Genuine Redundancy vs Unfair Dismissal: Navigating Section 389 Consultation

For Australian employers undergoing a restructure, the term “genuine redundancy” is often treated as an automatic legal shield. The prevailing logic seems simple: the business is cutting costs, the position is being eliminated, so the dismissal cannot be unfair.

The Fair Work Commission (FWC) sees it differently.

Every year, businesses with legitimate commercial reasons to downsize face unfair dismissal claims and potentially substantial compensation orders. They do not necessarily lose because the financial downturn was fabricated; they may lose because they failed to satisfy the procedural requirements of Section 389 of the Fair Work Act 2009.

Under Australian workplace law, genuine redundancy can prevent an employee from succeeding in an unfair dismissal claim. However, if an employer fails to comply with applicable award consultation obligations or does not properly consider redeployment, the dismissal may be subject to unfair dismissal scrutiny.

Here is a practical guide to navigating the three requirements of Section 389, managing consultation obligations and conducting a defensible restructure.

Businesses planning a restructure can also seek professional support through LiquidHR’s HR consulting services, which help organisations navigate complex HR matters and manage workplace challenges.

The Three Statutory Requirements of Section 389

To establish that a dismissal was a genuine redundancy, an employer must satisfy the requirements set out in Section 389 of the Fair Work Act 2009.

• Operational requirements (Section 389(1)(a)): The employer no longer requires the person’s job to be performed by anyone because of changes in the operational requirements of the enterprise.
• Consultation obligations (Section 389(1)(b)): The employer has complied with any obligation in an applicable modern award or enterprise agreement to consult about the redundancy.
• Reasonable redeployment (Section 389(2)): It would not have been reasonable in all the circumstances for the person to be redeployed within the employer’s enterprise or the enterprise of an associated entity.

Failing to satisfy any one of these requirements can mean the dismissal does not qualify as a genuine redundancy under Section 389.

Hurdle 1: The Job No Longer Exists (Operational Change)

The first requirement is generally easier to demonstrate when the business maintains accurate documentation. A role may become redundant when the functions and duties associated with it are no longer required to be performed by anyone.

The Fair Work Ombudsman’s guidance on redundancy explains when a redundancy may be considered genuine and outlines the importance of operational changes and applicable consultation requirements.

Legitimate operational reasons for redundancy may include:

• Restructuring to reduce overheads during a revenue downturn.
• Merging duties between departments following technological automation or process improvements.
• Outsourcing non-core business activities to third-party providers.
• Relocating or closing a specific branch, factory or site.

The Fatal Mistake: Disguising Performance Issues as Redundancy

If an employer uses redundancy to terminate a difficult or underperforming employee without following an appropriate performance management process, the genuine redundancy defence may be challenged.

If the Commission finds that the duties of the role are still being performed, or that a new worker was recruited into the same or a substantially identical role shortly after the termination, the employer may struggle to demonstrate that the position was genuinely no longer required.

The substance of the organisational change matters more than the job title assigned to the former position.

Hurdle 2: The Redundancy Consultation Process in Australia

Compliance with applicable award and enterprise agreement consultation requirements is a critical part of the genuine redundancy assessment.

Many modern awards and enterprise agreements contain consultation clauses requiring employers to consult when they have made a definite decision to introduce major changes that are likely to have significant effects on employees, including changes that may result in redundancies.

Employers should identify the applicable industrial instrument and understand its specific consultation requirements before proceeding.

The Fair Work Commission’s guidance on consultation obligations explains when consultation requirements apply, how they operate under modern awards and enterprise agreements, and why consultation must be genuine rather than merely a formality.

What Genuine Consultation Involves

Consultation is not simply a notification exercise. Informing an employee that their role has been made redundant after the decision has already been finalised does not, by itself, satisfy applicable consultation obligations.

A practical redundancy consultation process can be organised into four phases.

Phase 1: Formal Notification of the Proposed Major Change

Once a definite decision has been made to introduce proposed structural changes that may lead to job losses, employers should follow the consultation requirements in the applicable industrial instrument.

This may involve:

• Notifying affected employees in writing that their positions are at risk of redundancy.
• Explaining the nature of the proposed operational changes and their anticipated effects on staffing.
• Outlining any measures being considered to avoid or minimise adverse effects.
• Providing relevant information while appropriately protecting confidential commercial or financial information.

Phase 2: The Consultation Meeting

Arrange a meeting with the affected employee and provide reasonable notice so they can prepare and, where appropriate, arrange for a support person to attend.

During the meeting:

• Explain the business rationale for the proposed changes clearly and objectively.
• Give the employee an opportunity to ask questions.
• Invite suggestions for alternatives, including cost-saving measures, job-sharing, reduced hours or internal transfers.
• Explain the next steps and how the employee can provide further feedback.

Phase 3: Genuine Consideration of Alternatives

Employers should actively consider the issues and alternatives raised by affected employees.

They are not necessarily required to accept every suggestion. However, they should be able to demonstrate that relevant proposals were genuinely considered rather than dismissed automatically.

Documenting the feedback received, the alternatives assessed and the reasons for the decisions made can help demonstrate that consultation was meaningful.

Phase 4: Communicating the Final Decision

If the employer confirms that the redundancy must proceed after considering the relevant feedback and alternatives, it should provide formal written communication explaining the outcome.

Depending on the circumstances, this should address:

• The operational reasons for the redundancy.
• The employee’s notice period or payment in lieu of notice.
• Applicable redundancy pay entitlements under the National Employment Standards (NES) or other relevant provisions.
• Final pay arrangements, including accrued annual leave and any applicable long service leave entitlements.

Employers should verify the applicable entitlements before communicating the final figures.

Hurdle 3: Exploring Redeployment Obligations

Under Section 389(2), a dismissal is not a genuine redundancy if it would have been reasonable in all the circumstances for the employee to be redeployed within the employer’s enterprise or an associated entity.

Meeting redeployment obligations requires more than a casual review of vacancies. Employers should conduct and document reasonable inquiries into available roles across the relevant business and associated entities.

The Fair Work Commission’s guidance on redeployment explains how factors such as available positions, employee qualifications, remuneration, location and opportunities within associated entities may affect whether redeployment is reasonable.

Businesses that need ongoing support with workforce planning, employee relations and HR processes can explore Liquid HR’s HR outsourcing services.

1. Consider the Enterprise and Associated Entities

The redeployment assessment should not automatically stop at the employee’s immediate team or department.

The entire enterprise: Employers should consider relevant vacancies across the enterprise, including other departments, interstate branches and remote offices.

Associated entities: Where applicable, employers should also assess opportunities within associated entities, taking into account the relevant legal definitions and circumstances.

This may include roles within a corporate group, such as a parent company, subsidiary or sister company, where the relevant entity meets the applicable legal definition.

2. What Constitutes Reasonable Redeployment?

A vacant role does not necessarily need to match the employee’s existing salary, status or job title to be considered a potential redeployment option.

Relevant considerations may include:

• Whether the employee has the necessary skills, qualifications and experience to perform the role, including whether reasonable retraining is possible.
• The location of the position relative to the employee’s residence.
• The remuneration and other conditions associated with the role.
• The nature and responsibilities of the position.

The assessment depends on the circumstances of the individual case.

The Assumption Trap

Employers sometimes assume that an employee will not accept a lower-paid or less senior role and therefore do not consider offering it.

For example, an employer may decide not to raise an available administrative position paying $75,000 with a senior manager previously earning $160,000 because it assumes the employee would reject the offer.

That assumption may be misplaced.

Employers should assess whether available positions could constitute reasonable redeployment options rather than automatically excluding them because of differences in pay, seniority or responsibilities.

Where a position is a viable option, presenting it to the employee and allowing them to consider it may be appropriate. The employer should not make assumptions about the employee’s preferences without properly assessing the circumstances.

Four Red Flags That Can Turn Redundancies into Unfair Dismissal Claims

For an overview of how genuine redundancy is assessed and how redundancy interacts with unfair dismissal applications, consult the Fair Work Commission’s redundancy guidance.

1. Predetermining the Outcome

Preparing termination paperwork, finalising severance payments or drafting a farewell announcement before consultation has taken place may suggest that the outcome was predetermined.

Employers should ensure the consultation process allows genuine consideration of feedback and alternatives before a final decision is made.

2. Ignoring Award Coverage

Employers should not assume that an employee is award-free simply because they receive a salary above the relevant award rate.

Award coverage depends on the applicable award, the employee’s role and duties, and the relevant coverage and classification provisions. Where an employee is covered by a modern award or enterprise agreement, the applicable consultation requirements must be followed.

3. Advertising Vacancies Immediately After Dismissal

Advertising a substantially similar role shortly after making an employee redundant may raise questions about whether the position was genuinely no longer required.

Employers should ensure that recruitment decisions and organisational changes are consistent with the documented reasons for the redundancy.

4. Targeting Employees Because They Exercised Workplace Rights

Using a restructure to target employees because they have recently returned from parental leave, lodged workers’ compensation claims or raised workplace safety concerns can create significant legal risks.

Depending on the circumstances, such conduct may raise general protections or other discrimination-related issues under applicable legislation, in addition to any unfair dismissal concerns.

Employers should ensure that redundancy decisions are based on legitimate operational requirements and are not influenced by unlawful considerations.

Action Checklist for Australian Employers

Before implementing an organisational restructure or redundancy, employers should work through the following checklist:

• Identify the applicable industrial instrument: Confirm whether affected employees are covered by a modern award or enterprise agreement and identify the relevant consultation requirements.
• Document the business case: Record the commercial reasons for the restructure and the operational changes being considered.
• Check vacancies across the business: Conduct a reasonable search for suitable redeployment opportunities throughout the enterprise and relevant associated entities.
• Notify employees of the proposed changes: Provide the information required under the applicable consultation provisions.
• Conduct consultation meetings: Give affected employees a meaningful opportunity to discuss the proposed changes and suggest alternatives.
• Document the consultation process: Keep accurate records of meetings, employee feedback, alternatives considered and the reasons for decisions.
• Assess redeployment options: Consider relevant vacancies and communicate potential opportunities to affected employees where appropriate.
• Calculate final entitlements correctly: Verify notice, redundancy pay and other final payment obligations under the applicable legislation and industrial instruments.

A restructure should strengthen an enterprise, not create avoidable legal disputes.

By approaching consultation and redeployment as rigorous, documented business processes rather than administrative hurdles, employers can manage organisational change while reducing legal risks and preserving procedural fairness.