Re-engaging an employee after termination due to redundancy

Share this article
Facebook
LinkedIn
Twitter

What are the risks and relevant considerations when an employee is re-engaged after termination due to redundancy?

We start with the position that it is lawful for an employer to re-engage an employee whose employment was previously terminated due to redundancy. However, there are several matters which need to be considered. Potential areas of risk include matters relating to unfair dismissal, reinstatement of accrued personal/carer’s leave, long service leave and taxation issues.

Genuine redundancy

An employee will be excluded from access to the unfair dismissal jurisdiction under the Fair Work Act if they were terminated due to redundancy and that redundancy was genuine.

However, the re-engagement of an employee can raise questions about the genuineness of a prior termination in some circumstances. This may be so when, for example, the employee is re-engaged soon after a termination and there has been little change in business conditions.

Risks in this area can be minimised by thorough business documentation which evidences the need for changes (including both the need to terminate and to re-engage staff).

Personal/carer’s leave

An employer may be obliged to re-credit personal/carer’s leave to an employee who has been re-engaged following termination due to redundancy. Employers should check all relevant industrial instruments to determine their obligations in this regard. For example, clause 35.2 of the Manufacturing and Associated Industries and Occupations Award 2020 requires an employer to re-credit a personal/carer’s leave balance if an employee is dismissed and then re-employed within a 6-month period.

Long service leave

Long service leave jurisdictions address the impact on long service leave entitlements when an employee is re-engaged following dismissal due to slackness of trade. Redundancies will often be made due to slackness of trade or issues with workflow. Redundancies may also occur due to other reasons, such as due to restructures. Re-employment of employees in such circumstances could also impact on long service leave entitlements.

Some relevant provisions to consider in regards to these issues are set out in the table below:

Long service leave jurisdiction	Continuous service considerations for redundancies
Pre-modern federal award (1998 Metal Award)	Slackness of trade – see cl 5.1.1(c): may be continuous service if reinstating employee within 6 months of dismissal. Clause 5.1.1(e): period of time not worked may not beincluded Other reason – see 5.1.1(d): may be continuous service if re-employed within 2 months
NSW – Long Service Leave Act 1955	Slackness of trade – see s 4(11)(al)(v): may be continuous service. Section 4(11): period of time not worked may not be included Other reason – see s 4(11)(al)(vii): may be continuous service if re-employed within 2 months
Vic – Long Service Leave Act 1992	Slackness of trade – s 62(2)(C)(h): employment may be continuous. Section 62(4): period of time not worked may not be included Other reason – see 62(2)(C)(g): may be continuous service if re-employed within 3 months
QLD – Industrial Relations Act 2016	Slackness of trade - see s 134(7): employment may be continuous. Section 134(9): period of time not worked may not be included Other reason – see s 134(5): may be continuous service if re-employed within 3 months
SA – Long Service Leave Act 1987	Slackness of trade - see s 6(1)(g): employment may be continuous. Section 6(2): period of time not worked may not be included Other reason – see s 6(1)(i): may be continuous service if re-employed within 2 months
TAS – Long Service Leave Act 1976	Slackness of trade – see s 5(1)(h): employment may be continuous if the employee returns within 6 months of dismissal and they return within 14 days of offer and any other relevant conditions are met. Section 5(2): period of time not worked may not be included Other reason – see s 5(1)(g): may be continuous service if re-employed within 3 months
WA – Long Service Leave Act 1958	Slackness of trade - see s 6(2)(g): employment may be continuous if the employee returns within 6 months of dismissal. Section 6(3): period of time not worked may not be included Other reason: see s 6(2)(f) and (i): may be continuous service if re-employed within 2 months
ACT – Long Service Leave Act 1976	Slackness of trade – see s 2G(2)(b): employment may be continuous if employee returns within 6 months of dismissal. Section 2G(5): period of time not worked may not be included Other reason - see s 2G(2)(e): may be continuous service if re-employed within 2 months
NT – Long Service Leave Act 1981	Slackness of trade – see s 12(4)(c): employment may be continuous. Section 12(5): period of time not worked may not be included Other reason – see s 12(4)(e): may be continuous service if re-employed within 2 months

Taxation

Some termination payments made on redundancy receive favourable tax concessions. In this way, the Australian Taxation Office may be concerned by circumstances which indicate that any such favourable tax concessions were improperly achieved. Employers should seek tax advice from the Australian Taxation Office or their taxation agent about potential tax issues that may result from re-engagement of employees following termination due to redundancies. Employees may also need to seek tax advice about their personal circumstances.

More information

There are numerous strategies that employers can use to minimise any risks associated with re-engagement of staff. For more information about such strategies, please call the Ai Group Workplace Advice Line on 1300 55 66 77.