A new High Court ruling has just made it trickier to claim a dismissal is a ‘genuine redundancy’, especially if you use contractors or labour hire.

The case saw Metropolitan Coal Mine workers take on Helensburgh Coal after being dismissed and replaced by contractors when coal prices dropped. The judgment in favour of the coal miners has ramifications for businesses of all sizes.

The High Court decision confirms it’s no longer enough to shrug and say no other roles are going. Employers now have to show they seriously considered whether their business could be rejigged to avoid the redundancy. Reshuffling roles and replacing contractors to redeploy staff instead of showing them the door will become a mainstay. So, even if a job doesn’t currently exist, you might still be expected to create one if it’s reasonable to do so. If contractors are doing similar work, the Fair Work Commission (FWC) will closely inspect whether you could have shuffled things around to keep the employee on.

High Court ruling expands definition of ‘genuine redundancy’

Under section 389(2) of the Fair Work Act, the Fair Work Commission now has more room to dig into whether an employer could have restructured their workforce to make a role available. This poking around could involve examining jobs currently filled by contractors or labour hire workers. Plus, asking whether it would have been reasonable to reorganise the work to create a position for someone facing redundancy. The ruling also stretches to positions that are about to become available, not just the ones open right now.

The upshot? Redeployment doesn’t have to be into an existing vacancy. The law now says ‘reasonable’ changes should be on the table to keep someone on the books.

Why this is a big deal for Australian small business owners

HR consulting firm Peninsula, which advises more than 24,000 small and medium businesses in Australia, says redundancy is already one of the top three headaches their clients ask about. This ruling cranks up the pressure.

Stephen Roebuck, Peninsula’s Associate Director of Consultancy, says business owners need to tread very carefully.

“If the business could be reorganised to prevent the redundancy, for example, by reducing reliance on contractors, you could be exposed to costly unfair dismissal claims,” he warns.

Roebuck says even if you need to train someone up for a new role, that alone isn’t a get‑out‑of‑redeployment‑free card under the Fair Work Act.

How to avoid unfair dismissal claims after the ruling

If you’re considering making a role redundant, it’s time to thoroughly review your options. Check whether you can shuffle the workload, trim back your contractor use, or move things around to make room for the person in another role. Review your labour hire agreements to make sure they’re not stepping on your employees’ toes, and maintain records of every redeployment option you’ve considered.

The High Court’s decision indicates redundancy is now under the microscope. Moving forward, any business planning redundancies need to ensure they are ‘genuine’. If you’re uncertain, get HR advice before you take action. It could save you from an expensive day in Court.

Looking for more HR advice for your business? Check out our HR hub.

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