Counting the cost of outsourcing (part 3)

Welcome to the third of a 3-part series on the risks associated with offshoring arrangements. Job losses may occur when organisations offshore office functions. Indeed, it is important to mitigate risks associated with major workplace changes and redundancies.

A 3-part series

In part 1, we discussed an organisation’s obligations to protect personal information when offshoring office functions.

In part 2, we discussed offshore outsourcing of employee payroll as well as handy tips to safeguard personal information.

Here in part 3, we will discuss redundancy issues associated with outsourcing arrangements.

What is genuine redundancy?

Under the Fair Work Act 2009 (Cth) (Act)^[1], a termination will be a genuine redundancy if:

the organisation no longer requires the employee’s role to be performed by anyone;
the organisation has complied with its obligations to consult with the employee under any applicable modern award or enterprise agreement; and
there are no suitable redeployment opportunities for the employee within the organisation or any associated entity.

Test 1: is the role redundant?

The organisation should consider whether the position is no longer required to be performed by anyone because of changes in the organisation’s operational requirements. This may include:

an organisational restructure to improve efficiency;
downsizing;
financial downturn; or
outsourcing of office functions to third party providers.^[2]

Test 2: consulting with the employee?

An organisation must comply with consultation provisions in an applicable enterprise agreement or modern award. This may include:

consulting with employees about major workplace changes likely to significantly affect them, such as:
a) changing rosters and hours of work;
b) restructuring; or
c) redundancies.
providing effected employees with information relating to:
a) the proposed changes; and
b) steps taken to avoid or mitigate the impact of the redundancies.

Test 3: redeployment opportunities?

The organisation should, where reasonable to do so, consider redeploying the employee to another available position within the organisation or any of its associated entities. Generally, redeployment will be reasonable if:

it does not have any adverse impact on the operational efficiency of the organisation; and
the redundant employee has the appropriate skills and qualifications to perform the redeployed role.

Redundancy is a legal minefield – don’t get blown up!

Organisations face significant challenges and risks when making an employee’s position redundant in favour of an outsourcing arrangement. If the redundancy is not genuine, the organisation may be exposed to an unfair dismissal claim, resulting in:

compensation being awarded to the redundant employee; and/or
the organisation being ordered to reinstate the redundant employee.

This will defeat the purpose of the outsourcing arrangement and potentially erode the cost savings to be gained from such an arrangement.

You should seek advice from one of Bespoke’s employment lawyers before taking steps to make positions within your organisation redundant in favour of outsourcing office functions to external providers

^[1] Section 389 of the Act.
^[2] Explanatory Memorandum to Fair Work Bill 2008 (http://www.austlii.edu.au/au/legis/cth/bill_em/fwb2009124/memo_0.html)

^{Counting the cost of outsourcing (part 1)}
^{Counting the cost of outsourcing (part 2)}
^{Privacy: a new broom sweeps across borders}
^{Privacy cleared for take off}