

(a) The reallocation of the Resolve Program duties to the Regional Manager – Western NSW role was done because it made good geographical sense – the Resolve Program being based in Orange and Cranebrook (near Penrith) and the Regional Manager – Western NSW role being based in Bathurst;

(b) [name omitted]’s original position as Senior Cluster Manager was in fact targeted for redundancy during the restructure, and [name omitted] accepted redeployment in a lower role of Cluster Manager (later Regional Manager – Western NSW); and

(c) Decisions in relation to redeployment and redundancy are not made by Mr O’Brien, but by the executive team. It is therefore denied that Mr O’Brien made any decision to “save” another staff member or “target” the Applicant as she has claimed.

  1. In relation to paragraphs 23 and 24 of the Applicant’s Statement, the continuation of the Resolve Program had no bearing on the Applicant’s role being made redundant. The Resolve Program on review did not require a full-time manager working solely on the Resolve Program. The management duties that continued under the Resolve Program were able to be reallocated to an existing management position, in this case the Regional Manager – Western NSW role (in addition to the duties of that position), with overflow duties allocated to their direct reports.” 37
  2. c) thirdly, the Applicant has identified no evidentiary basis upon which a finding can be made that it would have been reasonable or appropriate for the Respondent to have provided her with a partial redundancy and offered her the Resolve Program Manager role on a part-time basis. Indeed, such an approach would have been contrary to the evidence of Mr Fong, who sets out genuine reasons as to why the functions, duties and responsibilities of the Resolve Program Manager role were amalgamated into the Regional Manager – Western NSW role. 38

[28] I equally concur with the Respondent’s submissions as to these matters, which read:

“4. The Applicant and her representative had at Hearing and continue to have apparent difficulty in conceptually separating the “job” of Resolve Program Manager, which ceased to exist after the restructure, with the “duties” carried out by the Resolve Program Manager, namely the remaining management functions of the Resolve Program which continued and were allocated primarily to the Cluster Manager/Regional Manager Western NSW, crucially, in addition to that position’s existing duties.

  1. Had the Respondent placed [name omitted] into the role of Resolve Program Manager, then the Applicant would have a viable argument that the role of Resolve Program Manager was not redundant, because another employee had been placed into that role and the “job” was clearly still required to be carried out. Similarly, if the Respondent had employed a new person carry out the management functions of the Resolve Program, but for example, called it something different, this would also be indicative that job was still required to be carried out by the Respondent. However, neither of these scenarios were the situation in this case.
  2. [name omitted] after the restructure was the Regional Manager – Western NSW and in addition to her existing duties, carried out the duties remaining in relation to the management function of the Resolve Program. This is a scenario well traversed in cases relating to genuine redundancy and our previous submissions.
  3. In relation to paragraphs 14 or 27 of the Applicant submissions in reply, it is denied that there was a contractual obligation to “maintain the Position” as alleged by the Applicant.
  4. The relevant section of the Transcript notes Mr O’Brien saying:

Mr Miniawy: “I’m talking about a particular position. So, are there set positions that are funded, particular, so you know, I suppose set positions. I think what I’m trying to get to is, was the applicant’s position a position that had to exist pursuant to the funding agreement, or not?”

Mr O’Brien: “There was a funding agreement which said yes, there was a Resolve Program Manager. Yes, so that was written in the contract, that there was a funded – as there were positions for all other staff which required the numbers, yes.”

  1. With respect, it is not in dispute that the funding of the Resolve Program staffing related to the various “levels” of staff. But there was no evidence led that any contract between the Respondent and any other party imposed or obliged the Respondent to maintain the Resolve Program Manager role as a separate and distinct role.

  1. The Respondent’s evidence was ample and clear – management duties of the Resolve Program remained. The vast majority of these remaining duties were allocated to the Regional Manager- Western NSW in addition to their existing duties. The propriety of this and the case law supporting this as an appropriate and genuine redundancy has been well traversed in the Respondent’s previous submissions.

  1. [The Applicant] has given substantial evidence in an attempt to establish that the redundancy was not genuine and that she was unfairly dismissed. The Respondent submits that much of this evidence is irrelevant to the matters the Deputy President is obliged to consider in determining the jurisdiction of the Fair Work Commission to determine this matter, in particular:
  2. The Applicant’s pregnancy was clearly irrelevant to the decision to make the Applicant’s role redundant (as this redundancy occurred some 16 months prior to the termination of the Applicant’s employment).
  3. The funding of the Resolve Program is irrelevant to the decision of the Respondent to make the Applicant’s role redundant as the Respondent was the employer of the Applicant.
  4. The Respondent has large discretion to restructure its organisation to improve efficiency, and gave evidence as to the reasons for the restructure and how and why that included the Applicant’s role being made redundant.” 39

[29] All in all, I find that the Respondent had genuine operational reasons to make changes to its business (including to the Resolve Program), and that such changes (as determined by the Respondent) resulted in the Applicant’s job (as a 1.0 FTE Resolve Program Manager) no longer being required to be performed by anyone. Further, the fact that another employee thereafter performed the Resolve Program Manager role (or its functions, duties or responsibilities) as part of (or amalgamated into) their own broader role (on a 0.5 FTE basis) does not, and cannot as a matter of logic, give rise to the Applicant’s role (as a 1.0 FTE Resolve Program Manager) continuing to exist.”

Miniawy v RichmondPRA Limited T/A Flourish Australia Services (2022) FWC 2772 delivered 18 October 2022 per Boyce DP