• Unreasonable to Require Consideration of Redeployment to "Associated Entities" Lacking Common Managerial Control
  • May 15, 2015 | Author: Adam Salter
  • Law Firm: Jones Day - Sydney, New South Wales Office
  • In recent FWC decisions, the unfair dismissal claims of four mineworkers employed by a Rio Tinto subsidiary have been dismissed by the Commission, confirming that workers who seek redeployment in an associated entity must establish evidence of overall managerial control and integration between the associated entity and their former employer.

    The respondent, Kestrel Coal Pty Ltd ("Kestrel"), is a subsidiary of the Rio Tinto Coal Australia ("RTCA") Group, which in turn is a subsidiary of Rio Tinto Ltd. The workers' primary argument was that the dismissal was not a genuine redundancy because it would have been reasonable for Kestrel to consider redeployment in an associated entity such as one of the other coal mines operated by RTCA, or an associated entity of Rio Tinto Ltd outside of the RTCA Group. Kestrel objected, maintaining that it had considered all opportunities within RTCA before making the workers redundant.

    By reference to the earlier decision in Ulan No 2, the Commission considered what degree of control was required to establish an entity as "associated". In Ulan No 2, the Full Bench of the FWC qualified that redeployment considerations extended to associated entities which are all subject to overall managerial control by one member of the group. The Commission accepted the respondent's submissions that the Rio Tinto subsidiaries had structured their companies as autonomous business units, and Kestrel had no power to influence the recruitment decisions of other entities. As a result, Kestrel lacked the managerial integration and overall managerial control with non-RTCA entities for it to be reasonable to require consideration of redeployment there.

    The Commission accepted that Kestrel had considered all opportunities within its authority before making the workers redundant. In light of the timing and the short-term engagement of the project, the Commission also accepted that Kestrel had no authority to redeploy the workers into contractor roles.

    Point to Note for Employers

    When making a position redundant, it will be expected that an employer will consider redeployment of the employee in associated entities but only those with which they share common managerial control.