Higher bar for genuine redundancies set

The Full Federal Court (Helensburgh Coal Pty Ltd v Bartley [2024] FCAFC 45) has recently found that employers have an obligation to assess whether employees in a redundancy situation could replace already engaged contractors (not other employees) before making them redundant.

This decision has wide-ranging ramifications because it arguably extends every redundancy decision to require an earlier and more detailed analysis as to the meaning of “reasonably redeployed” to consider not just existing roles occupied by employees but now the roles being performed by third party contractors as well.

Our Take

Whilst the decision appears to have reversed the ‘conventional wisdom’ that existing third party contractor’s roles need not be considered for redeployment the test of reasonableness still applies to redeployment decisions.

Similarly, it should not be read into the decision that every existing contractor role must be given to an employee in a redundancy situation.

The critical aspect of the decision is that during the consultation process redeployment to an existing contractor’s job needs to be objectively assessed - a factor that the Full Court recognised would add additional complexity. In some situations, it may not be reasonable for an employee in a redundancy situation to be redeployed to an existing contractor's role because they don’t have the same specialist skills and are unable to be reasonably trained to a level of competency. But in others, it would be reasonable to redeploy in positions which are not currently available but are about to become available, for example, where the employer knows that other employees are soon to retire or that a contract with a third party for the performance of work is soon to expire.

We are unsure as to whether this decision will be further appealed, but we do know that legislative change is unlikely. Stay tuned for further updates as they arise and be mindful that employee representatives are already signalling this as a big win for permanent jobs and an opportunity to reduce outsourcing.

Action Items

• don’t use redundancies as a means to terminate poorly performing employees

• genuinely consult with your workforce regarding redundancies

• genuinely consider options for reasonable redeployment including contractor roles

• be prepared to demonstrate ‘your evidence’ of the above processes

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