A recent FWC case highlights how a failure to properly consult employees can turn an otherwise sound redundancy into an unfair dismissal. Here are five practical ways HR can ensure redundancy consultation is meaningful and capable of standing up to scrutiny.

For employers, the way a redundancy is handled can be just as important as the business rationale behind it.

A recent case heard by the Fair Work Commission (FWC) shows that even a genuine redundancy can unravel when an employer misses a crucial consultation step.

The employer in this case, an Australian cosmetics manufacturer, was under significant financial pressure and had decided to remove a standalone quality control role as part of a cost-cutting restructure. 

In its decision, the FWC accepted that the role was genuinely no longer required and that there was no reasonable opportunity to redeploy the employee. But because the employer had failed to provide the employee with the required information in writing for discussion before the decision took effect, his dismissal was found to be unfair.

Below, Neil Napper, Partner at Pinsent Masons, shares what employers can learn from this case about the legal pitfalls of redundancy consultation, and how HR can ensure the process is truly meaningful.

What went wrong for the employer in this case?

Consultation obligations in redundancy situations generally arise from the relevant modern award or enterprise agreement, says Napper.

In the case mentioned above, the company had treated the employee as “award free”, but the FWC found that he was in fact covered by the Manufacturing Award, which includes a requirement to consult about major workplace change and provide written information about the changes once a definite decision has been made to introduce them.

As those requirements had not been met, the redundancy could not be considered genuine under the Fair Work Act. As a result, the employee could bring an unfair dismissal claim against the employer.

“There are three requirements under the Fair Work Act in order for there to be a genuine redundancy,” says Napper. 

“Firstly, the employer needs to [establish] that it no longer needs that particular job done by anybody. Secondly, if there is an obligation to consult under a modern award or an agreement, then employers need to have complied with it. And thirdly, the employer has to demonstrate that they’ve considered alternatives to retrenchment.”

The FWC accepted that redeployment was not feasible or appropriate in this case, but noted that the employee hadn’t had a meaningful opportunity to discuss the changes and suggest alternatives himself.

This highlights a common pitfall for employers: treating consultation as an afterthought.

“In the context of restructuring, or indeed any other significant change that has an impact on employees at work, the industrial tribunals will generally regard genuine consultation as being something where the employees who are affected by the change have a real opportunity to affect the outcome,” says Napper.

As a result of the FWC’s findings, the employee was found to have been unfairly dismissed, and was awarded one week’s pay plus superannuation in compensation.

It’s worth noting that this figure is based on an explicit assumption in the ruling that consultation would have taken around a week, says Napper. While there is no fixed time period over which employers must consult, this offers an indication of what the FWC expected the process to look like in the circumstances of that case.

“The industrial tribunals will generally regard genuine consultation as being something where the employees who are affected by the change have a real opportunity to affect the outcome.” – Neil Napper, Partner, Pinsent Masons

What does meaningful consultation actually look like?

Awards generally require employers to engage in “meaningful” and “genuine” consultation when implementing redundancies. However, there is still some confusion around what needs to happen in order for consultation to be considered meaningful.

So what can HR teams actually do to ensure consultation is more than a box-ticking exercise? 

Below, Napper shares five practical considerations.

1. Don’t leave consultation until the termination meeting

In order to be considered meaningful, consultation generally needs to begin while there is still an opportunity for the employee’s input to influence the outcome.

“The employer has an obligation to notify the employees once that [provisional] decision has been made – tell them what’s happening and why, and tell them what the limits are around it,” says Napper.

In practice, he suggests a minimum of two formal meetings before a redundancy is implemented: firstly, an initial meeting with each affected employee to explain that their role has been identified as potentially redundant, followed by a consultation period and a later meeting to communicate the outcome.

2. Give employees enough information to respond

As the case above demonstrates, employees cannot meaningfully respond to a proposal if they don’t have enough information to understand it.

“Employers are not obliged to disclose confidential information that might be damaging to their business,” says Napper. “But otherwise, the expectation is that they would be giving the employees sufficient information to understand what’s happened, why it’s happening, and the impact on them and their job. 

“The employee should then be given the opportunity to talk, ask questions, make suggestions, and really have an opportunity to have some input into the decision-making process.”

3. Document the consultation process

A consultation process is much easier to defend when there is a clear record of what was discussed and considered.

Simply recording that a consultation meeting took place is not enough – records should capture the information provided to the employee, the questions and suggestions they raised, and what alternatives were considered.

This is particularly important when it comes to alternatives such as redeployment.

“It may be the case that there are no redeployment opportunities. But there needs to be some explanation around why,” says Napper.

4. Take employee suggestions seriously

If an affected employee proposes redeployment or another alternative, the employer should genuinely consider whether it could change the proposed outcome.

“If there is feedback from an employee, then you want to show that you’ve acknowledged it, you’ve looked into it and you’ve told the employee what you’ve done as a consequence of that,” says Napper.

One area where employers often trip up is assuming that they only need to consider redeployment offers within their own business.

“The obligation is to look for redeployment not only in the employer’s business, but also in any ‘associated entity’, which has a very broad definition borrowed from the Corporations Act,” he says. “For example, it could be subsidiaries, holding companies, sister companies, or any other operating entity where there’s a sufficient financial interest with the current employer.”

5. Consider the wider workforce

HR teams also need to think about what happens beyond the employees whose roles are at risk.

“Employers who are contemplating a restructuring process need to have a really strong communication plan,” says Napper.

“You not only want to think about communicating with the employees whose jobs are affected or likely to be affected, but you also need to think about how you are communicating to those who are not affected, because the last thing you want to do is destabilise everybody and [leave them] worried about their job.”

For HR, that could mean having FAQs ready, giving managers clear guidance on what to say and ensuring affected employees are directed towards available support such as an EAP.

Taken together, these steps can help HR teams build a consultation process that is not only legally compliant, but also transparent and meaningful for employees.

🧰 HR’s career resource toolkit

• Podcast: Listen to this ER/IR Unpacked podcast episode to learn more about best practice when it comes to restructures and redundancies.
• Article: Change to employers’ redundancy obligations following recent High Court decision
• Article: What does a reasonable redeployment offer look like?
• Learning: Enhance your ability to support individuals and teams through periods of organisational change with this course from AHRI.

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