Termination Under the Guise of Redundancy

When faced with an underperforming employee, some employers would rather let them down easy by making them redundant as opposed to dismissing them for their underperformance.

However, in the case of Paramore v Knight Watch Security Pty Ltd T/A Bluestar Security Services (Bluestar), the decision by the Fair Work Commission highlighted the risks that employers face when they attempt to terminate an employee for poor performance under the guise of a redundancy.

Background

The employee in question was employed in the senior management role of State Manager NSW with Bluestar in August 2018. According to evidence given by the company’s Director, they had considered terminating his employment with the company soon after his appointment to the role. The role of State Manager was primarily responsible for business development for the company, which involved strengthening relationships with old clients and building relationships with new ones.

Upon seeing that their strategy was not working, the Director decided to discontinue the role of State Manager in NSW and VIC, and instead introduce the position of General Manager to focus on operations management rather than business development. Rather than consider the employee for the new role being introduced to the company, a new employee was appointed to the role the day after the redundancy occurred.

What is a “genuine” redundancy?

For a dismissal to be considered a case of genuine redundancy, the employer must:

  • no longer require the job to be performed by anyone due to operational requirements; and
  • comply with any obligations to consult about the redundancy in either a modern award or enterprise agreement applying to the employment

Even if these requirements are met, a dismissal will not be considered a genuine redundancy if it would have been reasonable for the employee to be redeployed within the enterprise or an associated entity.

What went wrong?

In this case, it was accepted that Bluestar had restructured its operations and made the senior management positions in NSW and VIC redundant, and that the job was no longer required to be performed as part of one role. However, it was found that the reason for the restructure was the dissatisfaction with the employee’s performance, which supported the finding that it was not a genuine redundancy.

Further, Bluestar claimed that the employee could not be redeployed to the new role of General Manager because he had shown he was not suitable for a senior management role based on his performance, and they did not explore with him whether he had the requisite skills, experience or qualifications to fulfil the role.

The Commission found that the employee should have been considered for the new role since he had the requisite skills and experience, as well a Master of Business Administration. The Commission found that the dismissal was not genuine, and then in turn found that the dismissal was unreasonable since he was not warned that his employment was in jeopardy or given a chance to respond to allegations. However, when it came to the calculation of the remedy, the Commissioner found that the employee would have only been employed with the company for no more than 16 weeks due to the concerns regarding his performance, and when taking in all remaining factors, the former employee was awarded just shy of $18,000.00.

In Summary

When dealing with difficult employees, sometimes an employer may feel as though redundancy is a way to let them down gently. In taking this route, however, an employer will expose themselves to liability when the Commission finds that the dismissal was not a genuine redundancy. The case also serves as a reminder that redeployment of an employee must be genuinely considered as an alternative to redundancy.

For further information or advice, get in touch with our employment law team today. 

 

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