Debate over employers versus contractors can lead to employer liability

A recent case at the Fair Work Commission has highlighted the need for clarity around redundancy laws.

In the case, an employee claimed he was unreasonably terminated over a redundancy that was not justified. He said his role as foreman on a construction site could not be made redundant as it was essential for ongoing projects.

Requirements for redundancy

Redundancy happens when the business becomes insolvent or bankrupt; or, more commonly, when an employer doesn’t need an employee’s job to be done by anyone. This can occur when the business:

• Introduces new technology
• Experiences falling sales
• Relocates
• Restructures due to a merger or takeover

Once the position is redundant, the employee can either be reassigned to a new role or retrenched.

To prove redundancy, the employer should be able to provide evidence including an organisational chart showing the updates to the business or financial records showing the business’s losses.

Redundancy can be voluntary, after discussions with the employee about the future of the business. One benefit of voluntary redundancy is that the staff member feels like they’ve had some control in the decision.

Factors to consider when making employees redundant

Before you begin the process, check your workplace policies and contracts of employment for things like:

• The process of consulting with staff and unions
• How much notice you are required to give
• Payments you owe for ending employment
• The process for notifying and carrying out redundancies

An employee may get extra pay (known as severance or redundancy pay) when their employment ends, based on how long they have worked for the business.

Adam Zuchowski is a disputes lawyer and principal at Sutton Laurence King Lawyers.

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