“This situation is leading some employers to make applications under the Fair Work Act to the Fair Work Commission seeking a reduction in the required redundancy pay under the act. Such an application can be made for reasons including the employer’s incapacity to pay. The commission doesn’t make such orders to reduce pay lightly.”

“There needs to be a demonstrable incapacity to pay (supported by cogent financial evidence) and, in the present environment, there are authorities that suggest an employer would likely need to show it considered seeking assistance from the federal government’s JobKeeper scheme.”

Given redundancy is an option that requires access to funds, the pair noted, employers are sensibly looking closely at whether they are eligible for JobKeeper to keep employees employed rather than making their positions redundant.

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“Redundancy is a permanent outcome to address what will (hopefully) be a temporary situation,” they said.

Redundancy issues for legal employers on the horizon

Speaking about the myriad issues arising with redundancy as a result of the global coronavirus pandemic, Mr Byrnes and Ms Capener – a partner and graduate solicitor at Swaab respectively – said that if the pandemic goes on for longer than we expect it to, there is a “real prospect” of an increasing number of legal employers struggling with cash flow.

From here, there will be a diminished capacity to make redundancy payments as required by legislation, they said.

“Even though making employees redundant is about cutting costs, redundancy can be an expensive exercise. Notice, redundancy and accrued entitlements need to be paid soon after redundancy is affected. This might lead some legal employers to make applications to the Fair Work Commission seeking a reduction in the required redundancy pay,” they posited.

“If legal employers do make such an application recently authorities suggest that they will need to show why they have not sought JobKeeper payments for those employees, including considering the way in which the flexibility conferred on employers by the JobKeeper enabling directions (stand-down, duties and location) could be used to avoid redundancies.”

Mr Byrnes said that if “well-known and established law firms” approach FWC for redundancy relief, they will likely be asked two questions.

“First, what was the draw of partners in recent years? Second, why are those partners now not kicking in to pay the full redundancy payments for employees whose positions are being made redundant? Perhaps unfairly such applications are likely to be met with some initial cynicism,” he mused.

“Because most law firms retain a partnership structure, they cannot as readily hide behind the ‘corporate veil’ of a company structure. Legal employers (of any kind) looking to avail themselves of redundancy relief will need to come armed with compelling evidence as to why that relief should be granted.

“They must expect searching questions in relation to financials. They will need to show how the pain has been shared with those at the highest levels.”

What legal employers must do

When asked how best legal employers can adhere to their duties to employees, Mr Byrnes and Ms Capener said that, as a first step, they should be managing potential redundancies with care and sensitivity.

“While it is understood some legal employers are going to need to take some difficult decisions (particularly those facing an existential threat), if the situation is handled poorly there could be serious long-term repercussions for morale, motivation and retention. This is a critical time for the ‘employment brand’ of employers,” the pair said.

“Before implementing redundancies, legal employers should be actively considering whether they, and the relevant employees, are eligible for JobKeeper payments. These payments may enable staff to be retained. This, of course, is good for those employees but also good for the legal employer as well, ensuring there is a workforce ready to deploy when there is (as is hoped) a resumption of normal levels of activity.

If JobKeeper payments are not available, Mr Byrnes and Ms Capener continued, then the legal employer should actively consider redeployment opportunities.

“Can the employee be usefully redeployed (even if temporarily) to an area which has not been adversely impacted (or might even be busier) as a result of the crisis? The principle that redundancy might be a blunt, permanent outcome to address what will (hopefully) be a temporary situation should be kept in mind. It is not just about survival but also the strength, viability and competitiveness of the business that [remain] after the crisis,” they said.

How legal employees can protect themselves

It may be difficult to bear in mind, but any employee in law who has been let go must remember one thing: “the cessation of their employment is not their fault”, the pair proclaimed.

“It is a product of a (hopefully once-in-a-lifetime) freak, unforeseeable event that has wreaked havoc on the economy generally and, in the process, some parts of the legal industry,” they insisted.

“If a legal employee has an opportunity during a consultation period for redundancy (which will not always apply) they should emphasise the value they bring (or can potentially bring) to the employer and that they are willing to be flexible in terms of the work they do.

“For instance, a lawyer practising in one area might want to indicate a willingness to work in a different area of the firm (which is busy during the pandemic – there are a few) for the duration of the crisis rather than have their employment end as a result of redundancy.”

Employees who have their employment terminated on a redundancy basis during the crisis, Mr Byrnes and Ms Capener added, should consider seeking a full reference from employers.

“Given the quality of many people whose employment has ended through no fault of their own, employees may want to ask employers to set aside their general reluctance to give employees references which offer a full endorsement of the positive attributes of the employee and contribution they made,” they advised.

“Many employers are implementing redundancies with a heavy heart knowing they are losing some excellent staff – they may well be receptive to doing what they can to help employees secure alternative employment and land on their feet.”

Remember – people are your greatest asset

Whilst it may be a trite statement, Mr Byrnes reflected, the main asset of a law firm, or in-house legal department, is its people.

“While there is an understandable temptation to make employees redundant in the present circumstances if there is a significant downturn other options (most notably JobKeeper) should be fully considered before redundancies are affected,” he said.

“Once the crisis ends (or at least some of the restrictions are lifted) legal employers with a significantly diminished workforce will not be in a position to effectively service work and clients (either internal or external) and will be at a competitive disadvantage. Even with more lawyers on the market, those firms (or departments) will not simply be able to quickly recruit a large number of suitably qualified employees to restore their pre-crisis capability.”

Choosing your employer

Moreover, Mr Byrnes suggested that any lawyer who is made redundant take time to consider what kind of employer they want to work for in the long run.

“Many would remember (or be aware of) Bob Hawke after the America’s Cup win in 1983 saying that, ‘Any boss who sacks anyone for not turning up today is a bum’. Employees made redundant during this period should remember that almost all employers are going to understand that the loss of your job is unrelated to your own ability, experience and overall value you bring to an employer,” he said.

“The very few employers who don't understand that probably fall into the ‘bum’ category (as described by the late R.J.L. Hawke) for whom you would probably not want to work in the longer term anyway. There are many employers devastated by the quality of the people they have had to let go because of this situation.”

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