Australia: The High Court Has Ruled that Employers Must Consider Restructuring to Create Redeployment Opportunities for Redundant Employees

Authors: Paul Lorraine, Harry Wynter and Aatish Budhwani

Helensburgh Coal Pty Ltd v Bartley [2025] HCA 29 (Peabody Case)

Introduction

Helensburgh Coal is a subsidiary of Peabody Energy, which operates a coal mine in Helensburgh, New South Wales.

Due to a drop in demand for coking coal during the COVID-19 pandemic, Helensburgh Coal reduced its weekly working days from seven to six. Ninety employees were dismissed, including 47 forced redundancies, while contractor numbers were reduced by 40%.

The High Court of Australia has now ruled that Helensburgh Coal was obliged to consider restructuring its arrangements with contractors to accommodate the 47 employees who were made redundant.

Background

In 2019, after a safety incident, Helensburgh Coal entered into a services agreement with Mentser Pty Ltd to outsource all servicing and auditing of the mine’s conveyor belt system from April 2020.

As a result, 47 employees were made redundant.

On 10 July 2020, the redundant employees claimed unfair dismissal in the Fair Work Commission, contending that their dismissals were not due to “genuine redundancy” because Helensburgh Coal could have redeployed them into other roles.

Under section 389(2) of the Fair Work Act 2009 (Cth) a dismissal is not “genuine redundancy” if the employee can be redeployed somewhere else in the employer’s enterprise.

The Peabody Case ran through two trials and two appeals before the Fair Work Commission, and a further appeal in the Full Federal Court of Australia, before finally being dismissed by the High Court of Australia.

The question for the High Court was whether the Fair Work Commission was able to propose hypothetical changes to a business to create roles for employees otherwise facing forced redundancy.

The Court upheld the Commission’s finding that it was reasonable for an employer to make changes to the structure of the workforce – in this case by hiring fewer sub-contractors – to create suitable work for employees.

This decision has significantly broadened employers’ obligations in cases of redundancy. While it was previously acceptable to look for suitable vacant positions, employers must now actively seek solutions to create suitable redeployment opportunities, which can include being required to restructure the workforce.

Definition of genuine redundancy

The issue in contention in each of the trials was section 389(2) of the Fair Work Act 2009 which defines “genuine redundancy.”

389 Meaning of genuine 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: (a) the employer’s enterprise; or (b) the enterprise of an associated entity of the employer.

The employees that were made redundant claimed to have the same skills as the contractors who had effectively replaced them, while Helensburgh countered that the contractors were hired for “specialist work.” Fair Work Commissioner Riordan rejected the “specialist” argument and found that it would have been reasonable to redeploy the employees, and therefore, it was not a genuine redundancy under the Act.

When Helensburgh’s appeal was denied, the company argued it would be “operationally impracticable” to replace the contractors, as this would be a fundamental change to the workforce. Commissioner Riordan found that while inconvenient, it was still feasible for Helensburgh to insource some of the work of the contractors, holding that it was not a genuine redundancy.

Helensburgh appealed again, and although the Fair Work Commission Full Bench disagreed with Commissioner Riordan’s conclusion that redeployment was feasible in the circumstances, the appeal was dismissed as all relevant information had been considered and there was no error in law.

Full Federal Court decision

Helensburgh sought to quash all four Fair Work Commission decisions in the Full Federal Court, contending that section 389(2) could not authorise the company to redeploy employees to roles that were already taken by contractors. Katzmann and Snaden JJ agreed that it was initially reasonable to conclude that the redundant employees could not be redeployed, as there were no available positions.

However, in a close reading of section 389(2) their Honours found the clauses “would have been” and “in all the circumstances” required the employer to consider a wide range of ways that an employee might be redeployed. There was no reason for Helensburgh not to consider reducing its reliance on external contractors to create space to redeploy its employees.

Raper J gave additional reasons in support, noting that section 389(2) does not confine redeployment to a vacant position, and relief could be found under section 391 by reinstating the employees, even if a new role needed to be created. Her Honour acknowledged such cases would be rare but left open the possibility of section 391 reinstatement to be determined later in the unfair dismissal proceedings.

The previous Fair Work Commission decisions were upheld, and Helensburgh sought leave to appear in the High Court, claiming that the Fair Work Commission did not have jurisdiction to suggest the company should make changes to its workforce.

High Court decision

The High Court was asked to determine whether the Fair Work Commission was limited in the obligations it could place on employers in the case of redundancy. Helensburgh contended that section 389(2) did not permit the Commission to consider changes to the company’s enterprise, including by replacing contractors with employees.

In reviewing the previous Helensburgh decisions, Gageler CJ, Gordan and Beech-Jones JJ considered the construction of section 389(2) and the lengths an employer must go to when making employees redundant.

(a)                 Employers must look beyond redeploying a redundant employee to a vacant position. The term “redeploy” implies potential reorganisation or rearrangement of the workforce to enable continued employment [36].

(b)                The phrase “would have been reasonable” requires a hypothetical assessment at the time of dismissal of what could be done to redeploy the employee [37].

(c)                 The phrase “in all the circumstances” is unmistakably broad. The employer must consider the employees attributes, skills, experience, training and competencies. The employer must also consider their own workforce arrangements, policies, long-term goals, and business operations, such as using contractors alongside employees. The employer may take into account practical considerations such as whether training is needed to redeploy the employees [39]-[41].

Edelman J and Steward J gave separate judgements, although largely agreed with each other. They agreed that section 389(2) is broad, but noted limits to what the Fair Work Commission should consider in imagining hypothetical arrangements that lead to the redeployment.

(d)                While the language of s 389 allows an employer to consider making changes to its enterprise to accommodate a redundant employee, it does need to make changes that are inconsistent with the nature of the enterprise: Steward J at [136]; Edelman at [69].

(e)                 The nature of the enterprise must be characterised at the time of dismissal, in reference to:

[A]ll of the actual policies, processes, procedures, strategies and business choices of the enterprise, including any plans it had for the future. It includes the composition of the enterprise’s actual labour force, as well as any vacant positions which existed at that time, or which were expected to arise.

Steward at [131]; echoed by Edelman J at [67].

(f)                 Steward J also noted that redeployment should not require the termination of another person, at [136]:

It would make very little sense in the ordinary case to conclude that it was reasonable to redeploy a person by terminating the permanent employment of another person. No different conclusion might be expected if the other person were employed by a contractor, or if they were themselves independent contractors or casual labourers. Redeployment of a person at the expense of another person’s position would be a very grave step to take and would be unlikely to be a reasonable outcome.

High Court dismissed the appeal

After the discussion of section 389, each of the Justices turned to the jurisdictional argument put forward by Helensburgh Coal. The Justices applied the House v King standard and unanimously agreed that the Commission had made a discretionary ruling well within its jurisdiction, with Edelman J noting at [86]:

The Commission is a specialist tribunal afforded extremely broad powers with which to determine whether a dismissal is a genuine redundancy. The exercise of its powers, including in relation to such a determination, must take into account “equity, good conscience and the merits of the matter”. The Commission is not bound by rules of evidence and procedure and has powers to “inform itself in relation to any matter before it in such manner as it considers appropriate.”

Key Notes for Employers

The High Court has made it clear that in considering redundancy and redeployment, an employer must consider a wide range of alternatives, including potentially restructuring the workforce to create redeployment opportunities.

This could include considering hypothetical situations within the enterprise and associated businesses, which goes much further than the previous standard practice of looking for suitable vacant positions.

In future, in-house legal and HR practitioners should review any proposed changes before implementation.

Employers also need to be cognisant of their consultation obligations including under industrial awards and enterprise agreements.

Harmers Workplace Lawyers can provide advice about restructuring and redundancy, and wider employment and industrial relations issues. If you require legal advice or assistance, please contact our legal team at + 61 2 9267 4322.