Redundancy
Being made redundant is very common but can also be stressful.
The law relating to redundancy can be complicated, and it is common to be asked to sign a release in exchange for a redundancy payout. If you are being made redundant, you may benefit from legal advice.
Can I be made redundant?
In general, yes. An employer can structure their business as they see fit. However
- the employer must comply with the procedural requirements outlined the relevant award or agreement (consultation)
- the redundancy should be genuine
- you should not be selected for redundancy based on an unlawful reason (discrimination).
What does redundancy mean?
A redundancy situation arises when the employer ends the employment of the employee because they no longer wish the job to be done by anyone. A slightly different definition may apply under an applicable enterprise agreement or award.
Is the redundancy genuine?
One of the major sources of conflict over a redundancy is whether the position is genuinely redundant. You should ask yourself: “Am I being replaced?”
The Fair Work Act 2009 (FW Act) provides that a person’s dismissal is considered a genuine redundancy if:
(a) the employer no longer requires the person’s job to be performed by anyone because of changes in the operational requirements of their business; and
(b) the employer has complied with any consultation requirements in an applicable award or enterprise agreement.
The FW Act further provides that:
A person’s dismissal was not a case of genuine redundancy if it would have been reasonable in all the circumstances for the person to be redeployed within:
(a) the employer’s enterprise; or
(b) the enterprise of an associated entity of the employer.
We recommend speaking to an expert to determine whether these requirements have been met.
What is consultation?
An enterprise agreement or award will usually contain a clause outlining consultation obligations in relation to major changes that are likely to have significant effects on employees. These terms are often disputed.
Consultation is supposed to be a genuine process in which the employer gives notice of a proposed change, and takes into consideration the views of affected employees before deciding on a final outcome.
What if the redundancy is not genuine?
If you suspect that your redundancy is not genuine, you should seek legal advice.
If your redundancy is not genuine, it may be possible to lodge an unfair dismissal application or General Protections claim. Please refer to Henry Bournes’ information about Unfair Dismissal and General Protections.
Dismissal claims need to be made to the Fair Work Commission within 21 days of the dismissal taking effect.
What is the severance entitlement?
If you are made redundant, you may be eligible for redundancy severance pay. Redundancy severance pay is in addition to notice and accrued leave.
Under The FW Act redundancy severance is:
Redundancy pay period | ||
| Employee’s period of continuous service with the employer on termination | Redundancy pay period |
1 | At least 1 year but less than 2 years | 4 weeks |
2 | At least 2 years but less than 3 years | 6 weeks |
3 | At least 3 years but less than 4 years | 7 weeks |
4 | At least 4 years but less than 5 years | 8 weeks |
5 | At least 5 years but less than 6 years | 10 weeks |
6 | At least 6 years but less than 7 years | 11 weeks |
7 | At least 7 years but less than 8 years | 13 weeks |
8 | At least 8 years but less than 9 years | 14 weeks |
9 | At least 9 years but less than 10 years | 16 weeks |
10 | At least 10 years | 12 weeks |
This is a minimum entitlement. Note that a greater entitlement may exist under a contract of employment, company policy, or an enterprise agreement.
Are there any exclusions?
Some employees are excluded from the redundancy, including:
- Employees with less than 12 months’ service
- Casual employees, apprentices, trainees and specified-term employees
- Employees of a small business (fewer than 15 employees), although some further exceptions apply.
An employer may also apply to reduce the severance entitlement when they cannot pay the severance, or if they provide other acceptable employment for the employee.
Should I sign a deed of release?
It is common during a redundancy process for an employee to be asked to sign a deed of release. A deed of release is a document that intends to release the employer from any liability following the employment.
There is no reason to sign a release in relation to a genuine redundancy where you receive the minimum entitlement. However, it is more common to sign a release in exchange for extra payments (ex gratia payments) or other incentives.
We recommend seeking legal advice before signing a deed of release.
This information only relates to employees under the Fair Work Act (Cth) 2009). It is information only and is not legal advice. Redundancy can be complicated. If you require advice or assistance in relation to a redundancy, please click ‘book now’ for a confidential consultation.
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