Genuine redundancy and what employers must prove under the Fair Work Act

When an Australian business decides a role is no longer needed, everything turns on one question: is this a genuine redundancy? Under s 389 of the Fair Work Act 2009 (Cth), a dismissal is only a genuine redundancy if the employer can satisfy three separate tests. The job must genuinely no longer need to be done by anyone because of changes in the operational requirements of the business. Any consultation obligations in the applicable modern award or enterprise agreement must have been met. And it must not have been reasonable to redeploy the employee. Satisfy all three and the redundancy can defeat an unfair dismissal claim. Miss any one of them and the same dismissal can be found unfair, with reinstatement or compensation on the table.

This guide sets out who the genuine redundancy defence applies to and the thresholds that decide it, what each of the three tests actually requires in practice, the pay obligations that run alongside any redundancy, and what is at stake if the process fails. If you are planning a restructure, this is the framework a lawyer would check against before the first conversation with an affected employee.

When the genuine redundancy defence matters

The defence only matters if the dismissed employee could otherwise bring an unfair dismissal claim. That is the first thing to check, because it decides how much care the process needs. An employee is protected from unfair dismissal only if they meet the minimum employment period and are not excluded by the high income threshold:

• Minimum employment period: 6 months of continuous service, or 12 months if the employer is a small business employer (s 383 of the Fair Work Act 2009 (Cth)).
• High income threshold: employees who earn more than the threshold are not protected from unfair dismissal unless they are covered by a modern award or enterprise agreement. The threshold is $190,100 for the 2026-27 financial year.
• Small business status: an employer with fewer than 15 employees (with regular casuals counted and associated entities treated as one) is a small business employer (s 23). This affects both the minimum period and whether redundancy pay is owed.

For a small business employer, a dismissal must also be consistent with the Small Business Fair Dismissal Code, but a genuine redundancy remains a complete answer to an unfair dismissal claim regardless of business size (s 385(d)).

None of this means a genuine redundancy is optional paperwork. Even where an unfair dismissal claim is unlikely, the notice, redundancy pay and final pay obligations still apply, and the Fair Work Ombudsman can enforce them. The defence is a shield against a claim; the pay obligations are duties that exist regardless.

Test one: the job must no longer be required

The first limb of s 389(1)(a) asks whether the employer no longer requires the person's job to be performed by anyone, because of changes in the operational requirements of the enterprise. Two things are being tested here, and employers often stumble on the first.

The change must be operational. Downturns in revenue, loss of a contract, restructuring to reduce costs, automation, closing a location, outsourcing work or consolidating tasks into fewer roles can all qualify. What does not qualify is a decision about the employee themselves. If the real reason is performance, conduct or "fit", calling it a redundancy will not survive scrutiny, because the job is still needed, just not by this person. Redundancy is about the role, never the person.

The job must no longer be required by anyone. If someone else will do substantially the same work after the termination, the FWC can find the role was never genuinely redundant. Stronger scenarios include removing a position entirely, merging two roles into one genuinely different role with a different scope or skill requirement, or cutting headcount after a proven reduction in workload. Even where duties are redistributed, a restructure can still be genuine if the role as a whole disappears, but the before-and-after structure needs to be documented to show it.

A red flag that commonly undoes employers is hiring into a substantially similar role soon after the redundancy. Circumstances can change and a business can legitimately re-hire later, but the timeline and rationale need to be explainable from the records kept at the time.

Test two: consultation obligations must be met

The second limb, s 389(1)(b), is the one most often missed. Where a modern award or enterprise agreement applies to the employment and contains a requirement to consult about the redundancy, the employer must comply with it. Most modern awards and enterprise agreements contain such a clause.

The model consultation term in the Fair Work Regulations 2009 (Cth) (Schedule 2.3) is typical of what these clauses require. It is triggered when the employer has made a definite decision to introduce a major change to production, program, organisation, structure or technology that is likely to have significant effects on employees, including possible termination of employment. Once triggered, the employer must notify the affected employees, discuss the change, give them a genuine opportunity to contribute their views, and consider those views before implementing the decision.

The Fair Work Commission has been clear that consultation must be genuine and not perfunctory. A one-line email announcing the decision is not consultation, because the decision has already been made. In practice, a compliant process usually looks like this:

• Notify: tell the employee what change is proposed, why, and that their role may be affected.
• Explain: set out the likely effects, including the possibility of redundancy.
• Listen: give the employee a real opportunity to respond, ask questions and raise alternatives, with a support person if they want one.
• Consider: genuinely weigh what is raised, including reduced hours, job sharing or alternative roles.
• Confirm: put the outcome in writing and explain the next steps.

If consultation is skipped or rushed where it applies, the redundancy is not genuine under s 389, and the defence fails even if the job really did disappear. This is a standalone failure: it does not matter how strong the business case was.

Test three: redeployment must not have been reasonable

Even where the job is genuinely gone and consultation was proper, the dismissal is not a genuine redundancy if it would have been reasonable in all the circumstances to redeploy the employee (s 389(2)). Redeployment is assessed across the employer's own enterprise and the enterprise of any associated entity, so a vacancy in a related company can count.

The test is objective: what a reasonable employer would have done, not what the employee says they would have accepted. The FWC weighs factors including whether vacant roles existed at the time, whether upcoming vacancies were known, whether the employee could perform an available role with reasonable training, whether a move to another location was practicable, and whether the employee held the qualifications a role required.

Redeployment does not mean creating a new role or inventing a job to keep someone on. But an employer cannot simply assume the employee would not be suited or would not want the role. The realistic options need to be identified and discussed, and if nothing is suitable, that conclusion needs to be documented at the time. The records that matter are the ones made before the termination, not the explanation constructed after a claim is filed.

The separate obligation to pay entitlements correctly

A genuine redundancy still carries payment obligations under the National Employment Standards. Three are worth planning for before the decision is announced.

Notice of termination

An employer must give written notice of the day of termination, and the notice period or payment in lieu must be at least the minimum in s 117: 1 week for up to a year of continuous service, 2 weeks for 1 to 3 years, 3 weeks for 3 to 5 years, and 4 weeks for more than 5 years. Employees over 45 with at least 2 years of service get an extra week. Payment in lieu of notice is available.

Redundancy pay

Under s 119, an employee whose employment is terminated because the job is no longer required is entitled to redundancy pay based on continuous service, at the base rate of pay for ordinary hours:

Exemptions matter. No redundancy pay is owed where the employee has less than 12 months of continuous service, or where the employer is a small business employer (s 121). Where employment transfers and the employee refuses an offer that is substantially similar and recognises their service, the redundancy pay obligation can also be extinguished (s 122).

Accrued annual leave

On termination, untaken paid annual leave must be paid out at the amount that would have been payable had the leave been taken (s 90(2)).

An award, enterprise agreement or contract can add to these minimums, so the applicable documents need to be checked rather than assumed. Final pay errors are a common and easily avoidable source of disputes.

What happens if the redundancy is not genuine

If any of the three tests fails, the dismissal can be found to be an unfair dismissal. The Fair Work Commission can then order reinstatement, or compensation in lieu where reinstatement is not appropriate (s 390). Compensation is capped at the lesser of 26 weeks of the employee's remuneration or half the high income threshold, which is $95,050 for the 2026-27 financial year (s 392).

The exposure is not limited to the dismissed employee. The Fair Work Ombudsman can take enforcement action over unpaid redundancy entitlements: in Fair Work Ombudsman v Spotless Services Australia Ltd [2019] FCA 9, the Federal Court dealt with an application for declarations that the employer had breached s 119 by failing to pay redundancy pay. Underpaying notice, redundancy pay or annual leave is a separate contravention that does not depend on whether the redundancy was genuine.

A compliance checklist for a lawful redundancy

Before and during the process, work through this list and keep records of each step:

• Document the business case: the operational reason for the change and the before-and-after structure, including which roles are affected and why the remaining roles are different.
• Check the coverage: which modern award or enterprise agreement applies, what its consultation clause requires, and what notice and redundancy pay it provides.
• Consult before the decision is final: notify, explain, listen, consider alternatives, confirm in writing.
• Search for redeployment options: vacant and upcoming roles, reasonable training, other locations, associated entities, and record why any option was not suitable.
• Give written notice or payment in lieu: check the s 117 minimums, including the extra week for employees over 45.
• Calculate final pay: wages to the last day, notice, accrued annual leave, and redundancy pay after checking the exemptions.
• Keep the records: the documents created at the time are what explain and defend the decision if it is ever challenged.

When to get legal help

The decisions that decide whether a redundancy is genuine are made early, before the first conversation with the employee. A lawyer's value is concentrated there. A practitioner can confirm which award or enterprise agreement applies and what its consultation clause demands, stress-test the business case against s 389(1)(a), advise on whether redeployment options make the dismissal risky, and prepare the consultation and termination paperwork so the process itself is defensible. Where a claim has already been filed, a lawyer can assess whether the defence holds and prepare the response to the Fair Work Commission.

Bring the proposed restructure to a lawyer before announcing it, not after a claim arrives. The consultation and documentation decisions made in the first week determine whether the defence survives.

Start with the consultation clause in your award

Of the three tests, consultation is the one most often missed, and it is the one that fails independently of everything else. A business can have an unanswerable operational case and still lose the genuine redundancy defence because the applicable award required consultation and the employer skipped it. The practical first step for any planned redundancy is to pull the applicable modern award or enterprise agreement, find the consultation clause, and work out whether it has been triggered. That single document also tells you the redundancy pay scale and the notice obligations for the process, so it is the natural place to start.