“Unsophisticated employer”: Fair Work rules Perth company unfairly dismissed worker it made ‘redundant’

The Fair Work Commission has been highly critical of the human resources practices of a Perth tradie directory platform, finding it unfairly dismissed its account manager when it claimed it had to make her redundant because the business was struggling to “keep up with its creditors”.

Local Trades is a Western Australian business directory that connects tradespeople with customers. At the start of the year its former customer service and account manager brought unfair dismissal proceedings against the business after it ended her employment in December 2017 by telling her that “due to financial and operational struggles of the company”, she had to be made redundant.

The worker claimed she had been unfairly dismissed because not only did her boss fail to consult with her about possible redeployment options, another staff member was also hired to do parts of her role.

She claims she was even instructed to email clients in the days before she finished with the business, informing them of the commencement of this new worker.

In response, the company asserted it had followed its responsibilities under the Small Business Unfair Dismissal Code. It said the new employee was a contractor and the cost of this person was “nowhere near the cost of employing a full-time person”.

“Our business is losing money and struggling to keep up with its creditors. So the decision of dismissal was a genuine case of trying to survive in the business,” the employer said.

The business provided documents outlining that for the six months to December 31, 2017, it experienced a net loss of tens of thousands of dollars.

However, Fair Work Commission deputy president Abbey Beaumont said while it was clear management thought they were executing a genuine redundancy, it doesn’t mean they were.

Beaumont said the business needed to prove the worker’s role was no longer needed to be performed in order for a redundancy to take place. There were no details provided as to the nature of the new hire and whether they were an employee or contractor.

Beaumont said the business had not proved that it no longer needed someone to do the account manager’s job. She was critical of the lack of procedural fairness the business showed throughout the process, given the company had clearly decided to dismiss the worker before having the conversation with her about the company’s situation.

She labelled the business an “unsophisticated employer” without a human resources department, but said lacking this human resources experience was no excuse for not being able to follow basic process. For example, if the case was actually a genuine redundancy, the business should have at the very least offered a four-week payout, which it did not, Beaumont said.

The dismissal was found to be unfair and the parties have been invited to make submissions about an acceptable penalty.

SmartCompany has contacted Local Trades but did not receive a response prior to publication. The former employee could not be contacted.

Write everything down

This case drives home for small businesses the importance of “approaching redundancies carefully and with conscious thought”, says Holding Redlich partner Rachel Drew.

“They need to make sure they write down their decision-making process before they enter into consultation with the employee,” she says. 

If small business owners do not keep detailed documents on an employee’s redundancy, they can struggle to recall the order of their decision making if they are called before the Fair Work Commission, Drew says.

“The employer needs to be able to show it does not require the employee’s job to be done by anyone. The second obligation is that they have to engage in a consultation process about the redundancy, and they have to consider whether the employee can be redeployed within the company,” she says.  

Even if the business believes it was right to make a worker redundant, if the employer can’t show the Commission why the job didn’t need to keep being performed, and what the business looks like now that the role has been eliminated, then it’s very tricky to assert the redundancy was real, Drew says.

“While oral evidence can be presented to the Commission, there are lots of challenges with this. In a busy small business it is very difficult to a couple of months later remember the exact process you followed to reach a decision,” she says.  

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