In considering the scope of redeployment obligations that must be met to engage the “genuine redundancy” defence to an unfair dismissal claim, the High Court has unanimously held that it may be reasonable and necessary for an employer to consider whether the employee could perform a contractor’s work.
In reaching this conclusion in Helensburgh Coal Pty Ltd v Bartley,[1]the majority expressed a clear view that employers should not simply take a static view of their organisation to see whether there are any currently vacant and suitable roles, as this would be an impermissibly narrow approach. This reasoning may have implications stretching beyond circumstances involving the use of contractors.
Background
In 2020, Helensburgh Coal Pty Ltd (Helensburgh Coal) faced a downturn due to COVID-19. To adapt, it scaled back its mining operations meaning that fewer workers were needed. During redundancy consultations, employees asked Helensburgh Coal to reduce its reliance on contractors from Nexus Mining Pty Ltd (Nexus Mining) and Mentser Pty Ltd (Mentser) in order to preserve direct hire employees. Helensburgh Coal went ahead with the restructure and cut its direct workforce by 90 employees, but continued to engage 90 Nexus and 8 Mentser contractors at the mine.
Twenty-two of the dismissed employees brought unfair dismissal applications in the Fair Work Commission (FWC). Helensburgh Coal objected to each of the applications, stating that all the dismissals were a result of genuine redundancy and therefore not capable of being regarded as unfair dismissals.
The matter involved a long procedural history in the FWC, including an initial decision, an appeal, a fresh decision on remittal and then a further FWC appeal. The conclusion of these proceedings was a finding that Helensburgh Coal could have redeployed the employees into roles being performed by contractors. An application for judicial review brought by Helensburgh Coal was dismissed by the Full Federal Court, leading to a final appeal to the High Court.
The legal questions
There were essentially two questions before the High Court:
- Whether s389(2) of the Fair Work Act 2009 (Cth), which states that a person’s dismissal is not a case of genuine redundancy if it would have been “reasonable in all the circumstances” for the employee to be redeployed, allows the FWC to consider if an employer could change how it uses its workforce – for example, by insourcing work from contractors to direct hire employees (Primary Question); and
- Whether the Full Bench of the FWC applied the incorrect standard of appellate review when considering the decision of Commissioner Riordan, the first instance decision-maker (Secondary Question). Helensburgh Coal alleged that the question of whether redeployment was reasonable has a right and wrong answer, such that no latitude or discretion is afforded to the FWC when determining these matters.
The High Court’s decision
In relation to the Primary Question, the majority (Gageler CJ, Gordon J and Beech-Jones J) analysed the requirements of a “genuine redundancy”.
Importantly, they held that two threshold requirements, being whether the employer no longer requires the employee’s job to be performed by anyone and whether this is because of changes in the operational requirements of the employer’s enterprise, are matters for the employer alone and are not attended by any reasonableness standard. That is, it is for an employer to make decisions about what jobs it requires to be performed and what changes might be required in its enterprise.
This will give a significant degree of clarity and comfort to employers embarking on organisational restructures.
The redeployment obligations are however more complex. The majority held that while employers are not required to alter the fundamental nature of their enterprise to create redeployment opportunities, the FWC otherwise has an “unmistakably” broad remit to consider what other changes might have been made.
In particular, the concept of redeployment “does not require there to be a vacant position” and might involve “some change to how an employer uses its workforce to operate its enterprise that facilitates redeployment.”
The phrase “all the circumstances” in s389(2) was interpreted broadly, allowing the FWC to weigh factors such as future business plans, risk appetite, workforce composition and operational decisions when assessing whether redeployment was a viable alternative to termination, bearing in mind that the inquiry necessitates consideration of a hypothetical scenario of “what would have been”.
Where the issue involves an assessment of whether a contractor should be displaced to allow for redeployment, consideration of the contractor’s contractual terms, degree of permanency and whether their work is specialist in nature, will all be relevant. However, as can be seen from the analysis set out above, the implications of this case are not limited to blended workforces of employees and contractors.
In relation to the Secondary Question, the High Court held that even if the standard of review applied by the FWC Full Bench was wrong (that is, if it should have simply determined whether redeployment was or was not reasonable, rather than allowing latitude to the Commissioner), this was not an issue amenable to judicial review. As such, the majority provided no guidance on the appropriate review standard.
The High Court has in effect left it to the FWC to determine the correct standard of appellate review, which means the long-standing application of the discretionary standard of review to matters of this type will not be disturbed.
Key takeaways
This decision carries significant practical implications for employers who are undertaking organisational restructures. It confirms that the FWC can look beyond the surface of a redundancy and assess whether, in all the circumstances, it would have been reasonable to retain employees by reducing contractor engagement, or taking other steps which may have included rearranging the workforce.
Certainly, the time-honoured approach of providing displaced employees with a list of vacant roles now carries a much greater risk of being regarded as insufficient.
The High Court has now set a clear expectation that employers approach redeployment with a more creative and critical mindset. While sweeping structural changes are not generally required, businesses must be prepared to consider reasonable alternatives, possibly even if they involve some level of disruption or operational adjustment.
This nuanced approach required for redeployment is likely to prompt further litigation in the FWC, particularly around what constitutes a reasonable inquiry into insourcing where contractors are used.
The decision leaves open the complex question of where the line should be drawn between preserving employee roles and maintaining contractor arrangements. Grey areas include:
- labour hire arrangements where contractors are embedded in the business long-term and perform similar duties to employees;
- outsourced roles that are functionally interchangeable with internal positions, such as administrative support or maintenance; and
- future operational plans or other upcoming changes, such as when a contractor’s engagement is due to end shortly after redundancies are made, raising the question of whether employees could have been retained to fill that gap.
These scenarios illustrate the nuanced balancing act employers must now perform.
[1] [2025] HCA 29.
If your business needs assistance with navigating the redundancy process, please reach out to the team at Kingston Reid.