Thinking ahead in redundancy situations: employers must look at all arrangements, including contractors

Under the Fair Work Act 2009 (Cth), employees dismissed due to 'genuine redundancy' are barred from obtaining an unfair dismissal remedy. To establish this bar, employers need to take an extra step: considering, before dismissing any employees, whether to terminate the engagement of independent contractors instead – to make way for affected employees. That is the impact of the recent High Court of Australia decision in Helensburgh Coal Pty Ltd v Bartley [2025] HCA 29.

Facts

When Helensburgh Coal restructured its Illawarra mining operations by retrenching 90 employees and cutting contractor numbers by 40 per cent, 22 former employees claimed unfair dismissal, arguing Helensburgh should have redeployed them to work it still paid contractors to perform.

The bar for 'genuine redundancy' means that the Fair Work Commission (Commission) cannot determine the unfairness of a dismissal if it is satisfied (amongst other things) that the employee's employment was terminated for redundancy, and it would not be reasonable to redeploy the person within the employer's enterprise or the enterprise of an associated entity.

In Helensburgh's case, Riordan C of the Commission was not convinced that redeploying employees to contractors' work would not be reasonable, despite Helensburgh's arguments that it would have been impractical to make the significant operational change required to have employees perform the specialist work in question. An appeal to a Full Bench of the Commission did not succeed, and the Federal Court dismissed Helensburgh's application for judicial review. Helensburgh appealed to the High Court.

Issues

Helensburgh argued the contractors were not engaged within the scope of its enterprise, or that of a related entity. On that basis, the Commission and Federal Court had overstepped, by considering whether Helensburgh could have changed the structure of its workforce to keep employees. The appeal did not deal with whether the dismissals were unfair.

Decision

All five judges of the High Court rejected Helensburgh's arguments about how the Commission is supposed to conduct its inquiry.

According to the majority (Gageler CJ, Gordon and Beech-Jones JJ), the Commission is not free to disregard the nature of the employer's enterprise when it conducts its inquiry. However, the Commission can ask whether the employer could have changed the way it operates that enterprise so as to create, or make available, a role for an employee it would otherwise have dismissed.

Steward J agreed, but took a broader view, stating that the Commission can consider (amongst other things) labour force composition as part of the employer's enterprise. The Commission can then inquire whether the employer could have made changes to its enterprise to create a position which would enable redeployment of an otherwise redundant employee.

Edelman J agreed with Steward J's broader view of the employer's enterprise, but found that:

• the Commission may not consider the 'reasonableness' of a redeployment that would involve a change so significant to the employer's policies and practices that it would be a change in the employer's enterprise;
• Helensburgh had jobs that could promptly have been made available to employees at the expense of the contractors, without any change to an essential facet of Helensburgh's enterprise; and
• as a result, the Commission could find that redeployment of the employees to roles previously held by contractors would have been reasonable in all the circumstances.

The High Court also rejected Helensburgh's argument that the Commission applied the incorrect standard of appellate review, or that in doing so it failed to exercise its jurisdiction properly.

Lessons for employers

Employers can still retrench employees. However, to manage unfair dismissal risks effectively, employers who also engage contractors must be able to show that they have considered where and why they engage contractors and whether it would be reasonable to remove contractor personnel to create redeployment opportunities for employees they might otherwise retrench.

This does not mean that a reduction in contractor headcount will always be required to manage unfair dismissal risks, that retrenchment will always be unfair without a reduction in contractor headcount, or that sacking contractors will somehow ward off unfair dismissal claims.

Instead, a business that engages contractors should demonstrate that it has, and how it has, considered contractor numbers and functions, as one more step in any redundancy process. Failure to demonstrate this may make it easier for an affected employee to challenge the dismissal as unfair.

If you would like to discuss the implications of this decision further, or if we can assist you in planning for a restructure, please contact our Employment, Workplace relations, Safety team.

Authors

Paul Vane-Tempest | Senior Consultant | +61 2 5135 8675 | pvanetempest@thomsons.com.au

Jacquie Seemann | Partner | +61 2 9020 5757 | jseemann@tglaw.com.au

Andrew Cardell-Ree | Partner | +61 7 3338 7926 | acardellree@tglaw.com.au

Joseph Milligan | Lawyer

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