How Unreasonable Can Reasonable Redeployment Be?

Section 389 of the Fair Work Act 2009 (FW Act) sets out the test to determine whether a redundancy is genuine. a person’s dismissal was a case of genuine redundancy if:

• 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; and
• The employer has complied with any obligation in a modern award or enterprise agreement that applied to the employment to consult about the redundancy.

Additionally, section 389(2) of the FW Act provides an employee’s dismissal will not be a case of genuine redundancy if it would have been reasonable in all the circumstances for the person to be redeployed within:

• The employer’s enterprise; or
• The enterprise of an associated entity of the employer.

The Full Court of the Federal Court in the recent case of Helensburgh Coal Pty Ltd v Bartley [2024] FCAFC 45 considered the extent to which employers must investigate alternative roles for workers when making operational changes, specifically whether it is reasonable to consider if employees can be redeployed into roles occupied by contractors.

Background to the Case

In 2020, a number of employees at a mine operated by Helensburgh Coal were dismissed from their employment as a result of a decision to reorganise performance of work at the mine in response to the COVID-19 pandemic.

22 of the former employees of Helensburgh Coal sought to challenge their dismissal on the grounds that they had been unfairly dismissed and made applications to the Fair Work Commission (FWC).

Helensburgh Coal lodged a jurisdictional objection on the basis that the dismissals were all cases of genuine redundancy.

The employees contended that it would have been reasonable for Helensburgh Coal to redeploy them to other roles being performed by employees of contractors to Helensburgh Coal, Nexus and Mentser. This was notwithstanding that Helensburgh Coal had agreed to reduce its reliance on contract workers as part of the consultation process.

At first instance, Commissioner Riordan of the FWC found in the employees’ favour on the basis that some, if not all, of the Helensburgh Coal employees could have been redeployed to roles being performed by the contractors’ employees.

Helensburgh Coal appealed the decision, which was allowed by the Full Bench of the FWC, and the matter was referred back Commissioner Riordan for reconsideration.

Commissioner Riordan once again found that the employees’ dismissal was not a case of genuine redundancy, which was subsequently upheld by the Full Bench on a second (re)appeal.

Helensburgh Coal then applied to the Federal Court seeking the quashing of the previous 4 FWC decisions on the basis that the FWC had misconstrued how section 389(2) was intended to operate.

The Decision

The Full Federal Court ultimately upheld the FWC decision and, on the basis that it considered the FWC acted within the scope of its powers under the FW Act, and that it was open to the FWC to consider the reasonableness of redeployment opportunities as including roles that were not vacant because they were occupied by contract workers.

The Court considered the broad nature of the wording of section 389(2) of the FW Act stating “if there were circumstances that were intended to be inapt to inform whether, in any given case, ‘redeployment would have been reasonable’, the legislature would not have used the qualifying phrase, ‘in all [of] the circumstances’”. Emphasising the breadth of the circumstances the FWC could consider under section 398(2), the Court found that this means  the FWC could take into account whether employees can be redeployed into roles occupied by contractors when assessing a genuine redundancy.

In doing so, the Court emphasised that its role was to examine whether the FWC acted within its jurisdiction under section 389(2) – not whether it ultimately agreed with how the FWC assessed all of the circumstances.  In this regard, it is noteworthy that Justice Raper of the Federal Court specifically commented that although the FWC has the power to take into account whether employees can be redeployed into roles occupied by contractors when assessing a genuine redundancy, ‘it would be a rare case indeed, where an applicant (seeking to avail him or herself of unfair dismissal protections) could satisfy the Commission, under this provision, that redeployment in such circumstances was reasonable’. This is because this would require the FWC to make orders which would in effect require an employer to terminate third party contractual arrangements and a fundamental change in the employer’s business model.

Therefore, theoretically while the Federal Court agreed the FWC could take into account redeployment into roles held by contractors, we interpret in its decision that it has cautioned that it is not necessarily the role of the FWC to interfere with third party contractual arrangements between employers and contractors in order to create a new position for redundant employees.

The matter has now been remitted to the FWC to determine remedies on the basis that the dismissals were not a case of genuine redundancy. The FWC has the power to award reinstatement (with backpay), or compensation capped at 6 months wages for the individual employee or half the high income threshold, whichever is lesser. Given Justice Raper’s comments above, it appears likely that the FWC will award compensation as opposed to reinstatement.

Lessons for Employers – is outsourcing on the nose?

This ruling has been welcomed by the unions as a ‘win’ for permanent jobs, and represents a further blow to the labour hire industry which has been targeted by the Federal Government under the recent Closing the Loophole changes (see here for our previous article).

The unintended consequence of this decision, particularly in light of the recent Qantas decision on outsourcing, may mean that employers will think twice about outsourcing certain functions and/or engaging labour hire, and that employers may be required to replace such contracted roles with direct employees.

It is clear from the decision that employers should be aware that when determining whether redeployment was reasonable in the circumstances, it is necessary to genuinely consider (in addition to other matters) whether there is any available work that is being performed by contractors that redundant employees could be redeployed to do. Clearly documenting the business case as to whether redeployment is reasonable will also be important in defending subsequent unfair dismissal claims. However, it is important to emphasise that the decision does not, in our view, stand for the proposition that continued reliance on contractors/outsourcing will not be available in appropriate circumstances.

Please contact HR Legal if you require any assistance with understanding your legal obligations relating to genuine redundancies.

Case reference: Helensburgh Coal Pty Ltd v Bartley [2024] FCAFC 45 (5 April 2024)