Restructuring: The risks of overlooking redeployment opportunities

On 5 April 2024, the full Federal Court handed down a notable decision on an employer’s obligation to explore reasonable redeployment opportunities when effecting redundancies within their organisation.

In Helensburgh Coal Pty Ltd v Bartley [2024] FCAFC 45 (5 April 2024) (Helensburgh Coal), the Court dismissed the Applicants’ judicial review application, finding that the Fair Work Commission (FWC) was correct to conclude that the dismissal of 22 employees was not a “genuine redundancy” in circumstances where it was reasonable for the employer to redeploy the affected employees to positions occupied by independent contractors.

We unpack the findings and explore its implications for employers looking to implement organisational change.

What happened in this case?

Helensburgh Coal Pty Ltd (Helensburgh) is a large mining company that employs workers to operate a coking coal mine owned by Peabody Energy in Helensburgh, NSW.

In August 2018, Helensburgh entered into a two-year services agreement with Nexus Mining Pty Ltd (Nexus) to supply contractors who would supplement Helensburgh’s permanent employee workforce at the mine.

The following year, Helensburgh entered into a second services agreement with Mentser Pty Ltd (Mentser) after a safety incident involving the mine’s underground conveyor belt system. While Mentser was only initially engaged to conduct a safety inspection of the mine’s conveyor system, Helensburgh subsequently agreed to outsource all servicing and auditing of the mine’s conveyor system to Mentser from April 2020.

When the COVID-19 pandemic hit, Helensburgh experienced an unprecedented reduction in the demand for coking coal. In response to the poor economic climate, Helensburgh reduced its operations at the mine, transitioning from a seven-day work week (with five crew) to a six-day work week (with four crew).

While Helensburgh insourced some of the contractors’ work to existing employees, they proceeded to dismiss 90 employees and reduced the number of contractors working at the mine by 40 per cent. Despite these mass redundancies, Helensburgh elected to continue under its existing services agreements with Nexus and Mentser.

On 10 July 2020, 22 of the employees challenged their dismissal in the FWC, contending that their dismissal was not a “case of genuine redundancy” as Helensburgh could have redeployed them to other roles that contractors from Nexus and Mentser were performing.

When will a dismissal be a “genuine redundancy” under the Fair Work Act?

In considering whether a dismissal is a “genuine redundancy” under section 389 of the Fair Work Act, the Commission must be satisfied that:

• the employee’s role is no longer required due to changes in the operational requirements of the business
• the employer has complied with its obligation to consult with affected employees under any applicable modern award or enterprise agreement
• it was not “reasonable in all the circumstances” to redeploy the employee to another role within the employer’s enterprise or an associated entity of the employer.

The decision in Helensburgh Coal ultimately turned on the last of these criteria, being whether it was reasonable for Helensburgh to reduce its reliance on independent contractors and redeploy its affected employees to positions held by contractors.

Proceedings in the Fair Work Commission (FWC)

This case has an extensive procedural history in the FWC. The outcome of each previous decision is set out below:

Mr Neil Bartley & Ors v Helensburgh Coal Pty Ltd [2020] FWC 5756

• Commissioner Riordan (Commissioner) found that the dismissals were not a “genuine redundancy” as it was reasonable for Helensburgh to insource some of the work undertaken by Nexus and Mentser. This was because the work being carried out by Nexus and Mentser contractors was not “specialist work” and was “within the skills and competencies” of the permanent employee workforce at the mine (at [58]-[59])

Helensburgh Coal Pty Ltd v Bartley & Ors [2021] FWCFB 2871; (2021) 306 IR 219

• the Full Bench of the FWC quashed the Commissioner’s first instance decision, finding that the Commissioner did not have an evidentiary basis to conclude that it was reasonable to consider insourcing work performed by contractors (at [90])

Bartley & Ors v Helensburgh Coal Pty Ltd [2021] FWC 6414

• he Commissioner again ruled in favour of the employees, finding that the dismissals were not a “genuine redundancy”. The work being performed by Nexus and Mentser was not regarded as exclusively specialist in nature and was capable of being performed by Helenburgh’s permanent employee workforce (at [101]-[104])

Helensburgh Coal Pty Ltd v Bartley & Ors [2022] FWCFB 166

• The Full Bench upheld the Commissioner’s decision, finding that the errors in the Commissioner’s decision did not warrant quashing the decision (2022 decision).

The 2022 decision, which was the only decision relevant for the purpose of the judicial review proceedings in the full Federal Court, involved the Full Bench assessing whether the Commissioner had incorrectly applied the test under section 389(2) of the Fair Work Act. This test required a decision-maker to consider whether redeployment was “reasonable in all the circumstances”. 

The Full Bench found that the Commissioner was correct to consider:

• the skills of the employees seeking redeployment
• whether Nexus and Mentser contractors were performing “specialist work”
• any training required to carry out the work performed by Nexus and Mentser contractors
• the employees’ capacity to undertake the work being performed by Nexus and Mentser contractors
• the practicality of insourcing the work currently being performed by contractors.

While the Full Bench ultimately upheld the Commissioner’s decision, it found that the Commissioner had erred by failing to consider the implications of terminating Helensburgh’s existing services agreements with Nexus and Mentser or the impact insourcing may have on the contractors’ employees.  

Proceedings before the full Federal Court

Helensburgh commenced judicial review proceedings in the full Federal Court, arguing that the 2022 decision should be quashed on the basis that it was a product of jurisdictional error.

Among other grounds of review, Helensburgh contended that the Full Bench had misconstrued section 389 of the Fair Work Act by finding that it required an employer to consider redeploying employees to roles already filled by contractors.

The full Federal Court dismissed the judicial review application, finding that it was “reasonable in all the circumstances” for Helensburgh to reduce its reliance on external service providers and redeploy its affected employees to positions currently occupied by contractors. The Court held that “reasonable in all the circumstances” requires analysis of what an employer could have done apart from dismissing the employee. The fact that redeployment was made more difficult by the need to retrain employees did not act as a barrier to redeployment. 

Key takeaways

The decision in Helensburgh Coal serves as a stark warning for employers that termination of employment due to redundancy should be viewed as a ‘last resort’. The FWC will only be satisfied that a dismissal is a “genuine redundancy” when an employer has considered all options short of dismissing an employee. These options include:

• redeploying an employee to a role occupied by an independent contractor or position occupied by a labour hire employee
• retraining an employee for a different position
• retaining an employee for a short period in circumstances where a redeployment position is expected to become available.

If you have any questions regarding this article, please get in touch with a member of the team below.

Disclaimer
The information in this article is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this article is accurate at the date it is received or that it will continue to be accurate in the future.

Published by:

Jennifer van Bronswijk

Annelise Harper

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