This article has been prepared by Colin Biggers & Paisley Lawyers.
The current environment sets up a tangible risk of employees being able to make a claim against your business. In order to manage this, it is important that your business has an accurate idea of the risk that it is facing in each individual circumstance. This is made all the more important given the rapid changes that will have taken place in your business over the last 6 months – reductions in hours, changes in pay, contractual amendments, JobKeeper directions and more. The playing field has changed, and it is important to get on top of what these changes mean for your business before making any decisions around termination of employment.
For example, you may have previously assumed there is little risk associated with terminating the employment of an employee who is paid well above the high income threshold (currently $153,600), as an employee earning over the threshold cannot bring an unfair dismissal claim. However, if you have entered into a COVID-19-related contractual agreement to temporarily reduce an employee’s remuneration, it is possible that the employee in question will be able to bring an unfair dismissal claim on the basis that their reduced salary falls under the threshold. This scenario was explored in Stringer v 1 Step Communications Pty Ltd  FWC 3508, in which Masson DP found that it was the employee’s reduced salary that should be considered, despite the fact that the employer paid out termination entitlements on full pay rather than the reduced salary. Consequently, the employee was eligible to make an unfair dismissal claim – a consideration the business may not necessarily have taken into account when terminating her employment.
This case demonstrates that recent changes the business has undertaken in the name of COVID-19 could render a once-ineligible employee able to make claims they previously were excluded from making. Therefore, it is exceptionally important that prior to implementing any redundancies, the business undertakes a thorough, accurate risk mitigation process, and prepares for the actual possibilities that could eventuate from a termination of employment.
It is also worth noting that other risks apart from unfair dismissal should be considered, even if the business determines that the employee is above the threshold and is ineligible for unfair dismissal. General protections claims, discrimination complaints, breach of contract claims and more are avenues an employee can access – therefore, a solid, well-explained business case for any redundancy is imperative.
Read Part 2 – Is our ability to make an employee redundant impacted by our eligibility for JobKeeper?
Disclaimer: This is commentary published by Colin Biggers & Paisley for general information purposes only. This should not be relied on as specific advice. You should seek your own legal and other advice for any question, or for any specific situation or proposal, before making any final decision. The content also is subject to change. A person listed may not be admitted as a lawyer in all States and Territories. © Colin Biggers & Paisley, Australia 2020.