The Fair Work Act 2009 (FWA) provides employees with various rights and remedies upon termination of employment, including statutory entitlements to redundancy pay and protections against unfair dismissal. This article outlines redundancy entitlements and the conditions under which an employee can bring an unfair dismissal claim for redundancy.

Statutory Entitlement to Redundancy Pay

Under section 119 of the FWA, employees are entitled to redundancy pay if their employment is terminated due to redundancy. Redundancy pay is mandated when:

  • Employer-Initiated Termination: The employer no longer requires the employee’s job to be done by anyone. Business operational requirements could cause this.
  • Employer Insolvency or Bankruptcy: The employer becomes insolvent or bankrupt, necessitating the termination of employment.

The amount of redundancy pay is calculated based on the employee’s period of continuous service with the employer and their base pay rate for ordinary work hours. The redundancy pay periods outlined in section 119(2) of the FWA are:

Redundancy Pay Period Employee’s Redundancy Pay Period
1 At least 1 year but less than 2 years 4 weeks
2 At least 2 year but less than 3 years 6 weeks
3 At least 3 year but less than 4 years 7 weeks
4 At least 4 year but less than 5 years 8 weeks
5 At least 5 year but less than 6 years 10 weeks
6 At least 6 year but less than 7 years 11 weeks
7 At least 7 year but less than 8 years 13 weeks
8 At least 8 year but less than 9 years 14 weeks
9 At least 9 year but less than 10 years 16 weeks
10 At least 10 years 12 weeks

 

Small businesses are exempt from the requirement to pay redundancy pay. This exemption applies to employers with fewer than 15 employees, as defined by the FWA.

Unfair Dismissal Claims in Cases of Redundancy

The FWA also addresses when an employee can bring an unfair dismissal claim.  An employee cannot claim unfair dismissal if the redundancy is deemed a “genuine redundancy.”  A redundancy is considered genuine if it meets the following criteria:

  • Operational Changes: The employer no longer requires anyone to perform the job due to changes in operational requirements. This could happen if there is a restructure within the business, the company is acquired or mergers with another business, there is a slow-down of work or production in the business, the business closes or relocates, or if new technology is introduced.
  • Consultation Obligations: The employer has complied with any obligations under a relevant award or enterprise agreement to consult with the employee about the redundancy.

However, an employee may bring an unfair dismissal claim if the redundancy is not genuine. This can happen if it would have been reasonable for the employee to be redeployed within the employer’s enterprise or an associated entity, or if the employer still requires the employee’s role to be performed. In such cases, the employee’s dismissal might not be considered a genuine redundancy, opening the door for an unfair dismissal claim.

Understanding the provisions of the FWA regarding redundancy pay and unfair dismissal is crucial for both employers and employees. Employees are entitled to redundancy pay under specific circumstances, and genuine redundancy can protect employers from unfair dismissal claims. However, employees may have grounds to challenge their dismissal if the redundancy is not genuine.

If you or someone you know is an employer or employee and in need of employment advice, you can contact our team of experts by calling us at 9525 8688.