Global restructuring - redundancy exercises in Australia

Out-Law News | 27 Oct 2020 | 12:05 pm |

Patrick Williams explains redundancy law and procedure applicable to businesses with a presence in Australia.
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  • Transcript

    In recent weeks we have been looking at the impact of Covid-19 on businesses globally as employers consider making difficult decisions around cutting costs – decisions which in many cases will impact directly on the workforce – multinational businesses are having to grapple with various different jurisdictions as they look to restructure and survive the worst of the economic crisis. Earlier we were looking at the picture in Australia and how their businesses over there are dealing with the pandemic. As everyone is well aware, the aviation sector has been hit very hard so no surprise to see Quantas struggling and, as they attempt to restructure. Back in June the FT reported how the airline planned to cut 6,000 jobs as part of its recovery plan, making more than a fifth of its workforce redundant. The latest news is there is more to come. The Australian newspaper reports that around 2,500 more jobs are at risk under plans to outsource ground handling operations at Australian airports where the work is done in-house. As you might expect, that has not gone down well with the Transport Workers’ Union but chief executive Alan Joyce is quoted saying how the job cuts are necessary to rebuild the balance sheet. Responding to heavy criticism from the union, a spokesman for the company confirmed that, in line with its legal obligations, the company will consult with relevant unions on the proposed job losses.

    So let’s turn to those legal obligations. Back in July we heard from Katie Williams, who is based in Perth, explaining how employers in Australia are required to consult about redundancies when a modern award or enterprise agreement applies to the employment. But what does that mean exactly, and when is that duty to consult triggered? I had the opportunity of putting those questions to Paddy Williams, also based in Perth, but first I asked about the current situation with the virus and how businesses are coping: 

    Patrick Williams: “So really, I think what we're seeing in Australia is similar to many places around the world. Obviously COVID-19 is having a significant economic impact on many businesses in Australia, possibly more in some states than in others. We're seeing a slight difference in terms of how COVID is actually spreading in various states. Now that's leading many businesses clearly to consider the need to restructure and as part of that, possibly redundancies, to future proof their business and as part of that what often arises is the question about the need to consult. So the consultation obligations in Australia, they won't be that dissimilar to clients in the UK who are familiar with UK regime, but the first thing you're needing to look at when you're considering contract obligations around redundancy requirements in Australia is actually whether or not you have a modern award or an enterprise agreement that applies to your workforce. So modern awards are essentially legislative instruments. Enterprise agreements are the bargaining instruments that many employers who have union presence will be aware of and generally in Australia they will contain consultation obligations in relation to major workplace change. That can include many things but one of the things that it often includes is redundancy consultation obligations.

    Joe Glavina: “Modern awards and enterprise agreements are of course something we don’t have in the UK but clearly they are very important for HR professionals to know about. So let’s imagine a situation where we have a multinational business with headquarters in the UK but offices in Australia. Let’s say the decision has been taken to cut jobs in your country, Paddy. What are the classic mistakes you see made? The traps if you like?

    Patrick Williams: “So the first thing we see generally is people aren't aware as to as to what awards enterprise agreements even apply to their workforce. So certainly getting some advice and having an understanding of which awards might apply to your employees is crucial and, indeed, I'd make the point that different awards can apply to the same branch of your business. So you can have many different employees in your business that are covered by different occupational and industrial awards but once you actually know what industrial instruments are applied to your workforce, then the next key trap is getting that consultation obligation right. So really the reason you're doing it is twofold. The first is to ensure that the redundancies you implement, if indeed you do implement them, are genuine redundancies and ensuring you comply with the consultation obligations goes a long way to ensuring that happens but the second thing really is about making sure that if you are consulting then you know exactly what you need to do to consult. Unfortunately, different awards and enterprise agreements will contain slightly different consultation provisions. For example, some might require provision of notice in writing, whereas others might simply allow for any form of notice in relation to the potential workplace change that you're considering. So making sure you actually know what your obligations are is crucial. So you've identified the award or enterprise agreement, you then know what you need to do to consult. Then I think, really the final pitfall and potential trap is trying to go through that consultation process a bit too quickly, or failing to know exactly what you need to do, such as notifying the unions. Then once you've gone through that process, it's really about explaining to your employees what the potential changes might be and then taking on board the issues that they raised and the potential ways that you might mitigate the adverse effects of the visual workplace change. So in the redundancy process, practically speaking, that might include things like considering reducing hours of your employees might include the diminution of duties. It might even include redeployment into other branches of your business. It’s really about being open to what your employees have to say and then making a decision based on that.

    Joe Glavina: “Yes, I’m sure HR can relate to that. Final question Paddy – here in the UK the penalties for making mistakes in collective redundancy exercises can be severe – serious financial penalties in the form of protective awards. Is it similar in Australia?

    Patrick Williams: “The consequences can be similar, I would say, but the actual requirements are nowhere near as prescriptive. Generally if you're familiar with the UK consultation requirement, you're going to find the Australian ones to be far less prescriptive, particularly in terms of timeframes, but the risks of getting it wrong can still be significant. Employers might face a myriad of unfair dismissal claims, for example, and there can also be pecuniary penalties for failing to comply with the terms of an enterprise agreement or modern award, so definitely not something you want to get wrong.”

    You can find more information about enterprise agreements and modern awards on the Fair Work Ombudsman website of the Australian government. As Paddy said, remember that different awards and enterprise agreements will contain slightly different consultation provisions and you need to make sure you know precisely what your obligations are. If in doubt, get legal advice on that.