Redundancy and redeployment: common and costly mistakes

A number of recent legal cases have raised questions about the extent of employers’ obligations under agreements, contracts and policies; particularly relating to redeployment of employees whose roles are being made redundant.

In a recent case, a bank employee was awarded $300,000 compensation because the Federal Court found that the bank had not fulfilled its implied “duty of trust and confidence” to find the employee a new role within the organisation. Interestingly, redeployment in the case of redundancy was not a term of the employee’s contract and, in fact, the employer’s manual expressly stated that its policies were not terms of employment. Despite this, the court found that the bank had an obligation and that its efforts to redeploy the staff member were inadequate.

Other recent cases – for example, Howarth v Ulan Coal Mines Limited (2010) and Goldman Sachs v Nikolich (2007) – provide further commentary on employers’ obligations to comply with policies and documentation which they issue. Where redundancy or redeployment policies exist, employers must act accordingly and transfer employees within the organisation if a suitable role exists.

Section 389 of the Fair Work Act makes an important distinction between redeployment and genuine redundancy. The legislation makes clear that if redeployment is a reasonable option within the employer’s enterprise or associated entities, then the redundancy will not be considered a genuine redundancy.

Another important element emerges in the findings from some of the cases above. In general, assisting the employee to find an alternative job does not discharge the employer’s obligations if redeployment within the organisation is a reasonable option. This places a significant obligation on employers.

iHR Australia offers HR Support Services including help with redundancies, policies & procedures, contracts and agreements.