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Communicate to avoid workers' fret of looming job cuts

Author: Sarah Rey and Magda Marciniak - Sarah Rey is a partner in Justitia Lawyers and Consultants and Magda Marciniak is a solicitor at the law firm
Date: 05/11/2008
Words: 789
Source: AGE
          Publication: The Age
Section: Business
Page: 14
Leave sacked workers their dignity to head off legal action, write Sarah Rey and Magda Marciniak.

IN THIS economic climate many businesses are considering how to cut costs. Where can we make a saving? What is not essential?

For many, the big costs are wages. Employers may consider cutting staff. Some may feel uncertain when it comes to starting the process - who to choose and what is a lawful and effective redundancy process? How will it affect remaining workers?

Workers feel insecure; it's tough times for many. How redundancies are managed has a big impact on morale and productivity. Too many employers don't realise that a poorly managed redundancy process costs them dearly. Getting it right is essential.

From the perspective of employment law, there are two things for employers to consider: what are the worker's entitlements upon redundancy; and how to avoid being sued by a former worker? This article focuses on the latter.

One of the biggest risks for an employer when terminating employment is the risk of an unfair dismissal claim. It's brought by former workers in the Australian Industrial Relations Commission alleging that the termination of their employment was harsh, unjust or unreasonable and in breach of the Workplace Relations Act. It is a quicker and cheaper claim to bring than a traditional court action.

Can a former worker bring an unfair dismissal claim if their employment is terminated by redundancy? For now, the answer is "no" because employers can rely on the "genuine operational reasons" exemption to unfair dismissal. It provides that where a worker's employment is terminated for genuine operational reasons or for reasons that include genuine operational reasons, the former employee is precluded from bringing an unfair dismissal claim. Operational reasons are defined as "reasons of an economic, technological, structural or similar nature relating to the employer's undertaking, establishment, service or business, or to a part of the employer's undertaking, establishment, service or business".

So where an employer terminates employment because the position is genuinely no longer needed by the employer, the former employee cannot successfully bring such a claim. The key word is "genuinely".

To rely on this exemption, an employer must demonstrate that an operational reason is behind the dismissal. If the reason for the dismissal is a different reason - such as the employee's conduct or a prohibited reason such as disability or because it is a convenient way to deal with a poorly performing worker - the employer cannot rely on the exemption.

One would expect that some employers may have genuine operational reasons to make positions redundant. But it is important to remember that when defending an unfair dismissal application an employer must prove the termination was for genuine reasons. So an employer shows this by way of a paper trail of an operational reason for the termination.

Some examples of documentary evidence are: financial statements showing a loss; memos or reports considering how to cut costs and concluding that certain positions should be made redundant; charts with the new structure and an analysis of the costs saved when the post-redundancy organisational structure is implemented.

The process for creating these documents, if it is part of a review that employees know about, will also have the effect of forewarning them that changes are being contemplated and that these may involve job losses.

The effective communication of this review process can mean the difference between a highly disruptive and morale-destroying business downsizing, or one in which workers feel they are being treated with dignity and given the chance to hear the rationale for the changes and their selection, even if they may not agree with them.

The Rudd Government is drafting its industrial relations legislation and it is possible

that the operational reasons exemption may disappear. As a consequence of a concerted anti-WorkChoices campaign last year, the Labor Party was under extreme pressure from unions to agree to its removal.

If the exemption is not retained, then workers whose positions are redundant may bring an unfair dismissal claim (assuming they do not fall within another exemption).

This means that the termination, including the reason for it and the procedures adopted in bringing it about, will be scrutinised to determine overall fairness by the Australian Industrial Relations Commission or its successor.

If the exemption is retained, the situation will continue to be easier for employers compared with earlier unfair dismissal legal tests. Although it will still be up to the employer to show that the redundancy is genuine.

In these uncertain economic times, employers have another reason to be interested in the content of the forthcoming industrial reforms.

Sarah Rey is a partner in Justitia Lawyers and Consultants and Magda Marciniak is a solicitor at the law firm.

 
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