Most Modern Awards contain a requirement for employers to consult with employees that they have “made a definite decision to introduce major changes in production, program, organisation, structure or technology that are likely to have significant effects on employees”.
But what is a ‘major change’? In Port Kembla Coal Terminal Ltd v Construction, Forestry, Mining and Energy Union [2016] FCAFC 99, the Full Court of the Federal Court provided some useful commentary on the meaning of the phrase.
Jessup J’s Approach
Jessup J said that the fact that an employee or a group of employees were being made redundant did not of itself constitute a major change. In order to determine whether a major change was taking place, Jessup J said that the court had to consider the “size and importance” of the change “with which those redundancies were associated”.
His Honour found that the change initiated by Port Kembla Coal Terminal Ltd which resulted in Mr was not a major change, as it only involved the termination of 3 out of 98 employees and had a minimal effect on the duties of the remaining employees.
White J’s definition of ‘Major Change’
White J agreed with Jessup J, adopted a similar interpretation of the term ‘major change’. His Honour explained that “a simple comparison” between the number of employees made redundant and the number of employees in the workforce overall will not determine conclusively whether or not a change is major. His Honour did suggest that a change that involves making employees redundant may be major if the employees who are being made redundant occupy senior and important employees, and the redundancies will have substantial consequences for the continuing employees.
Rangiah J’s definition of ‘Major Change’
Rangiah J adopted a reasonably broad definition of the phrase ‘major change’, suggesting that it refers to a major change in the manner in which work is done, managed, arranged or otherwise organised in the employer’s enterprise.
Contrary Jessup and White JJ, Rangiah J held that the change instituted by Port Kembla Coal Terminal Ltd was a major change. His Honour found that the operational review conducted by Port Kembla Coal Terminal Ltd involved a commitment to make use of voluntary redundancies to reduce the number of stand-alone positions in the medium term. This of itself constituted a major change that was likely to have a significant effect on employees in the future. It did not matter that the impact was not immediate or direct.
Lessons for Employers
Employers need not be worried that every single round of redundancies will constitute a ‘major change’ that engages the consultation provisions in the Modern Award that applies to their employees.
Rather, when considering whether they are required to consult with their employees, employers should focus on the organisational and operational changes that underpin any such redundancies. They should consider:
- The size and importance of the changes for the employee’s business.
- How many employees those operational and organisational changes are likely to effect.
- How senior the affected employees are likely to be.
- How significant the effect on them is likely to be.
They should not only consider direct and immediate impacts, but should also take into account effects of the change that might not materialise until some time in the future. They should also keep in mind that changes can affect different employees in different ways. For example, the termination of one employee could lead to a significant increase in the workload of another employee.
Most employers realise that employee consultation and communication is a key component of the planning of all significant organisational and operational changes. Needless uncertainty and stress in the workplace is not conducive to strong employee performance and productivity. In this respect, good employers will err on the side of consulting their employees.
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The information contained in this post is current at the date of editing – 27 November 2023.
