There are two main defences to a claim of Unfair Dismissal under Part 3-2 of the Fair Work Act (“FW Act”).  These are:

  1. The dismissal was not “harsh, unjust or unreasonable” per s.385(b) FW Act; or
  2. There is a “jurisdictional objection” to the proceeding.

The first of these is considered in cases where there is a question regarding the overall fairness of the situation. For example: the employee was not given a valid reason, proper notice was not provided or the employee had never been told they were underperforming, etc.

The second category is more complex. A “jurisdictional objection” is an objection to the claim on the basis of specifically legislated grounds.  These include, but are not limited to, applications made outside the 21-day time period, the employee earned over the high income threshold or it was a case of genuine redundancy.

FWC Commissioner Cambridge heard Williams and Ors v Staples Australia Pty Ltd [2017] FWC 607 on 3 February 2017.  This case highlights the complexities involved in making jurisdictional objections as well as the need to ensure procedural fairness.

The Facts

Staples Australia (“Staples”) is a national supplier of business and office products and has 31 sites throughout Australia.  It employs over 1,700 employees including over 60 permanent warehouse staff and a casual labour hire workforce of 90 to 100 individuals at its warehouse in Erskine Park, NSW.

The permanent staff of the warehouse are covered by an Enterprise Agreement (“EA”).

On 5 July 2016, Staples decided to reduce the permanent staff at Erskine Park by approximately 10 employees as the warehouse had operated $1 million over budget in the previous financial year and 60% of total operating costs were labour related.

As the EA required, on 11 July a meeting of the Joint Consultative Committee (“JCC”) was convened.  At this meeting the JCC was informed that redundancies would be occurring.

After this meeting all permanent staff were notified of the planned redundancies and were given letters confirming the process. The letters stated that a “selection matrix” would be used to determine which staff would be made redundant by 13 July.

On 12 July, the National Union of Workers (“NUW”) informed Staples that the consultation was inadequate, the selection criteria were flawed and that the NUW would challenge the process at the FWC.

Despite this, on 13 July Staples told 12 employees that their roles were redundant, effective 20 July, and that there were no opportunities for redeployment.  They were all paid the relevant redundancy entitlements.  Four of the 12 employees were the Applicants in this case.

While there appears to be straightforward redundancies, there were several complicating factors:

  • Clause 28 of the EA required Staples to hire 20 new employees by the end of the year in an effort to expand the warehouse staff. As a result of this, 19 new permanent employees were hired in December 2016. They were employed to essentially do the same work that had previously been done by the redundant Applicants;
  • One of the Applicants was a union delegate;
  • The “selection matrix” included subjective factors such as “Lives the Company Values and Commitments” and “Attitude towards the company and peers”; and
  • There was evidence that the financial position of the warehouse had been understated as the Erskine Park site, as a whole, beat budget by $685,847 due to the strong performance of the Transport and Facilities teams. There was no evidence submitted that there were any documented concerns about the financial position of the warehouse.

The Decision

Commissioner Cambridge found for the Applicants and ordered their reinstatement with back pay for the period that they had not work (less their redundancy packages).

The Commissioner found that the dismissals were not genuine redundancies and that they were harsh, unjust and unreasonable.

In particular, the Commissioner was critical of the “unduly hasty and largely tokenistic” consultations and that the entire process was “astonishingly fast” and “too pre-emptory, hasty and unseemly” given that the entire process from decision to engage in redundancies to final date was only 15 days.

These comments were in reference to s.389 of the FW Act that defined the meaning of genuine redundancy. Section 389(1) set s out two criteria for genuine redundancies, as follows:

(a) The employer no longer requires the person’s job to be performed due to the operational requirements of the enterprise; and

(b) The employer complied with any obligations in a modern award or enterprise agreement to consult about the redundancy.

The EA had specific consultation obligations that were not followed.

This included the lack of time and opportunity for employees who had been informed that they would be made redundant to respond to the “selection matrix” that had made the decision.

Commissioner Cambridge stated that the conduct “went far beyond some minor or trivial absence of technical, procedural compliance”.  Therefore, the jurisdictional objection that t he redundancies were genuine was struck down.

The “selection matrix” itself was also subject to criticism as being “so severely flawed that the consequential dismissals of the applicants were entirely unreasonable”.

As stated, there was still a need for the jobs to be performed as evidenced by the need to hire new staff in December 2016. The fact that the employer was already aware of the need to create 20 new jobs to fulfil their obligations under the EA also demonstrated there had been no proper attempt to redeploy the selected staff members, as required pursuant to s.389(2) of the FW Act.

This, in conjunction with the highly subjective “selection criteria”, was sufficient to establish that the dismissals were harsh unjust and unreasonable.

Messages for Employers

This case highlights the importance of reviewing the FW Act, all letters of offer and relevant industrial instruments such as Enterprise Agreements before implementing any proposed redundancies.

There must be a fair consultation process when undergoing redundancies.

Despite the operational requirements of a workplace or management’s desire to “trim the fat”, a proper process must be followed.

Ideally, the process should take place over a reasonable period of time, with affected staff informed of all aspects and developments.

We recommend that employers should seek legal advice at an early stage when considering redundancies.

As seen in the case above, a failure to ensure procedural fairness and natural justice may leave the employer open to both costly legal proceedings and large compensation payments.