High Court clarifies what employers must consider before letting roles go

The High Court's decision marks the beginning of the end of a five-year dispute between Helensburgh Coal and 22 former employees (Applicants) that commenced unfair dismissal claims after their roles at the Metropolitan Coal Mine (the Mine) were terminated. 

At the time of the terminations, Helensburgh Coal had agreements in place with Nexus Mining Pty Ltd (Nexus) and Menster Pty Ltd (Menster) under which Nexus and Menster engaged contractors to provide services at the Mine (the Contractors). 

The Mining and Energy Union, representing the Applicants, argued that the Applicants should have been redeployed to positions which were filled by the Contractors. In response, and with reference to s 389 of the FW Act, Helensburgh Coal argued that the terminations were genuine redundancies and that it would not have been reasonable, in all of the circumstances, to redeploy the Applicants into positions which were not vacant.

This case has a long procedural history. It involved four decisions – including two decisions by the primary Commissioner and two appeals – in the Fair Work Commission (Commission). Ultimately, the Commission found that the terminations were not genuine redundancies as it would have been reasonable in all of the circumstances for the Applicants to have been redeployed to roles that were being performed by the Contractors at the time of their termination. 

Following the second unsuccessful appeal in the Commission, Helensburgh Coal appealed to the Full Court of the Federal Court, again without success. You can read more in our previous article published about the Federal Court Judgment. 

Helensburgh Coal then sought special leave to appeal the Federal Court decision to the High Court of Australia, which was granted in September 2024. 

Helensburgh Coal's appeal to the High Court proceeded on two grounds. The first concerned the correct interpretation of s 389(2) of the FW Act; the second concerned the standard of review applied by the Full Federal Court. However, the High Court decided that it was unnecessary to decide on the correctness of the standard of review applied by the Full Federal Court. Accordingly, for the purposes of this article, we have focused solely on the first ground of Helensburgh Coal’s appeal.

The principal issue before the High Court was whether s 389(2) of the FW Act, which requires consideration of whether it would have been reasonable in all the circumstances for an employee to be redeployed within the employer’s enterprise as an alternative to being dismissed for redundancy, allows the Commission to consider whether the employer could have made changes to how the employer uses its workforce to operate its enterprise, including by replacing contractors with employees. 

Helensburgh Coal argued that s 389(2) of the FW Act did not permit the Commission, when assessing whether a redundancy was genuine, to inquire into whether an employer could have made changes to how the employer uses their workforce as an alternative to making redundancies (which in this case, resulted in a finding by the Commission that employees could be redeployed into a part of the business that had been outsourced). The Applicants argued that an inquiry of this kind was permitted under s 389(2) of the FW Act. 

Through judgments from Edelman J, Steward J and a joint judgment from Gageler CJ, Gordon and Beech-Jones JJ, the High Court unanimously dismissed the appeal, affirming the Federal Court decision in favour of the Applicants. Themes that were agreed upon and discussed between the three judgments in varying detail have been summarised below.

• The Commission can inquire into whether an employer can make changes to how it uses its workforce (which may include an assessment as to whether work can be insourced), however this power is limited in that it does not allow the Commission to disregard the nature of the employer’s enterprise. They cannot consider the reasonableness of a potential redeployment that would involve a change to an essential or important facet of the enterprise itself.
• The language of s 389 does not otherwise limit how the Commission is to answer the question as to whether it would have been reasonable for a person to be redeployed in the employer’s enterprise.
• The words 'all the circumstances' in s 389(2) are intentionally broad in application and do not preclude the Commission from considering particular circumstances (eg, whether the employer could make changes to their workforce) when deciding whether it would have been reasonable for the person to be redeployed within the employer’s enterprise. 

In light of these findings, the High Court rejected Helensburgh Coal’s submission that s 389 of the FW Act prohibits the Commission from assessing whether an employer could have made changes to how it uses its workforce to operate its enterprise. 

The High Court decision was solely focused on the question of whether the dismissal of the Applicants was a case of genuine redundancy, which is one of the preliminary matters that needs to be considered when determining whether an employee can pursue an unfair dismissal claim. 

For this reason, while the High Court confirmed that this was not a case of genuine redundancy, no determination has yet been made as to whether the dismissals were unfair. The Applicants will now continue their unfair dismissal applications in the Commission, now that the preliminary question of genuine redundancy has been resolved. 

Many employers choose to outsource portions of their business for commercial reasons. This case raises concerns for businesses which, due to a downturn in trade, seek to make directly employed positions redundant whilst continuing to have aspects of their business outsourced. 

While the High Court in this case affirmed that the Commission can inquire into whether changes could have been made to an employer's workforce structure to enable reasonable redeployment (which may include the insourcing of work) – this principle should not be overstated in its broader application. It should be noted that both the High Court and Full Federal Court have commented that it would be unusual for such an inquiry to be reasonable in all the circumstances. 

Factors which made the inquiry 'reasonable' in this case included there being no apparent legal obligations on Helensburgh Coal to continue to engage the Contractors, who were engaged on an ‘as needed’ basis. Additionally, the Contractors were performing duties that were deemed suitable to be performed by the redundant employees, including with reasonable training. As such the changes would not have changed a core aspect of the enterprise.

While the High Court has clarified that employers are not expected to make changes that would result in a change to an essential or important facet of their enterprise, there does seem to be an increasing expectation on employers to make changes that may cause some inconvenience, discomfort or disruption to the business if it means a person can be redeployed, rather than their employment terminated.

In this respect employers are put on notice to approach redeployment through a critical and increasingly creative lens.

If you need support navigating redundancy or other employment matters, our Employment and Workplace Relations team is here to help. Please don’t hesitate to get in touch. 

This article was written with assistance by Patrick Hogan, Law Graduate.