What is a sham redundancy?

sham redundancy

A sham redundancy is often a way for employers to get rid of an employee that they dislike. Or perhaps because they exercised a workplace right like, for instance, making a bullying complaint. These employers will use the excuse that they can no longer afford the employee, or that their job is no longer needed.

Of course, many employers have legitimate reasons to let an employee go. However, some fail to comply with their legal obligations when doing so. For example, they may not have an adequate redundancy consultation with the worker. Or they may not make a genuine effort to see if the worker can be redeployed to another role within the business.

She would do “any activity” to avoid redundancy

Manager Says

A recent Federal Court case shed light on sham redundancies. It involved Bureau of Meteorology manager Jasmine Chambers who believed she was let go due to taking two taking two days of approved leave. The leave was taken while she was at a work event in Paris. Her manager thought that taking the leave would look bad to the public. Ms Chambers had asked colleagues if it was normal for employees to take leave while overseas. They replied that “it is something that people do all the time.”

The bureau claimed it was unable to find another job for Ms Chambers elsewhere in the business. But she told the court that she was willing to do “any activity” rather than lose her job. When asked by the judge if that included delivering mail, Ms Chambers answered “yes.”

Manager made bullying complaints

Ms Chambers is suing the bureau for breaching the Fair Work Act 2009. She told the court that she had made a complaint in 2019 about bullying at the bureau. She also claimed that she had experienced “unjustified and vague” criticisms about her performance. And that managers at the bureau had made “bizarre” comments to her, including that she should not wear a “fancy suit.”

We’ll have to wait and see if the court decides that Ms Chambers was the victim of a sham redundancy. As of writing, the case is still in motion.

What is a sham redundancy?

When an employer makes an employee redundant due to changes in its operational requirements, they must adhere to certain obligations required by the Fair Work Act 2009. They must ensure that:

  1. The role is genuinely not needed
    The employer must ensure that the worker’s role is no longer required to be performed by anyone else. This means, for example, if the employer seeks to recruit someone for the role a few months down the track, it was a sham redundancy.

    It also means that an employer simply cannot let you go because they do not like you. Or because you made a workplace complaint. The reasons for letting you go must be genuinely related to the changing operational requirements of the company. For instance, if it is experiencing financial struggles and can no longer afford to pay you.
  2. The worker can’t be redeployed
    An employer must ensure they genuinely try to find another role for the worker within the business. Or within an associated entity. This could be a role within the business of a long-time customer or business partner, for example.
  3. Conduct a consultation

Before the redundancy takes place, the employer must also genuinely consult with the employee. However, this is generally only required if the employee is covered by a modern award or enterprise agreement that specifies a consultation process must take place. A consultation should involve a conversation about the changes to the worker’s employment. And the possibility of redeployment or any steps the employer can take to lessen the effect of the proposed redundancy.

sham redundancy case Australia

Unfair dismissal case: Redundant worker not offered alternative role

The unfair dismissal case Alesia Khliustova v Isoton Pty Ltd [2023] provides an example of a sham redundancy. It involved Alesia Khliustova, who worked as a full-time software engineer for Isoton. In mid-2022, the company decided to establish a technical support function in India, which aimed to decrease long term costs. Initially, it intended to hire 12 technical support workers in India.

However, the company soon encountered financial challenges due to the deferment of a major contract and substantial revenue loss. This saw the need to remove a number of the positions intended for its Indian support team, in addition to four positions in Australia. One of these positions was Ms Khliustova’s.

On 10 December 2022, she was informed that she was surplus to requirements and that her last day would be 9 January 2023. The company provided several reasons why it was dismissing her. This included an “extra large project” for a client who “cancelled and failed to pay.” Also, “several large projects” that were “pushed out and cancelled.” Isoton also said that it had a “significant company tax bill” and had “issues with staff efficiency and overall profit.”

Isoton interviewed for roles while making others redundant

In her unfair dismissal claim, Ms Khliustova disagreed with the fact that Isoton needed to let her go. She argued to the Fair Work Commission that there had not been a change in the company’s operational requirements. And that she had therefore experienced a sham redundancy.

The reason Ms Khliustova made this claim is because she said that Isoton’s general manager interviewed candidates for various roles in India between 29 November 2022 and 9 January 2023. In her opinion, this showed that the work she performed was still required. And that she could have performed at least one of the roles in India.

Isoton denies sham redundancy

Isoton, however, provided the Fair Work Commission with the reason why it did not offer Ms Khliustova the India-based role. Its general manager said that he “did not believe she would have accepted it.” Namely, because it “was in India and had a lower level of remuneration compared to the Australian role.” Isoton also argued that there were no other positions within the business that Ms Khliustova could have been redeployed to.

Was it a sham redundancy? The Fair Work Commission decides.

At Ms Khliustova’s unfair dismissal hearing, the Fair Work Commission first examined whether Isoton held a genuine redundancy consultation with her. Ms Khliustova had a right to one as she was covered by the Professional Employees Award 2020, which mandates specific consultation requirements for major workplace changes.

Isoton maintained that it held a consultation with Ms Khliustova on 9 December 2022. However, she claimed that she was notified of her dismissal a day prior to this meeting. The Fair Work Commission found that Isoton’s consultation was perfunctory and failed to meet the Award’s explicit requirements.

Isoton could have offered India-based role

The Fair Work Commission also took issue with Isoton failing to offer Ms Khliustova the India-based position. It found that the company did not meet the redeployment requirements of the Fair Work Act 2009. This was because there was a reasonable opportunity for Ms Khliustova to be redeployed within the business.

The Fair Work Commission said that had Isoton held a genuine consultation with Ms Khliustova, it would have learned that she may have been willing to relocate and work in a different country, even with the lower salary.

“It is dangerous for employers with redeployment options to fetter offers based on their own prejudices,” the Fair Work Commission said.

Ultimately, the Fair Work Commission ruled that Ms Khliustova had experienced a sham redundancy. Her unfair dismissal claim was referred to another member of the Fair Work Commission for further conciliation.

redundancy of a professor - real case

University fined $37,00 for sham redundancy

The Federal Court of Australia case National Tertiary Education Union v Royal Melbourne Institute of Technology [2013] saw Melbourne’s RMIT University cop a huge fine for dismissing a prominent professor. This came after she made a general protections (adverse action) claim with the Fair Work Commission regarding what she called her sham redundancy.

“A history of major work-based conflict”

Professor Judith Bessant was a professor in the Youth Work discipline of RMIT’s School of Global Studies, Social Science & Planning. She reported to Professor David Haywood, who in 2009 and 2010 had been subject to bullying complaints made by Professor Bessant. In 2010, RMIT sought to look into the financial viability of certain schools within the university.

Professor Haywood was tasked with doing this for his school. During this process, he wrote to Professor Bessant telling her that she had been earmarked for redundancy. Professor Haywood told RMIT that he had chosen Professor Bessant for “a mixture of interpersonal, organisational and financial reasons.” He also highlighted that she had “a history of major work-based conflict.”

Professor makes further bullying complaints

In April and June 2010, Professor Bessant complained yet again about bullying from Professor Haywood. In June, she also initiated an action under her enterprise agreement regarding what she believed was RMIT’s failure to meet its statutory health and safety obligations. This led to the establishment of a Redundancy Review Committee, which obliged the university to take steps to placate Professor Bessant. One of these steps involved moving her to another office.

RMIT then hired a human resources consultant who determined that there was no proof for the Professor’s bullying complaints. It did, however, note that there were flaws in the restructuring process that were to her detriment.

Professor is made redundant

Following a meeting on 18 July 2011, Professor Hayward told Professor Bessant that her job “had been identified as potentially redundant.” She later engaged in a conciliation with RMIT, being represented by the National Tertiary Education Union (NTEU). But this did not reach a resolution. Then on 28 October 2011, Professor Bessant was told that she would be let go.

Together with the NTEU, Professor Bessant made a general protections (adverse action claim) with the Fair Work Commission. She argued that she was the victim of a sham redundancy and had been let go because she had made bullying complaints. Also, because she had exercised a workplace right. The Professor also claimed that RMIT had breached the terms of the enterprise agreement.

RMIT accepted that Professor Bessant’s dismissal constituted adverse action. However, the university claimed that it was not unlawful adverse action. This is because she had been chosen to be let go due to the Youth Work discipline’s financial troubles.

Federal Court provides ruling

Professor Bessant’s adverse action claim required RMIT to demonstrate that her dismissal was not motivated by a prohibited reason. Failure to discharge this reverse onus of proof could incur significant penalties. After considering all the evidence, the Federal Court of Australia found several flaws with RMIT’s arguments.

It accepted that the Youth Work Discipline was losing money. However, it disagreed with RMIT’s claim that the reasons for Professor Bessant’s dismissal were “primarily financial.” The court did not find a clear connection between that and the decision to let her go, branding the redundancy a “sham.” It said that RMIT used it as an excuse to get rid of Professor Bessant, partly due to her exercising her workplace rights b making bullying complaints.

Examining the enterprise agreement breach

The Federal Court’s scrutiny extended to RMIT’s breach of the enterprise agreement. Despite the Redundancy Review Committee highlighting the absence of natural justice in the redundancy process, RMIT proceeded with the termination. The enterprise agreement also mandated offering a voluntary redeployment process before redundancy, which was not provided to Professor Bessant.

Professor is reinstated

The Federal Court was not satisfied that the reasons for Professor Bessant’s did not include a prohibited reason. It therefore ruled that adverse action had been taken against her and that she had been a victim of a sham redundancy. RMIT was ordered to reinstate Professor Bessant and pay a combined penalty of $37,000. This was for contravening the adverse action provisions of the Fair Work Act and breaching the enterprise agreement.

Have you been unfairly dismissed?

We at A Whole New Approach are Australia’s leading workplace mediators and commentators. Our experts can help simplify the processes of contesting your dismissal through the Fair Work Commission. We can also help you take action against your employer if they violated your casual rights. Or if you experienced discrimination or sexual harassment while at work.

Contact us today at 1300 766 700 for a free and confidential conversation about your situation.