Key takeaways

• The High Court confirmed that the FWC may consider whether an employer could have restructured its workforce, including reallocating contractor roles to employees, when assessing the reasonableness of redeployment under section 389(2) of the Fair Work Act.
• In assessing whether redeployment was reasonable in the circumstances, the FWC can examine whether work existed (or could have been made available) that the employee was capable of performing, including through reorganisation or reallocation of duties, and including by making roles available – not just looking for vacant roles.
• While employers are not required to overhaul their business model, they are expected to consider reasonable and objective adjustments, even if disruptive, where such changes could have retained an employee. If contractor roles are suitable for employees and could be reassigned without fundamentally altering the business, the employer may be required to do so.
• The decision reinforces that redundancy planning must be forward-looking and holistic, with the FWC entitled to consider a wide range of factors including employee skills, contractor arrangements, and anticipated workforce transitions.

In depth

Background

The High Court considered whether the dismissal of 22 mine workers in June 2020 constituted genuine redundancies under section 389 of the Fair Work Act. The employees had been let go following a downturn in trade during the COVID-19 pandemic, while contractor workers continued to perform similar duties at the mine.

During consultation with employees about the proposed restructure, Helensburgh was asked to consider redeployment opportunities and to reduce its reliance on two contractors (Nexus Mining Pty Ltd and Mentser Pty Ltd) to help mitigate the impact of the redundancies. Despite this, Helensburgh proceeded with the restructure.

The 22 dismissed employees brought unfair dismissal claims, arguing that they could have been redeployed into roles occupied by contractors. The FWC initially found in favour of the employees that the dismissals were not genuine redundancies. After a series of appeals by Helensburgh, the matter reached the High Court, which ultimately dismissed the appeal.

What is a genuine redundancy?

Under section 389 of the Fair Work Act, a dismissal is a genuine redundancy if the employer no longer requires the employee’s job to be performed by anyone due to changes in operational requirements, and the employer has complied with any applicable consultation obligations.

However, a dismissal will not be a genuine redundancy if it would have been reasonable in all the circumstances to redeploy the employee within the employer’s enterprise or an associated entity.

The central issue before the High Court was how this section should be interpreted. Specifically, the Court considered whether the FWC is allowed to examine whether an employer could have made changes to how it uses its workforce to operate its enterprise.

Reasoning

In a joint judgment, Chief Justice Gageler, Justice Gordon, and Justice Beech-Jones rejected Helensburgh’s argument that the FWC must limit its inquiry to the employer’s workforce structure as it existed at the time of dismissal. Instead, the Court confirmed that section 389(2) allows for a broader inquiry into whether it would have been reasonable to redeploy the employee, even if doing so would have required adjustments to the way the enterprise operates.

The joint judgment clarified five key elements of the section 389(2) inquiry to be made by the FWC:

1. Scope of the enterprise: The term “enterprise” refers to the employer’s business, activity, project or undertaking. The FWC must respect the nature of the enterprise but is not confined by the employer’s current workforce arrangements or the reasons behind the way the enterprise is operated.
2. Meaning of redeployment: Redeployment does not require a vacant position. The ordinary meaning of “redeploy” includes reorganising or reallocating work. The FWC may consider whether work existed (or could have been made available) that the employee was capable of performing.
3. Timing of the inquiry: The FWC must assess whether redeployment “would have been” reasonable at the time of dismissal. This is a hypothetical inquiry focused on whether redeployment was a reasonable possibility at that point in time.
4. Objective reasonableness: The test of whether redeployment is reasonable is objective. While the perspectives of the employer and employee may be relevant, the FWC must determine reasonableness in the context of the enterprise as a whole.
5. All the circumstances: The phrase “in all the circumstances” allows the FWC to consider a wide range of factors. These may include the employee’s skills and experience, the employer’s policies and business decisions, the nature of contractor arrangements, and anticipated changes such as contract expirations or workforce transitions.

Separate reasons were delivered by Justice Edelman and Justice Steward. Justice Edelman agreed with the majority but emphasised that the FWC should not assess the reasonableness of redeployment options that would involve significant changes to an employer’s policies or strategic direction. Justice Steward similarly accepted that changes to workforce structure may be considered, but cautioned that redeployment at the expense of another worker’s position would be a serious and likely unreasonable step.

What it means for employers

The High Court’s decision confirms that employers must take a broader view when assessing redeployment options. The Fair Work Commission can consider whether roles performed by contractors could have been reassigned to employees, even if doing so would require some operational adjustment. While businesses are not expected to overhaul their structure or replace contractors in every case, they are expected to critically assess whether practical changes could have allowed an employee to remain employed. This is particularly important for organisations with blended workforces, where failing to explore redeployment into contractor roles may expose them to unfair dismissal claims.

In some cases, it may not be sufficient for an employer to rely solely on the argument that contractors are cheaper than employees in justifying why an employee was not redeployed to a role, particularly where the structure of the business and the nature of the contractor arrangements make it reasonable to do so. It will be necessary for employers to carefully consider the structure of their workforce, and to be prepared to answer questions from the FWC about why redeployment was not reasonable in the circumstances.