29/06/2015

A recent decision by the Fair Work Commission has shed light on the extent that employers have an obligation to redeploy redundant workers to a related company of the employer.

Kestrel coal mine is an underground coal mine located in Central Queensland and is managed by Kestrel Coal Pty Ltd - one of four subsidiary companies of the well-known mining giant Rio Tinto. As a result of continued downturn in the coal industry, a range of cutbacks and cost reduction measures, including redundancies, were implemented at the Kestrel Coal mine late last year as part of an ‘organisational restructure’.  

Four workers who had been made redundant by Kestrel brought separate unfair dismissal claims to the Commission against Kestrel Coal Pty Ltd in Stickley v Kestrel Coal Pty Ltd [2015](’Stickley’).  

While Kestral claimed that the workers were made genuinely redundant, the dismissed workers argued that Kestrel had an obligation to employ them within one of the associated coal mining companies forming part of the Rio Tinto Group.  This argument was based on the definition of ‘genuine redundancy’ contained in s389(2) of the Fair Work Act 2009(Cth) which provides that a redundancy is not genuine where it would have been reasonable to redeploy the worker in an associated entity.

In Stickley, the Commissioner clarified that the obligation to redeploy workers into an associated entity only arises where the employer is part of a group of associated entities who are subject to overall control by one member of the group.  Furthermore, there must also be managerial integration between the related entities.

Where the company is one of a group of related entities, the employer must also consider the reasonableness of redeploying the worker within the company’s subsidiaries by considering a range of factors such as:
-    the employee’s qualifications and experience and whether they align with any available positions;
-    where the available position is located in relation to where the employee lives; and
-    the remuneration on offer for the position.

The Commission also considered whether the employee would be required to compete for a position in a related entity with other applicants, noting that if the employee was required to compete for a position, this would suggest that the employee was not genuinely redundant.

After a consideration of the above factors, each of the four workers were found to have been made genuinely redundant. Kestrel Coal did not have an obligation to redeploy the workers within its related entities as the Commission noted that there was a lack of managerial integration between Rio Tinto’s company structures of ‘autonomous business units’, with each company making its own separate and distinct recruitment decisions.  

While the obligation to redeploy workers did not arise for Kestrel in this case, the FWC decision does raise additional considerations for employers to address when considering redundancies where their business forms part of a larger structure with related entities.

In order to avoid unfair dismissal claims in cases of redundancy, employers should carefully consider the business structure not only of their own company, but also the overall structure of the related entities within the larger corporate group.  Employers should also consider the extent of integration and managerial processes between these businesses and whether this raises further liability to consider comparative vacancies within the broader corporate structure.

For further information, please contact Townsends Business & Corporate Lawyers on (02) 8296 6222.