The legal process employers must follow for redundancies

Australian businesses continue to face operational challenges, including global economic uncertainty, supply chain disruptions, increased labour costs and fluctuating demand. Businesses affected by these external pressures are conducting reviews of their operations to minimise costs and improve efficiency in their workforces to remain financially sustainable and competitive.

Increased market pressures means it may be commercially necessary for businesses to re-evaluate and restructure. However, in doing so employers must ensure that any redundancies are carried out lawfully and in accordance with the Fair Work Act 2009 (Cth) (the FW Act), and any applicable modern award or enterprise agreement.

For workforces that are predominantly composed of employees covered by modern awards or enterprise agreements, it is critical that employers understand the legal requirements surrounding redundancies. A redundancy process which is carefully planned mitigates legal risk whilst also helping to maintain employee trust during restructure processes.

Failure to comply with these obligations can expose businesses to unfair dismissal claims in the Fair Work Commission (FWC). Where the FWC finds an employer did not comply with their obligations, the FWC may order the employee be reinstated to their position, or where reinstatement is inappropriate, that the employer pay compensation. Note, to make an unfair dismissal claim, the employee must have been employed for a minimum of six-months (or 12 months for a small business with fewer than 15 employees).

Alternatively, a poorly planned and executed redundancy process may also give rise to general protections claim in the FWC; where an employee may argue that the decision to make their role redundant was because they exercised a workplace right (e.g. took personal leave), made a complaint or inquiry or for any other prohibited reason.

What is a genuine redundancy?

The FW Act recognises changing operational requirements may require businesses to reduce their workforces. However, for a redundancy to be lawful, it must meet the definition of a ‘genuine redundancy’. A dismissal will only be regarded as a genuine redundancy if three main requirements are met.

1. Job no longer required

For a position to be genuinely redundant, the role must no longer be required to be performed by anyone due to changes in the operational requirements. ‘Operational requirements’ is not defined in the FW Act. It is a broad term which allows consideration of matters including, the current state of the market the business operates in and the steps taken to improve a business’ overall efficiency. This may include changes such as the introduction of automation in production processes and closure of production lines.

The test for assessing whether the position is no longer required to be performed by anyone focuses on whether the previous job survived the restructure. Crucially, redundancy does not concern an employee’s performance. A dismissal will unlikely constitute a genuine redundancy where an employer replaces an employee with someone essentially performing the same role. A position can still redundant even if its tasks remain, where the tasks have been assigned to other roles.

2. Consultation

An employer must consult with an employee about redundancy when a modern award or enterprise agreement that contains consultation provisions applies to their employment for the termination to be a genuine redundancy.

There is no legislative requirement to consult about redundancy when an employee is not covered by a modern award or enterprise agreement, but from a cultural perspective there is value in taking the same approach.

Modern awards contain consultation provisions requiring employers to notify employees about proposed major workplace changes that are likely to have significant impact on employees. Amongst other things, these obligations require employers to:

• notify affected employees in writing of the anticipated changes;
• provide relevant information in writing about the proposal (subject to confidentiality);
• discuss the effects of the proposed changes;
• ask employees to provide feedback; and
• consider matters raised by employee before a final decision is made.

Consultation must not be perfunctory — it must be meaningful. Consultation is intended to provide employees with an opportunity to understand the proposed changes. Although there is no requirement for employers to take on employee suggestions, employers must consider matters raised. Ideally, records would demonstrate that employee feedback was considered within the decision-making process. Maintaining clear records of consultation meetings, correspondence and employee feedback can assist employers to demonstrate compliance in the event the process is challenged in the FWC.

3. Redeployment

Once an employer has completed consultation and the employee and employer have not identified a viable alternative to making the position redundant, the employer is obliged to consider whether it is reasonable to redeploy the employee into another position within the business or its associated entity.

Whether redeployment is reasonable (as in whether you can require the employer to take up the position) is assessed objectively and will depend on the circumstances at the time of the dismissal. Considerations may include:

• the location of other positions;
• the employee’s level of qualifications, skills and experience; and
• the size of the employer’s business.

This requires consideration of redeployment opportunities at other sites, warehouses or related entities within the corporate group, including overseas. An employer should not assume that the employee will refuse to be redeployed to a position at a lower level, travel a longer distance to work, or relocate. The employee must be given the opportunity decide between termination by reason of redundancy and redeployment to the available role.

It is important to document the assessment of redeployment, particularly where an employer cannot identify a suitable alternative position. Additionally, where an employee does not immediately have the skills and experience, but would be able to develop the necessary skills within a ‘relatively’ short timeframe, the employee’s immediate lack of skill will not be valid reason for failing to redeploy an employee into an available position.

Last year, in the decision of Helensburgh Coal Pty Ltd v Bartley [2025] HCA 29, the High Court held that employers must genuinely consider all reasonable redeployment opportunities before making a position redundant, including whether it is necessary to redeploy employees to positions otherwise held by contractors or labour hire workers.

Additionally, the FW Act allows application to the FWC to reduce redundancy pay where an employee is offered redeployment to a suitable alterative position but refuses to accept it.

Reducing legal risk

Carefully planning is the best way to minimise legal risk. Employers should have a clear business rationale for the restructure, apply consistent and objective selection criteria and maintain clear records of the process. A decision matrix may be useful. Importantly, consultation must be meaningful, it is not a ‘tick-a-box’ stage. It is also important to be able to demonstrate that that the decision to make an employee’s role redundant was not because they exercise a workplace right, make a complaint or inquiry or for any other prohibited reason.

Conclusion

Australian businesses remain resilient despite difficult market conditions. However, economic challenges and market instability is likely to influence further restructures, making it critical for employers to comply with redundancy requirements to mitigate their risk of exposure to unfair dismissal or general protections claims, and adverse findings in the FWC.

Contact us

If your business is considering redundancies as part of a restructure and you require assistance navigating your obligations under workplace laws, please contact a member of our Workplace Relations team.