Court decision confirms ‘restructures carry unfair dismissal risk’, warns lawyer

There is now a greater level of risk for employers looking to restructure their businesses, following a landmark decision in the nation’s highest court.

As recently reported, the High Court of Australia has upheld a decision from the Fair Work Commission and Federal Court that 22 underground miners’ sackings were not genuine redundancies, after a third appeal was launched by Helensburgh Coal.

Back in 2020, the miners were sacked by Helensburgh Coal, which cited that the COVID-19 pandemic had “significantly reduced” the need for the extraction of coal at the mine. Due to the reduction in work, a restructure was undertaken, resulting in several redundancies for employees.

During consultations before the restructure, Helensburgh was asked to mitigate the impact of the restructure on employees by reducing its reliance on contractors from Nexus and Mentser – who were engaged back in 2018 and 2019 to provide numerous services at the mine.

Helensburgh agreed to some “insourcing” – but ultimately did not agree to terminate the arrangements with Nexus and Mentser.

According to the documents, the restructuring resulted in 40 per cent of contractors being dismissed, whereas 90 employees, including the 22 miners who filed for unfair dismissal, were sacked.

The Fair Work Commission found that the terminations were not cases of “genuine redundancy” as affected staff should have been redeployed to perform the work that was being performed by the remaining contractors. Despite appeals, the commission’s decision was upheld.

The decision most certainly serves as a wake-up call to employers nationwide.

In conversation with HR Leader, McInnes Wilson Lawyers principal Ryan Murphy said that the High Court’s decision is an “important one” for employers, in that the judgment “adds a greater level of risk to an often-used exemption from unfair dismissal laws: that dismissals through a restructure are due to a ‘genuine redundancy’”.

Ultimately, Murphy noted, the High Court confirmed that the Fair Work Commission has broad powers when assessing whether redeployment of employees would have been reasonable.

That is, he said, the commission must consider all the circumstances.

While five justices of the High Court were unanimous in dismissing the appeal, he continued, Justices James Edelman and Simon Steward made some clarifying comments, including to echo the reasoning of Justice Elizabeth Raper from the Full Federal Court decision.

“Specifically, that it would be ‘a rare case indeed’ in which the commission could order redeployment that would require the creation of new positions or the fundamental change to an employer’s business model,” he said.

“That is, if a business had a set policy regarding the proportion of its workforce that must be contractors, or labour hire, say, that would be difficult (though not impossible) for the commission to disregard.”

“Whether such a policy or structure existed in practice would be a matter for advice and evidence in a particular case.”

Certainly, Murphy concluded, the Helensburgh Coal decision “confirms that restructures carry unfair dismissal risk for employers, which is potentially higher than ever before”.

“And for employment lawyers, there must be a greater depth of enquiry of their employer clients regarding the enterprise and the facts surrounding any restructure before advising about the risks surrounding restructures, and related unfair dismissals,” he said.