What is a 'genuine redundancy' and why does it matter?

Termination of an employee's employment due to redundancy -- including, for example, where an organisation is restructuring for financial or operational reasons -- can require different considerations and processes than are required in the case of a dismissal for other reasons.

A claim to Fair Work Australia for unfair dismissal will not be successful if the reason for dismissal was 'genuine redundancy'. However, employees who are dismissed by reason of redundancy are usually entitled to additional termination payments.

This means that it is important to understand what is involved in a 'genuine redundancy'.

Section 389 of the Fair Work Act 2009 states,

Meaning of genuine redundancy

(1)  A person's dismissal was a case of genuine redundancy if:

(a)  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

(b)  the employer has complied with any obligation in a modern award or enterprise agreement that applied to the employment to consult about the redundancy.

(2)  A person's dismissal was not a case of genuine redundancy if it would have been reasonable in all the circumstances for the person to be redeployed within:

(a)  the employer's enterprise; or

(b)  the enterprise of an associated entity of the employer.

The Fair Work Ombudsman provides the following explanation of the legislation:

A genuine redundancy is when:

the person’s job doesn't need to be done by anyone

the employer followed any consultation requirements in the award or registered agreement.

A dismissal is not a genuine redundancy if the employer:

still needs the employee’s job to be done by someone (eg. hires someone else to do the job)

has not followed relevant requirements to consult with the employees about the redundancy under an award or registered agreement or

could have reasonably, in the circumstances, given the employee another job within the employer’s business or an associated entity.

This is helpful in understanding what an employer should do when contemplating dismissing an employee due to redundancy. As a minimum, employers should be able to show that:

  • The employee's position has gone and won't be filled by another person;
  • If the employee is covered by an award or registered agreement, any consultation requirements in the award or registered agreement have been followed;
  • There has been a genuine consideration about whether the employee can reasonably be redeployed to another job within the business or any associated entity and no suitable job was identified.

If an employee's employment is terminated due to redundancy it is important to correctly calculate the additional entitlements that apply.

In complex or contentious cases it is advisable to seek expert advice, but in the first instance employers can access free resources from the Fair Work Ombudsman that are designed to assist in meeting obligations in this area. These resources include: