JobKeeper 2.0 – a crunch point for employers

Oct 2020 | Workplace Advisory

Since the JobKeeper extension took effect on 28 September 2020, many employers affected by the COVID-19 pandemic have been faced with a significantly increased wage cost in order to retain staff.

In the initial JobKeeper period, which ran from 30 March 2020 until 27 September 2020, eligible employees received $1,500 gross per fortnight irrespective of hours worked.

From 28 September 2020 until 3 January 2021, those payments have reduced to:

$1,200 gross per fortnight for eligible employees who worked 80 hours or more per fortnight in the four weeks prior to 1 March 2020 or 1 July 2020 (depending on the employee’s commencement date); or
$750 gross per fortnight for eligible employees who worked less than 80 hours per fortnight in the four weeks prior to 1 March 2020 or 1 July 2020 (depending on the employee’s commencement date).

Although JobKeeper enabling directions allow employers to take various measures with a view to ensuring the financial viability of the business and avoiding the need to terminate the employment of staff, the increased wage costs now being faced by employers may prompt many to review their staffing needs.

JobKeeper enabling directions

While an employer and employee remain eligible for JobKeeper, an employer may give a JobKeeper enabling direction to:

stand down an employee (in which case the employee would still be eligible to continue receiving JobKeeper payments);
alter the duties to be performed by an employee;
require the employee to perform duties at a place different from the employee’s usual place of work;
require the employee to perform duties on different days or at different hours than the employee’s usual work days/hours (including a reduction in hours); or
require an employee to take annual leave (provided the employee has a remaining annual leave balance of no less than two weeks at the end of the direction).

JobKeeper enabling directions are subject to notice and consultation requirements, must be made in writing, must not be unreasonable, and the employer must reasonably believe the direction is necessary for the continuation of the employee’s employment.

Critically, it is also important to note that any JobKeeper enabling direction which results in the employee working fewer hours will not impact on the employee’s leave entitlements. In other words, if a full-time employee has been stood down, they will continue to accrue leave entitlements as though they were working full-time.

These increasing leave liabilities have the potential to further eat into the bottom line for many businesses while turnovers remain low, leaving employers with little choice but to explore redundancies.

Impact of JobKeeper on redundancy consultation obligations

Pursuant to s 389 of the Fair Work Act 2009 (Cth) (FW Act), a dismissal will be a genuine redundancy if:

the employer no longer required the job to be performed by anyone because of changes in the operational requirements of the employer’s enterprise;
the employer complied with any obligation in an applicable modern award or enterprise agreement to consult about the redundancy; and
it would not have been reasonable in all the circumstances for the employee to be redeployed within the employer’s enterprise, or the enterprise of an associated entity.

In the current economic climate, employers tend to have little difficulty satisfying the first and third limbs of the test. It is nonetheless important for employers to ensure that:

the reason for dismissal is genuinely due to the operational changes - i.e. it is not permissible to 'mask’ a dismissal for performance or conduct reasons as a redundancy; and
all redeployment opportunities are explored. This extends to offering redeployment to positions which may involve lesser pay and responsibility, as well as roles which involve increased pay and responsibility (provided the employee has the skills and competence required to perform the higher role to the required standard either immediately or within a reasonable period of retraining).

Unsurprisingly, there have been a number of litigated unfair dismissal claims arising from redundancies necessitated by government restrictions and business downturn resulting from the COVID-19 pandemic.

The cases set out below provide useful guidance as to how the Fair Work Commission (FWC) is likely to approach some of the common issues which may arise in these circumstances.

Jennifer Wilson v Monizumi Pty Ltd T/A Shoji Australia [2020] FWC 2713

Ms Wilson had been employed by Shoji Australia (Shoji) for approximately ten years when her employment was terminated due to redundancy on 13 February 2020. Her role primarily involved the facilitation of student exchange programs between Australia and Japan.

Despite the fact that mainstream media was not treating the COVID-19 outbreak seriously at the time, Shoji had started to receive cancellations from school groups in early February 2020.

On 13 February 2020, Ms Wilson was notified of the redundancy of her position due to ‘severe downturn of the business activities caused by the recent Coronavirus outbreak and the concerns of future risks in the travel business under the current and foreseen future’s global outlook’.

Ms Wilson argued that Shoji still required her position to be performed because any school exchanges which had been cancelled were likely to be rescheduled, creating a significantly increased workload at some later point. In essence, Ms Wilson argued that Shoji had acted hastily in implementing the redundancy because she felt that any business downturn was likely to be short-lived.

By the time the matter was decided by the FWC in May 2020:

COVID19 had been declared a global pandemic; and
the Australian government had banned international travel, prompting the cancellation of all Shoji’s inbound and outbound student exchange programs.

While Shoji’s fears of a severe financial downturn were therefore proven to be well-founded, the FWC observed that ‘there is no requirement for a business to wait until a possible financial crisis has actually manifested itself before it takes action to protect its business interests’.

The FWC was satisfied that Shoji no longer required Ms Wilson’s position to be performed by anyone, and that there were no opportunities for redeployment. As Ms Wilson was not covered by an Award, there was no requirement for Shoji to consult about the redundancy.

Ms Wilson’s unfair dismissal claim was therefore dismissed on the grounds that it was a genuine redundancy.

Samuel McClelland v Kamori Australia Pty Ltd T/A Lone Pine Koala Sanctuary [2020] FWC 3707

Mr McClelland had been employed by Lone Pine for nearly five years when his employment was terminated due to redundancy on 3 April 2020.

Although Mr McClelland had performed various roles over the course of his employment, his role at the time of dismissal was in retail and photography.

On 26 March 2020, the federal government imposed restrictions which effectively prevented Lone Pine from opening, with the exception of an onsite café, which remained open for take-away orders.

Mr McClelland argued that the redundancy was not genuine on the grounds that:

his role was still required, noting several of the functions he had previously performed for Lone Pine continued to be performed by other staff;
the consultation process adopted by Lone Pine was ‘vapid and contrived’ in circumstances where consultation took place by email and telephone;
Lone Pine failed to adequately explore opportunities for redeployment; and
Lone Pine should have explored options other than redundancy, such as standing down employees and seeking the JobKeeper payment.

The FWC held that, notwithstanding that Mr McClelland may have previously worked in Lone Pine’s onsite café and in an IT role, the critical consideration was his position at the time of dismissal. As all retail and photography services had ceased due to government restrictions, the FWC was satisfied that Lone Pine no longer required Mr McClelland’s role to be performed by anyone.

The FWC further held that it was reasonable for Lone Pine to consult via email and telephone rather than in person in light of the gathering restrictions which were in force at the time.

The FWC also rejected Mr McClelland’s arguments surrounding redeployment, observing that his argument appeared to be that he should have been offered redeployment into casual work, in preference to other casuals retaining their roles. The FWC held that is not the test – the test is whether there were suitable ‘vacant’ positions into which Mr McClelland could be redeployed. As the casual roles were not vacant at the time of Mr McClelland’s dismissal, it was not reasonable to redeploy him into such a position.

Finally, the FWC held that any alternative measures such as standing employees down and seeking JobKeeper are not relevant to the determination as to whether there has been a genuine redundancy. Once it is established that the statutory test for a genuine redundancy has been met, the FWC does not involve itself in whether an employer’s decision to make operational changes was a good or bad decision.

Mr McClelland’s unfair dismissal claim was therefore dismissed on the grounds that it was a genuine redundancy.

Rachael Freebairn v Dandiie Pty Ltd T/A TJL Business Advisors and Accountants [2020] FWC 3915

Ms Freebairn had been employed by TJL as an administrative assistant for nearly seven years when her employment was terminated due to redundancy on 22 April 2020.

The evidence demonstrated that TJL’s business had suffered a downturn as a result of COVID-19 and had identified a need to reduce its operational costs. The FWC was satisfied that TJL no longer required Ms Freebairn’s role to be performed due to those operational changes.

However, as Ms Freebairn was covered by the Clerks – Private Sector Award 2020 (Award), TJL was obliged to comply with the consultation obligations in the Award. The only consultations which took place between TJL and Ms Freebairn included:

a staff meeting held on 18 March 2020, during which all staff were informed that TJL was considering ways to ensure the ongoing viability of business, and that staff may be directly affected; and
a meeting held between Ms Freebairn and a director of TJL on 25 March 2020, during which Ms Freebairn was advised that her position had been selected for redundancy because she would be better off financially if her employment ceased and she received JobSeeker. Ms Freebairn was asked if she had any questions, comments or suggestions. When she indicated she did not, she was handed a letter confirming the redundancy of her position.

The FWC found that TJL had not complied with its obligation under cl 38.1 of the Award to discuss with Ms Freebairn any measures to avoid or reduce the adverse effects of the operational changes. The FWC observed that ‘this obligation is not met by merely asking employees whether they have any questions, comments or suggestions. Nor is it met by informing an employee, as happened in this case, that the employee will be marginally better off financially by being dismissed and in receipt of JobSeeker payments than by remaining in employment on reduced hours’.

It was not in dispute that TJL also failed to comply with its obligation under cl 38.2 of the Award to provide information in writing about the changes, including their nature, the expected effect on employees, and any other matters likely to affect employees. This information must be provided in writing for the purpose of the discussion required under cl 38.1 of the Award. As Ms Freebairn had not received this information prior to the meeting on 25 March 2020, she was deprived of the opportunity to understand the changes, make sensible suggestions and ask relevant questions about the changes during the meeting on 25 March 2020.

As the FWC was not satisfied that the dismissal was a case of genuine redundancy, it then went on to consider whether the dismissal was harsh, unjust or unreasonable. Having regard to the factors in s 387 of the FW Act:

in circumstances where the dismissal was not for any reason related to capacity or conduct, the FWC found the factors in subsections (a)¹, (b)², (c)³ and (e)⁴ to be neutral;
the FWC was satisfied that Ms Freebairn had not been unreasonably refused a support person;
the FWC accepted that TJL was a relatively small employer which did not have access to dedicated human resources specialists or expertise;
when considering ‘any other matters the FWC considers relevant’, the FWC found that a proper consultation period would have extended to at least the end of March 2020, when the JobKeeper scheme was announced. In circumstances where all other administrative staff employed by TJL had their hours reduced in late March 2020, but had their usual hours reinstated once JobKeeper commenced, the FWC was satisfied that a proper consultation process would have resulted in Ms Freebairn remaining in employment and receiving the JobKeeper payment.

Having determined that reinstatement was not appropriate, the FWC ordered compensation in the amount of $3,189.01. In calculating the compensation figure, the FWC considered it relevant that Ms Freebairn’s position would likely have been made redundant approximately five weeks later, when TJL closed one of the offices at which Ms Freebairn performed her work.

In other words, there was no expectation on the part of the FWC that an employee in receipt of JobKeeper should be stood down rather than made redundant in order to ensure the employee’s continued receipt of JobKeeper payments.

Lessons

There is a common belief amongst employee representatives that a failure to consider JobKeeper payments during a redundancy consultation process will render a redundancy non-genuine.

While that is likely an overly simplistic approach to the FWC’s findings, it would nonetheless be prudent for employers to address the issue of JobKeeper during redundancy consultations if for no other reason than to reduce the likelihood of an employee being advised that the consultation process was deficient, and therefore being encouraged to pursue an unfair dismissal claim.

The recent decisions of the FWC make it clear that:

employers who are starting to feel the crunch of increased wage costs may take preemptive measures to ensure the ongoing viability of their business. There is no requirement for a business to wait until a financial crisis has manifested before reducing employee headcount;
the availability of alternative measures such as standing employees down and continuing to pay JobKeeper are not relevant to the determination as to whether there has been a genuine redundancy; and
if a dismissal is not a case of genuine redundancy, the FWC may consider the availability of such alternative measures in determining whether the dismissal was harsh, unjust or unreasonable.

.....

¹ Valid reason for dismissal related to capacity or conduct.
² Notification of reason for dismissal.
³ Opportunity to respond to reason for dismissal.
⁴ Prior warning of unsatisfactory performance.

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