Avoiding pitfalls in redundancy: Key lessons from The Fair Work Commission

The Fair Work Commission (FWC) has held that a national system employer must comply with the consultation obligations imposed by a modern award or enterprise agreement, in relation to a major workplace change, to be exempt from the operation of the unfair dismissal regime under the Fair Work Act 2009 (Cth) (FW Act).

If an employer does not effectively consult with an employee whose position is being made redundant, the dismissal will not be a case of “genuine redundancy” for the purposes of the unfair dismissal claim exemption, even if the consultation process would have failed to identify any alternatives to avert such an outcome.

In the decision of Zaicos v Tamworth Dementia Respite Service Inc¹, the Full Bench of the FWC granted an appeal and overturned an order to dismiss an unfair dismissal application on the grounds the genuine redundancy exemption applied.

In this article, we briefly discuss the FWC decisions, at first instance and on appeal, and the implications for employers required to respond to unfair dismissal claims arising out of a workplace restructure.

The legislation

Under Part 3-2 of the FW Act, a dismissal resulting from a case of genuine redundancy is exempt for the purposes of unfair dismissal (the Exemption).

Section 389(1) of the FW Act defines the Exemption as follows:

(a) the person’s employer no longer requires the person’s job to be performed by anyone because of changes in the operational requirements of the employer’s enterprise; and

(b) the employer has complied with any obligation in a modern award or enterprise agreement that applies to the employment to consult about the redundancy. 

The Exemption is, however, subject to an employer’s obligation under section 389(2) of the FW Act, to properly consider whether redeployment elsewhere within the organisation would be reasonable in all the circumstances, which involves an assessment or the employee’s skills, qualifications and experience, including after a reasonable level of retraining, in relation to any available job vacancies.

First instance decision

Ms Zaicos (the Employee) was employed by a social services provider called Tamworth Dementia Respite Services which places carers with people aged 65 years and over suffering from dementia (the Employer).

The employment relationship was regulated by the Social, Community, Home Care and Disability Services Industry Award 2020 (SCHADS Award).

The Employer was placed into voluntary administration due to experiencing extreme financial distress. Shortly afterwards, the Employee was summarily dismissed by the voluntary administrator, without the Employer engaging in a consultation process as required under the major change provisions in the SCHADS Award.

Following the holding of a “jurisdictional objection” hearing, a Deputy President of the FWC found that the failure by the Employer to consult was not fatal to the operation of the Exemption, as a consultation process would not have ultimately changed the dismissal outcome because of the need to cut labour costs to return the organisation to financial viability.

Appeal decision

On appeal, the Full Bench held that, in circumstances where no consultation process was followed by the Employer as required by the SCHADS Award, the Deputy President’s application of the Exemption was misconceived as a matter of law.

In addition, it was an entirely irrelevant consideration, for the purposes of the Exemption, that the practical outcome of the redundancy process would not have been changed by engaging in mandatory consultation.

In particular, the Full Bench explained as follows:

• Section 389(1) of the FW Act is definitional. It defines what constitutes a ‘genuine redundancy’.
• Unless the requirements of the subsection are strictly met, the dismissal is not a case of genuine redundancy.
• The requirements in s 389(1) of the FW Act are cumulative. A person’s dismissal is a case of genuine redundancy only if:

1. the person’s employer no longer required the person’s job to be performed by anyone because of changes in the operational requirements of the employer’s enterprise (per subsection (1)(a)); and

2. the employer has complied with any obligation in a modern award or enterprise agreement that applied to the employment to consult about the redundancy (per subsection (1)(b)).

• If the employer has not complied with an obligation in a modern award or enterprise agreement to consult about the redundancy for the purposes of s 389(1)(b) of the FW Act, then the dismissal is not a case of genuine redundancy, even if s 389(1)(a) of the FW Act is satisfied.

The Full Bench took umbrage with describing the Exemption as a “jurisdictional objection” and the common procedural practice of determining the question of any genuine redundancy, by way of a preliminary hearing, before finally determining the merits of the unfair dismissal application.

The Full Bench reiterated that the operation of the Exemption is a preliminary matter to be determined before assessing whether the dismissal was harsh, unjust or unreasonable, but that it would rarely be convenient and efficient to hold multiple hearings to determine each of the matters in isolation as the relevant issues to be considered may overlap.

Implications for employers

1. When making workplace changes resulting in employment positions being made redundant, employers must engage in any consultation process required under an applicable industrial instrument to validly invoke the Exemption.
2. Effective consultation should include, where relevant, meaningful engagement with the employee in relation to redeployment opportunities, including preferencing the employee to external applicants for available job vacancies.
3. Where a redundancy-based dismissal is challenged by an employee making any unfair dismissal claim, the employer should still carefully consider applying for programming directions to determine the Exemption as a matter of priority, where it can be shown on the facts that it is most conveniently and efficiently dealt as a preliminary matter before a final hearing, being the default position.

¹ [2025] FWCFB 231