A recent decision of the Fair Work Commission suggests that when small businesses implement a redundancy, it might not always be necessary to have every duck in a row.

In this case, an employer’s size and lack of HR resources and experience offered it a lifeline in circumstances that might otherwise have supported a finding of unfair dismissal.

The Applicant, a sales representative, commenced employment with Oxford Property Group (Oxford) in February 2017 on a “commission-only” basis, in keeping with the then-applicable industry Award. (As an organisation with fewer than 15 employees, Oxford was a small business under the Fair Work Act.)

On 2 April 2018, the Award was amended. The practical effect of this amendment was to require Oxford to pay the sales rep a salary from 2 April 2019. 

As a result of the economic downturn at the time – which affected Western Australia – poor sales results, and the changes to the Award, Oxford’s director decided to restructure the business and shed sales staff. 

Genuine or not?

On 10 April 2019, the director advised the sales rep that Oxford could no longer afford to employ him due to the changes to the Award. Both parties agreed that the sales rep’s employment with Oxford would cease just two days after this initial meeting. Five days after he was informed he was being made redundant, the sales rep filed an application with the Fair Work Commission alleging he had been unfairly dismissed, requiring the Commission to consider whether the dismissal was in fact, as Oxford contended, a case of genuine redundancy. 

“Where there is a genuine redundancy, the event is excluded from the unfair dismissal jurisdiction,” says managing director of Workplace Law Athena Koelmeyer. 

On the facts, FWC deputy president Binet was satisfied that Oxford no longer required anyone to occupy the sales rep’s role, since the business could not afford to employ him on salary, and Oxford had decided to refocus its business on property management rather than sales. The dismissal was, on its face, a genuine redundancy.

However, section 389(1) of the Act requires that, for a dismissal to be a genuine redundancy, the employer must have “complied with any obligation in a modern award… that applied to the employment to consult about the redundancy.”

Binet found that Oxford had not complied with Clause 8 of the applicable Award, which stipulated a range of measures to be taken by employers with respect to consulting employees affected by significant changes to their business. The dismissal was therefore found not to be a genuine redundancy pursuant to section 389.

Binet explained: “The usual rule is that consultation must not be perfunctory advice about what is about to happen (and this is what occurred in the present matter).”

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Deficient but not devoid of fairness

In the absence of other factors, the question of whether the sales rep’s dismissal was unfair – that is, “harsh, unjust or unreasonable” – hinged on two issues: the extent to which the size of Oxford’s business impacted on its procedures for dismissing employees, and the impact Oxford’s lack of HR management or expertise likely had on its implementation of these procedures.

“Whether the employer was a small business… will be relevant,”  Binet stated. “For example, a small business may not have the same resources on hand as a larger business which may employ managers or specialist human resources staff.” 

On the basis of Oxford’s small business status and lack of HR expertise, Binet dismissed the sales rep’s application, concluding that, “in the circumstances the procedures which [Oxford] adopted were deficient… but were not devoid of fairness.” Importantly, it was found that there was “no evidence that compliance with the consultation provisions would have led to a different outcome.” 

Also weighing in Oxford’s favour was the director’s good faith attempts to do the right thing. “[He] took a variety of steps to avoid the redundancies,” says Binet. “He explained in detail the steps he had taken and the reasons why he believed the retrenchment was necessary. He endeavoured to assist [the applicant] to secure alternative employment including offering to provide a reference.”

Koelmeyer explains the Commission’s thinking: “We can’t call it a redundancy because it doesn’t fit the definition, but that’s really what it was, so I’m not going to say it’s unfair in those circumstances.

“Where you’ve got a small business, it gives you a little bit of comfort that your unique circumstances might be taken into account by the Commission. It was just a very clumsily dealt-with redundancy.”

“Talking about elements of fairness: when it’s pretty clear that a business is trying its best in the circumstances, where it’s not educated about the niceties of the Fair Work Act and HR principles in general, the Commission will usually be reasonably forgiving,” says Koelmeyer.

For small businesses lacking HR experience, the decision is encouraging. However, there can be no substitute for the input of an HR professional in the oversight of any redundancy. Because the alternative might just be to test the limits of the Commission’s forgiveness.