s.394 - Unfair dismissal

Unfair dismissal application - genuine redundancy - application dismissed

• [1] Manjula Tilakaratne, also known as Malin Kroon, has made an application for an unfair dismissal remedy under s 394 of the Fair Work Act 2009 (Act). The respondent, Laurus Education Pty Ltd (Laurus), objects to the application on the ground that the dismissal was a 'genuine redundancy' within the meaning of s 389 of the Act, and contends that in any event the dismissal was not unfair.

• [2] On 26 May 2025, Mr Tilakaratne received a letter from Laurus advising him that due to financial pressure and the need to increase efficiencies and financial reporting output while also reducing current resources, the company was considering a restructure of the finance department and that his position of finance director could be made redundant. The letter invited Mr Tilakaratne to a meeting the following day to discuss the potential redundancy and stated that before any final decision was made Laurus would consider any matters raised by him, and would consider whether he could reasonably be redeployed into other roles. Mr Tilakaratne attended the meeting on 27 May 2025 with Jaq Terblanche, the financial controller. The proposed restructure was discussed. Mr Terblanche told Mr Tilakaratne that the restructure would involve the creation of a new position of senior accountant, which was a more junior role to that of finance manager, with a lower salary. On 28 May 2025, Mr Tilakaratne sent Mr Terblanche a document setting out a proposed alternative to his redundancy, which he believed would deliver greater savings to the company: he would transfer to the new senior accountant role; another employee would be dismissed; and further savings could be made by reducing a team based in Vietnam.

• [3] Mr Tilakaratne's evidence was that on 29 May 2025, Mr Terblanche told him that his proposal was rejected, and that the company would not redeploy him to the new role. He was handed a letter confirming his redundancy effective from that day and stating that he would be paid two weeks' pay in lieu of notice, four weeks' redundancy pay, plus an additional two weeks' paid in recognition of his contribution to the company.

• [4] Mr Tilakaratne said that he could and should have been redeployed to the new senior accountant role because he was both qualified and willing to do it, despite the lower salary, and that although Laurus alleged that he was deficient in the area of AASB compliant financial accounts, this was not in fact the case and there was no reason why he could not have performed this role. Mr Tilakaratne said that he was not given any counselling or warnings about his performance and that there had been no deficiencies in his work as the financial manager.

• [5] Mr Tilakaratne said that his redundancy was not a genuine one and that Laurus had designed a process to create the appearance of redundancy. He said that under the old structure of the finance department, he reported to the directors, and all junior finance staff reported to him, whereas the financial controller, Mr Terblanche, was excluded from the reporting structure. Mr Tilakaratne said that he believed that the redundancy of his role was implemented to change this and to remove him as an 'obstacle', and that he had been personally targeted. He said that the restructure was a pretext for his dismissal and that Laurus removed him to create a more 'pliable' finance department for Mr Terblanche, and then sought to justify its actions by citing financial pressures, when in reality there were none. Mr Tilakaratne said that the redundancy was a sham that had been orchestrated by Mr Terblanche, and that his dismissal was harsh, unjust, and unreasonable and therefore unfair.

• [6] Mr Terblanche gave evidence that in January 2025, Laurus's CEO instructed him to undertake a formal review of the structure of the finance team, and that the review was necessitated by increasing pressure on the cash flow of the group, as well as a need for the finance team to provide accurate monthly management accounts that comply with the accounting standards of the AASB. Mr Terblanche said that his review indicated that Laurus required a senior accountant who was able to prepare AASB compliant accounts, but that the company could not afford a senior accountant and a finance manager. The CEO decided to restructure the finance team accordingly.

• [7] Mr Terblanche said that on 26 May 2025, he telephoned Mr Tilakaratne to inform him of the restructure, and gave him a letter (see above). On 27 May 2025, Mr Terblanche met with Mr Tilakaratne to discuss the matter. On 28 May 2025, Mr Tilakaratne sent him an alternative proposal whereby he would take up the new senior accountant role. Mr Terblanche said that he then discussed Mr Tilakaratne's proposal with the CEO, but that they considered it to be deficient: it would involve removing the accounts payable officer and would require the tasks of that role to be redistributed to the accounts officer and the new senior accountant role, which would mean that both of them would be stretched in an environment that was already challenging. Further, Mr Terblanche said that the proposal did not address the need to ensure AASB compliant accounts, and that Mr Tilakaratne had not shown that he had an adequate understanding of this area. Mr Terblanche said that on 29 May 2025, after discussing the matter with the CEO, he confirmed the redundancy of the finance manager role with Mr Tilakaratne. Mr Terblanche said that Mr Tilakaratne's position of finance manager was made redundant and he was dismissed because Laurus no longer needed his job to be done by anyone as a result of changes in the company's operational requirements.

• [8] Under s 385 of the Act, a dismissal cannot be unfair if it was a case of 'genuine redundancy'. This is defined in s 389 as follows:

"(1) A person's dismissal was a case of genuine redundancy if:

(a) the person's employer no longer required the person's job to be performed by anyone because of changes in the operational requirements of the employer's enterprise; and

(b) the employer has complied with any obligation in a modern award or enterprise agreement that applied to the employment to consult about the redundancy.

(2) A person's dismissal was not a case of genuine redundancy if it would have been reasonable in all the circumstances for the person to be redeployed within:

(b) the enterprise of an associated entity of the employer."

• [9] I find that Laurus no longer required Mr Tilakaratne's job to be performed by anyone because of changes in the operational requirements of its enterprise. I accept the evidence of Mr Terblanche about the reasons for the company's decision to restructure the finance department and to make Mr Tilakaratne's job redundant. The changes in the operational requirements of the enterprise were those identified by Mr Terblanche in his evidence.

• [10] Mr Tilakaratne said that the redundancy was implemented to remove him as an obstacle, that he was personally targeted, and that the redundancy was a sham. I find that this was not the case. Mr Terblanche denied it. I believe him. Mr Terblanche was a credible witness. The reasons for the redundancy explained by Mr Terblanche were rational and convincing. I reject Mr Tilakaratne's suggestion that Laurus or Mr Terblanche had an ulterior motive for his dismissal.

• [11] Mr Tilakaratne said that most of the core functions of his job of finance director continued to exist and must be performed by someone, which meant that his position was not redundant. I reject this. Positions are frequently redundant even though some or all of their functions may still be required. What is relevant for the purposes of s 389 of the Act is whether the employer no longer wanted the employee's job to be performed by anyone, not whether the duties of that job are still needed. It is a routine matter for the work of a redundant job to be reassigned to other workers. Mr Tilakaratne said that some elements of his old job had not been retained and that this somehow called into question the genuineness of the redundancy, but I fail to see how. Mr Tilakaratne said that his proposal would have given the company greater savings. I do not accept this but in any event the reasons for the restructure and the redundancy were not confined to reducing costs.

• [12] Mr Tilakaratne said that the documents produced by Laurus showed that it had decided to implement the restructure before consulting with him and that this contradicted its statement in the letter of 26 May 2025 that it would not make any final decision until after it had spoken to him. I reject this. There is no contradiction. It is both legitimate and normal for a business to decide to make change and then to consult about it. Indeed, this is what is required by the consultation provision in clause 29 of the Educational Services (Post-Secondary) Award 2020 (Award), which covered Tilakaratne. An employer is required to consult about major change only once it has made a 'definite decision' to introduce the change. This does not preclude the possibility of the decision being altered. The result of consultation might be that the employer will change or modify its decision, based on the feedback from those consulted.

• [13] Mr Tilakaratne contended that the redundancy process was not a genuine one because Laurus did not identify any 'employment pool', and because a competencies document dated 27 May 2025 did not contain a scoring guide to explain how he was ranked against the evaluation criteria. But the Act does not mandate these things, nor do these matters have any factual bearing on the question of whether the requirements of s 389 were satisfied in this case. Mr Tilakaratne said that he disputed the scores that he was given in the competencies document that was submitted to the Commission. He said that some of the tasks listed in the document did not relate to his duties as finance manager. But as Mr Terblanche explained, the purpose of this document was not to assess Mr Tilakaratne's performance in his old role, but to assess his suitability for the new one. Further, provided that the scores reflected the genuine views of the company (I find that they did), it is irrelevant whether the scores were 'correct'.

• [14] Mr Tilakaratne said that the company did not have any cash flow difficulties, and that this cast doubt on the company's reasons for his redundancy. I accept Mr Terblanche's evidence that the company did have cash flow problems. Mr Terblanche, who was a more senior financial manager than Mr Tilakaratne, cited the example of the company's payment plans with the Australian Taxation Office as an example of this.

• [15] I find that the element of a 'genuine redundancy' in s 389(1)(a) is met. Laurus no longer required Mr Tilakaratne's job to be performed by anyone because of changes in the operational requirements of its enterprise.

• [16] I further find that Laurus complied with its obligations under the Award to consult with Mr Tilakaratne about his redundancy. Clause 29 of the Award requires an employer to consult with employees about major workplace change. Clause 29.1 states that where an employer has made a definite decision to make major changes in organisation or structure that are likely to have significant effects on employees, the employer must give notice of the changes to the employees who may be affected by them, and discuss the changes, their likely effect on employees, and measures to avoid or reduce the adverse effects of changes on employees. Clause 29.2 provides that for the purposes of these discussions, the employer must give affected employees information in writing about the changes and their expected effects. I find that Laurus complied with these requirements by sending Mr Tilakaratne the correspondence referred to above and through Mr Terblanche's discussions with him. The condition in s 389(1)(b) is satisfied.

• [17] As to s 389(2), I am not satisfied that it would have been reasonable for Laurus to redeploy Mr Tilakaratne within its enterprise or that of an associated entity. Mr Tilakaratne said that Laurus did not consider his request for redeployment or his alternative proposal. I accept Mr Terblanche's evidence that he did so and find that there were cogent reasons for not agreeing to the proposal. In particular, I find that Mr Tilakaratne was not a suitable candidate for the new position because of the reasons cited in Mr Terblanche's evidence, including because he did not have the required level of understanding in respect of AASB compliant accounts. Mr Tilakaratne said that this had not been part of his old job and that he had not been given warnings about his performance in this regard. But this is beside the point. Based on what he had observed of Mr Tilakaratne during his employment, Mr Terblanche had reason to be concerned about Mr Tilakaratne's aptitude in an area that was important for the new role. Mr Terblanche gave several examples of how Mr Tilakaratne had demonstrated shortcomings in this area, in respect of GST, PAYG and BAS issues; Mr Tilakaratne did not dispute the examples given by Mr Terblanche but said that he had addressed the relevant matters after they were raised. I find that these were objective reasons for Mr Terblanche's concerns about Mr Tilakaratne's suitability for the new role. This implies no criticism of Mr Tilakaratne's performance in his old role. Mr Tilakaratne said that the person who was appointed to the new senior accountant role (an internal promotion) did not have any Australian qualifications. But Mr Terblanche said, and I accept, that the person had extensive experience, including in particular with IFRS standards, which are substantially the same as the AASB standards. I find that it would not have been reasonable to redeploy Mr Tilakaratne to the senior accountant position, either as part of his alternative proposal or separately from this.

• [18] Mr Tilakaratne said that in order for a dismissal to be a genuine redundancy under s 389, it must be the case that there were no reasonable opportunities for redeployment, and that it had not been demonstrated that there were no such opportunities. In fact, s 389(2) states that a dismissal is not a genuine redundancy if it would have been reasonable in all the circumstances for the person to be redeployed within the enterprise of the employer or that of an associated entity. The employer does not have to prove that there were no reasonable redeployment opportunities. Rather, the Commission must determine whether, based on the evidence, it would have been reasonable for the person to be redeployed. Based on the evidence before me in this matter, I am not satisfied that this was the case. I find that Mr Tilakaratne was not suitable for the senior accountant role and no other position or work has been identified that he could reasonably have undertaken.

• [19] Each of the requirements of s 389 is met. The dismissal was a case of genuine redundancy and was therefore not unfair. In any event, had I concluded that the dismissal was not a 'genuine redundancy' for the purposes of s 389, I would have determined that the dismissal was nevertheless not unfair.

• [20] Section 387 requires the Commission, when considering whether it is satisfied that a dismissal was harsh, unjust or unreasonable, to take into account the matters in subsections 387(a) to (h). In circumstances of dismissal for reason of redundancy, no relevant finding can be made in relation to the consideration in s 387(a), namely whether there was a 'valid reason for the dismissal related to the person's capacity or conduct'. The company does not contend that there was any valid reason for dismissal related to Mr Tilakaratne's capacity or conduct. Its reliance on redundancy as the reason for dismissal is an operational reason to be considered in connection with s 387(h), 'any other matters the Commission considers relevant' (see below). Similarly, the considerations in ss 387(b) and (c) are not material in the present case. They concern whether the employee was 'notified of that reason' (i.e. the valid reason related to conduct or performance in s 387(a)), and whether the person was given an opportunity to respond to any reason related to capacity or conduct. There was no refusal to allow a support person to assist at any discussions relating to dismissal (s 387(d)), nor is the question of warnings for poor performance relevant (s 387(e)). The company is not a small enterprise and in my view the considerations in ss 387(f) and (g) carry no weight. As to s 387(h), 'any other matters the Commission considers relevant', my conclusion is that the company had a legitimate reason to end the employment, which was that it no longer needed the finance manager role to be done by anyone. I do not consider that there was any unfairness in the process that led to the dismissal. I note also that Mr Tilakaratne had worked for the company for over one year, that he was paid his lawful redundancy and other termination entitlements, and that he was also paid an additional two weeks of pay. His dismissal was not harsh, unjust or unreasonable. It was not unfair.

• [21] The dismissal was a case of genuine redundancy within the meaning of s 389. It was therefore not unfair. The application is dismissed.

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