Genuine Redundancy, or Not Addressing the Issue: the importance of doing things right.

by Oct 9, 2021All Posts, Human Resources

A recent case heard by the Fair Work Commission highlights clearly the importance of communication in the workplace and following all guidelines to the letter.

Confrontation can be difficult. Many people find it easier to keep the peace rather than address something troubling or prefer kindness above honesty. A recent case heard by the Fair Work Commission, however, has pointed out the dangers in not being honest with employees and confronting the issue as required, to the tune of an $18,000 unfair dismissal payout.

So what happened?

The case concerned Bluestar Security Services, a Victorian-based firm operating in locations across the country. In August 2018 the company director recruited a new employee as Bluestar’s NSW State Manager. According to the company director, it wasn’t long before he came to the opinion that the employee wasn’t a good fit for the role, as he wasn’t satisfactorily meeting KPIs for budget sales growth or bringing in new business opportunities, as per his job description.

In November 2019 the director’s business partner left the firm, after which the director began to explore new ways of structuring the business. He decided to remove the role of state managers, and in December 2019 retrenched the NSW State Manager. The next day Bluestar announced the hiring of a new employee in the freshly created role of National Business Development Manager, moving away from a state-based business development model to one co-ordinated at a national level.

Ultimately, however, it was the director’s concerns with the employee’s unsatisfactory performance that led to his decision to restructure the business. This is the key fact on which the case before the Fair Work Commission was made.

What was wrong with that?

The first question put before the Fair Work Commission was whether the employee was made redundant because of underperformance, or because the company genuinely didn’t need anyone in that role anymore.

In a case where an unfair dismissal claim is lodged, both the employer and employee have a right to speak, and a member of the FWC hears the matter. As part of this process the Bluestar director gave the following evidence:

“I made your position redundant. I wasn’t getting…a return on my investment. I couldn’t communicate; the relationship was coming to that breaking point between us. You were turning – seriously, you were turning up to meetings in shorts where you should have been working…or I had a manager tell me that you were actually going to the beach, and there were also times you were going to the gym. And when I did make the position redundant I took over your telephone, and guess what? The evidence was sitting in the phone, you should have been working.”

According to the FWC, whereas the restructuring of the business was a genuine business decision, the reason for the restructure was primarily the director’s dissatisfaction with the employee’s performance. This led to a finding that the redundancy was not genuine.

What is a non-genuine redundancy?

The Fair Work Act defines a redundancy to be non-genuine if the employer:

  • still needs the employee’s job to be done by someone (eg. hires someone else to do the job)
  • has not followed relevant requirements to consult with the employees about the redundancy under an award or registered agreement or
  • could have reasonably, in the circumstances, given the employee another job within the employer’s business or an associated entity.

In this case, another senior leadership position (National Business Manager) was made available in the business that the employee could have been considered for, and should have been considered for under National redundancy laws.

Redeployment opportunities

The Bluestar director asserted during the hearing that the employee had proven that he wasn’t suitable in a senior leadership role based on his poor performance as a state manager. Consequently, the director did not explore with him whether he might have had the skills, experience, or qualifications to perform the new role.

According to the Fair Work Commission, however, the employee should have been considered for the new role, as he did have the skills and experience necessary. Furthermore, the real reason he was not considered for the role was that communication between the director and the employee had broken down due to unaddressed performance issues.

Due to the reasons for the termination and because of the redeployment possibility, the dismissal was found to not be a genuine redundancy, and therefore an unfair dismissal.

How should poor performance be handled?

Underperformance should be dealt with as quickly as possible by an employer, in an appropriate manner, as employees are often unaware they are not performing well and so are unlikely to change their performance without intervention. You can find out more about the steps of addressing performance issues in the workplace here.

Ultimately, it’s the employer’s responsibility to address performance issues before communication breaks down and the work environment or the business itself suffers. Failure to do so can result in situations such as the one faced by Bluestar.

The costs of the unfair dismissal

The Fair Work Commission found that:

  • there was no evidence that supported a finding that the NSW state manager’s performance was sufficiently poor as to constitute a valid reason for his dismissal; and
  • he was not told in clear and explicit terms that his employment was in jeopardy if he did not rectify the concerns held by the company director, and was not given warnings or a chance to respond to the performance concerns due to the termination being carried out on the grounds of redundancy.

The dismissal was accordingly found to be unreasonable and unfair, and the FWC awarded the complainant almost $18,000.

The takeaway

The idea of restructuring rather than addressing performance issues with an employee with whom communication has broken down can appear appealing on the surface. It’s important to be aware though that things are not as simple as they appear, and by doing so you may open your business to costly liabilities, as Bluestar discovered.

If you have a staff member whose performance is unsatisfactory or you’re struggling to communicate with, it can be wise to employ a third party to address the issues before things go too far. Assurance HR are available to step in for cases such as this. If you need help addressing an underperformance issue, or have any other concerns raised by this article, give Assurance HR a call today, on 1800 577 515.

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