Decoding employer consultation obligations: a recent Fair Work Commission decision sparks debate

All modern awards and enterprise agreements include an obligation to consult with employees about ‘major workplace changes’ where those changes ‘are likely to have significant effects on employees’. Such changes include those which may result in cessation of employment.

In general terms, it has been understood that where a business has made a decision to restructure a division within the business – or a role – and that decision may lead to redundancy, the award or agreement consultation provisions are triggered and the business will be obliged to consult with affected employees. However, the recent Fair Work Commission (Commission) decision in Nicholas Williams v KTC Refrigeration & Conditioning Pty Ltd  (Williams) has given cause to further consider when exactly consultation provisions are enlivened.

Why the obligation to consult matters

A dismissal will not be an ‘unfair dismissal’ under the Fair Work Act 2009 (Cth) (Act) where it occurs due to  ‘genuine redundancy’. A ‘genuine redundancy’ is when a business:

  • no longer requires the job to be performed by anyone because of changes in the operational requirements of the business’ enterprise; and
  • has complied with any obligation in a modern award or enterprise agreement to consult. This element only applies where an award or an enterprise agreement applies to the employee’s employment.

If a business fails to consult with an employee, in circumstances where they were obliged to do so, the dismissal will not be a genuine redundancy but rather, an unfair dismissal under the Act, triggering compensation or reinstatement orders.

What does consultation entail?

Consultation involves “providing the individual, or other relevant persons, with a  bona fide opportunity to influence the decision maker”, and not “perfunctory advice on what is about to happen”. Where a business fails to consult an employee before making a decision about the redundancy, compliance may be significantly compromised. This was found to have occurred in Monks v John Holland Group Pty Ltd where the business consulted with the employee, but only after it had determined the position would be made redundant, a new position was created and a person was chosen to fulfil the new position.

Criticism of the genuineness of consultation can also occur where implementation of the process is swift. In Williams & Others v Staples Australia Pty Ltd, Commissioner Cambridge found that the business had failed to meaningfully consult with their employees when it made “disingenuous gestures which it sought to portray as consultation” but were “unduly hasty and largely tokenistic”. That conclusion arose in circumstances where twelve employees were made redundant, having been informed of the potential redundancy one day prior.

The decision in Williams

Nicholas Williams (Mr Williams) lodged an Unfair Dismissal Application alleging his dismissal was ‘unfair’ within the meaning of the Act. In response, KTC Refrigeration & Conditioning Pty Ltd (KTC) argued Mr Williams’ dismissal was an instance of genuine redundancy and denied the dismissal was unfair.

On this occasion, Deputy President Boyce determined that the consultation obligations were not enlivened at all because no ‘major workplace change’ had occurred nor was contemplated. In this regard, Deputy President Boyce gave considerable weight to the fact that a sole individual lost their job due to redundancy and they were employed in a small business. The loss of Mr Williams’ role was not a “major change”, nor did it have “significant effects” on  employees who remained employed. In this case, Deputy President Boyce took the view that where redundancy only impacted one employee, rather than a larger group, and where the removal of the singular position is akin to removing a drop of water from an ocean without leaving a ripple, that change is not “significant”.

Accordingly, the consultation obligations were found not to be enlivened and the fact that there was no consultation with Mr Williams prior to dismissal did not prevent the Commission finding that the dismissal was a genuine redundancy. Arguably however, the proposed change had significant effects on the employee whose employment ended – as opposed to the remaining group of employees. If the Commission had taken that view, the result would have been the reverse.

This article was co-authored by Ashlee Nealon, Paralegal. 

Read other items in the Australian Employment Brief - July 2023. 

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