HR professionals inhabit a unique environment with a unique set of challenges – they are expected to balance compliance, business interests and employee interests all at once. The most difficult position a HR professional can find themself in is being asked to carry out a business decision by a superior that conflicts with their obligations to ensure compliance with workplace laws, including the protections afforded to employees under the Fair Work Act 2009 (Cth) (FW Act).
Consider a situation where a HR manager is approached by the CEO and is told that the business needs to cut its labour costs and implement redundancies within three days.
Upon examining the section of the workforce that the CEO proposes reducing, the HR manager discovers that the employees are modern award covered and protected from unfair dismissal under the FW Act. Terminating their employment in such a hasty manner may expose the business to risks of unfair dismissal claims.
Rushed redundancies can lead to non-compliance with the consultation obligations under a modern award and a failure to secure the genuine redundancy exemption from the unfair dismissal jurisdiction.
The CEO’s directions were clear about what needed to happen – what should the HR manager do?
Make a financial case for compliance
The potential cost of non-compliance with consultation obligations can be significant and the process of dispute can distract a business from its true purpose.
The HR manager in the above scenario may consider using the likely financial costs of non-compliance as a reason to encourage the CEO to allow time to follow the requirements of the FW Act.
For example, successful unfair dismissal claims can result in an award of compensation (though reinstatement is the primary remedy) which can be up to 26 weeks of the employee’s wages or half of the amount of the high income threshold.
Additionally, contraventions of the FW Act, such failing to comply with the terms of a modern award, can attract penalties of up to $63,000 per offence for a corporation or $12,600 per offence for an individual “involved in” a contravention. In our example, both the HR manager and the CEO could be ‘involved in’ a contravention of the FW Act if they fail to comply with consultation obligations.
From a financial perspective, compliance with the provisions of a modern award and the FW Act is the best risk management strategy and could save a significant amount of time and money down the line.
The law as a compliance guide – securing the genuine redundancy exemption
It is well established that genuine redundancy consultation takes time – recently, a number of employers have come unstuck in cases before the Fair Work Commission (FWC) where their efforts at consultation have been labelled “hollow” or “unduly hasty and largely tokenistic.”
Where consultation is not carried out properly, it can render a redundancy not genuine and open the employer to the unfair dismissal jurisdiction. To contain this risk, employers should ensure that redundancies are genuine redundancies as defined in the exemption from unfair dismissal set out in the FW Act.
In our example, the HR manager could assist the CEO to understand what is required for a genuine redundancy by reference to the meaning of genuine redundancy contained in s 389 of the FW Act. The section sets out the three main criteria:
This definition of genuine redundancy serves almost as a checklist for employers setting out what needs to be done to ensure a redundancy is a genuine one.
Ensuring that a redundancy is genuine secures the employer a valid jurisdictional objection to an unfair dismissal claim.
Presenting the law to the CEO as a compliance position will assist the HR manager to objectively make a case for approaching the redundancies in a different way.
Clearly, the FW Act has a lot to offer HR professionals when trying to communicate the realities of risk and compliance to business leaders. The FW Act can lend credence to a HR professional’s position for compliance where the implementation of a business decision may not actually serve the best interests of the business from a risk perspective.
Information provided in this blog is not legal advice and should not be relied upon as such. Workplace Law does not accept liability for any loss or damage arising from reliance on the content of this blog, or from links on this website to any external website. Where applicable, liability is limited by a scheme approved under Professional Standards Legislation.
