Managing headcount in difficult times The legal do’s and don’ts David Cross, Partner

Agenda 1.Right sizing – is it right for you? 2.Alternatives to redundancies 3.What options are not available? 4.Implementing a redundancy strategy –industrial risks and obligations –breach of contract –unfair dismissal and discrimination risks –Centrelink –workers compensation and OHS –selection process –communication

Right sizing – is it right for you?  In good times, termination is a last resort – why does this change in bad times?  Reasons against dismissal: –bad times end, and staff will be needed in the future –loss of workplace culture / institutional knowledge –leads to bad morale and job security panic –loss of training / recruitment costs –expense of rehiring / retraining in the future may be prohibitive –dismissed employees may be employed by competitors and take clients, or set up in competition

Alternatives to termination  Creative leave solutions –leave without pay –leave on low pay –lump sum payment for extended leave period  Stand downs  Pay-cuts  Change in nature of employment –full-time to part-time or casual  Redeployment  Workplace agreement / contract renegotiations and amendments

What options are not available?  Force employees to take unpaid leave  Do any of the following without agreement: –change in nature of employment from full-time to part-time or casual –change roles –cut pay  Act inconsistently with a current workplace agreement

Implementing a redundancy strategy  Industrial obligations and risks – award employees –obligations to consult and/or notify –severance entitlements  Penalties for breaches  Industrial risks –consider risk of union activity –in pursuance of an agreement –secret ballot –business continuity planning -protected action ballot -in pursuance of an agreement

Implementing a redundancy strategy  Industrial obligations and risks – agreement employees –obligations to consult and/or notify –severance entitlements –redeployment –voluntary redundancies –outplacement  Penalties for breaches  Industrial action –lawful industrial action –unlawful industrial action –496 Orders –injunctive relief

Implementing a redundancy strategy (cont.)  Breach of contract –the myth of severance for non-award employees –puffery or promises –custom and practice McRae v Watson Wyatt Australia Pty Ltd [2008] FMCA 1568 Tibaldi Small Goods (Australasia) Pty Ltd v Maurice Rinaldi [2008] VSC 112

Implementing a redundancy strategy (cont.)  Unfair dismissal –genuine operational reason or reason that includes a genuine operational reason –Carter v Village Cinemas Pty Ltd [2007] AIRCFB  Unlawful termination and discrimination – by wary of the selection process: –age –disability –gender –union membership –Smith and Ors v Moore Paragon

Implementing a redundancy strategy (cont.)  Centrelink notification requirements: –Section 660 of the WRA – notification requirements:  15 or more employees;  before termination of employment takes place;  reasons for termination of employment;  number of employees;  categories of employees; and  the time and period over which terminations will occur

Implementing a redundancy strategy (cont.) OHS and workers compensation  manage stress claims  manage old war injuries  understand premium impacts  obligations to keep employees employed (for example section 155A ACA in Vic)  notification requirements (for example SA)

Implementing a redundancy strategy (cont.) Selection process  fact based  use objective data where possible  avoid discriminatory selection criteria  is selection defensible?  comply with requirements

Implementing a redundancy strategy (cont.) Communication  with affected employees  with other all employees  with unions  with customers  with suppliers  with media  ASX if publicly listed