Redundancies Just Became More Difficult for Employers

Under the unfair dismissal laws, a termination of employment on the grounds of redundancy will only be lawful if three conditions are met. One of these conditions is that there must not have been any suitable redeployment opportunities available for the relevant employee within the employer’s business. While this has been interpreted relatively broadly in the past to include offers of redeployment to positions that are more junior level, lower paying, located interstate, and for which a reasonable amount of retraining is required, it has not historically included work which is being carried out for the employer by contractors or labour hire workers. However, a recent decision by the Full Court of the Federal Court of Australia (the Full Court) has dramatically changed this approach.

The Full Court Case

In the case of Helensburgh Coal Pty Ltd v Bartley [2024] FCAFC 45, Helensburgh Coal had terminated the employment of a total of 22 employees based on redundancy. It was not in dispute that the Company no longer required the roles performed by these employees to be performed by anyone going forward. However, a number of the employees lodged unfair dismissal claims on the basis that they should have been redeployed to site positions which were already filled by contractor workers. The employees alleged they could have performed this work for the Company with a reasonable amount of training. The Fair Work Commission found in favour of the employees.

After a number of unsuccessful appeals, Helensburgh Coal eventually made an application to the Full Court, essentially arguing that the redeployment obligation on employers under the unfair dismissal laws only applies to vacant positions and does not extend to roles that are already filled by others, including those performed by contractors and labour hire workers.

The Full Court disagreed with the Company. It stated that “the immediate unavailability of a position to which a redundant employee could conveniently have been redeployed does not necessarily inoculate an employer against a charge that a dismissal was ‘not a case of genuine redundancy’.” Instead, the Full Court held that the possibility of redeployment should be assessed according to what would have been reasonable in all of the circumstances. That includes some analysis of the measures that an employer could have taken in order to redeploy an otherwise redundant employee, and “there is no reason to remove the possibility that an employer might free up work for its employees by reducing its reliance upon external providers”.

Implications for Employers

The decision by the Full Court represents a significant shift in the approach that has historically been taken by the Fair Work Commission and the Federal Court that it is not their role to question a company’s resourcing decisions. While Helensburgh Coal has lodged an appeal with the High Court of Australia, for the time-being the Full Court’s decision reflects the legal position in Australia. Therefore, employers must now consider whether it would be reasonable to redeploy an employee whose position has been made redundant to effectively replace the services being provided by independent contractors and labour hire workers. If an employer does not offer such redeployment, it will need to show there were good reasons why such redeployment was unreasonable in the circumstances. This may be an onerous burden to discharge.