When making an employee redundant, do you have to consider whether the employee could be redeployed to a position that’s currently outsourced to a contractor?

The Full Federal Court case of Helensburgh Coal Pty Ltd v Bartley [2024] FCAFC 45, suggests you do.

Let’s explore.

What happened in the Helensburgh Coal Case?

In the wake of the COVID-19 pandemic, Helensburgh Coal restructured its operations due to a decline in demand for coal, leading to inevitable redundancies.

Helensburgh Coal employed the bulk of the workers who worked at the Helensburgh Mine. However, some work was outsourced to Nexus Mining Pty Ltd and Menster Pty Ltd.

During the redundancy process, it was suggested that the work performed by contractors could, instead, be performed by existing employees of Helensburgh Coal – minimising the impact of proposed redundancies. Although some ‘insourcing’ was agreed to, arrangements with Nexus and Menster remained in place.

This raised a critical question: Should employers consider redeploying redundant employees to roles that may currently be outsourced to contractors?

The case went to the Fair Work Commission, which ruled that none of the redundancies qualified as ‘genuine redundancies’ under the Fair Work Act.

Why?

Because it would have been reasonable to redeploy them to roles or positions being undertaken by employees of Nexus and Menster.

This decision underscores several critical factors:

• Skills and capacity: the skills of the employees and their capacity to undertake the work of the contractors
• Specialised nature: delving into the specialised nature of outsourced tasks and the requisite training.
• Operational practicality: Evaluating the feasibility and challenges of insourcing.
• Feasibility of redeployment: Assessing barriers, including contractual obligations and skills gaps.

The Full Court of the Federal Court upheld the Fair Work Commission’s ruling. Quoting from the judgment, “…there is no reason to excise from ‘all [of] the circumstances’ the possibility that an employer might free up work for its employees by reducing its reliance upon external providers.”

What this means for employers

This case highlights the necessity for employers to explore all avenues before resorting to redundancies.

While barriers to redeployment may exist, such as skills misalignment or contractual complexities, the ruling underscores the obligation to thoroughly assess these possibilities.

So, where does this leave employers?

The verdict accentuates the imperative to deliberate on redeployment opportunities before deeming redundancies as the sole solution. It prompts a reevaluation of redundancy practices, advocating for a nuanced approach that prioritises the welfare of employees.

The Helensburgh Coal case serves as a catalyst for recalibrating redundancy processes in the context of outsourced operations. It underscores the significance of considering redeployment options, paving the way for a more equitable and conscientious approach to employment transitions.

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