Employers have specific obligations when things change at work.
Change is a constant – and business is no exception. Without ongoing change, businesses could stagnate, fail to meet market expectations, and lose relevance. But what are an employer’s obligations to consult with employees when change is on the cards?
The first tip for employers is:
Check the terms of the relevant award or agreement before change commences.
Every current award and agreement in the national industrial relations system obliges employers to consult with employees about major workplace change and changes to rosters or hours of work.
Each modern award contains the model clause, and enterprise agreements either must contain a clause regarding consultation or are deemed to include the model clause.
My comments here relate to the terms of the clause in the Timber Industry Award 2010 – and my comments are necessarily a summary of the clause. Please check the relevant award or agreement for specific requirements.
What is ‘major workplace change’?
Changes in the way employers organise work, including the introduction of new technology, or a restructure will be ‘major change’ if it will have a ‘significant effect’ on employees. The definition of ‘significant effect’ is very broad, and includes:
- Termination of employment;
- Alteration of hours of work;
- Change of location;
- Changes to duties;
- Restructuring; or
- Elimination or diminution of job or promotion opportunities.
When must consultation take place?
An employer must consult with employees as soon as practicable after a definite decision to change has been made, however, case law has shown that the decision can’t be set in concrete, as the purpose of consultation is to provide employees with a meaningful opportunity to affect the outcome.
A number of consultation clauses in enterprise agreements made with the CFMMEU set the timing of consultation further back in the change process, usually characterised as ‘when an in-principle decision has been made’. Again, please check the exact wording applying to your situation.
What constitutes consultation?
Employers are obliged to meet with all affected employees to discuss the change, the effect of the change, and any measures already devised to mitigate the adverse effect of the change on employees. Any affected employee may also have a representative, for example, a union, who must be included in the discussions.
In addition to holding discussions with employees and their representatives, employers are required to provide a written explanation of the change, and the effect of the change. Employers are not required to disclose confidential information if disclosure would be contrary to the employer’s interests.
Changes to rosters and hours
An employer must also consult with affected employees if there is any proposed change to an employee’s regular roster or ordinary hours of work. This does not apply if the award or enterprise agreement already allows the employer to change an employee’s roster or hours of work.
The employer is obliged to provide information about the proposed change to employees and their representatives, invite the employees to give their views about the impact of the change, and give consideration to the views expressed.
Consultation does not mean agreement is required
In the award, an obligation to consult with employees does not equate to needing to reach agreement with employees. Employees do not have a right to veto change simply by failing to agree, however, their views must be sought and considered prior to a final decision being made.
In theory, an employer may consult with employees about a change, and make the change anyway, provided the consultation is genuine.
What are the potential consequences of failing to consult?
Failure to consult with employees about major change or a change to working hours is potentially a breach of the award. Award breaches can attract fines of around $60,000 per breach for a body corporate. Each employee who wasn’t consulted would represent a single breach. Therefore, failure to consult fifteen employees would attract a maximum fine of $900,000.
Failure to consult with an employee prior to making him or her redundant would provide that employee with access to the unfair dismissal jurisdiction.
Any employee who is ‘genuinely redundant’ may not make a claim that their dismissal was unfair. There are three requirements that must all be met for a redundancy to be genuine:
- The employee’s job is no longer required because of the operational requirements of the business; and
- The employer complied with consultation obligations in a modern award or agreement; and
- It wouldn’t have been reasonable to redeploy the employee to another position within the business, or within any associated entity of the employer.
When an employee who has been made redundant applies to the Fair Work Commission (FWC) alleging their dismissal was harsh, unjust or unreasonable, often their argument will hinge on whether or not the consultation obligations were met. Employees have sometimes won with this argument.
Depending on the circumstances, the FWC may only award a few weeks’ pay on the basis that if consultation had taken place, the outcome would have been the same, and consultation would have taken two to three weeks to conclude.
Emma Watt is an independent industrial relations consultant who has, for more than 20 years, provided advice and assistance to employers in the timber industry. She has also worked as an unfair dismissal conciliator with the Fair Work Commission. Emma is very keen to ensure that employers know their rights and obligations, so they can sleep well at night!