Understanding Section 389 of the Fair Work Act: Employer’s Guide

If you’ve ever had to make a tough decision about letting someone go from your business, you’re not alone. Dismissals are a reality for many employers, no matter the industry or business size. But knowing the right way to approach these decisions isn’t always straightforward – get it wrong, and you could be facing an unfair dismissal claim that’s costly and time-consuming.

Section 389 of the Fair Work Act is a key part of Australia’s employment law landscape, spelling out what constitutes a “genuine redundancy” – one of the major legal exceptions that can protect you from unfair dismissal claims. Understanding s 389 Fair Work Act is vital for every employer who wants to do the right thing by their team, while also protecting their business interests.

In this guide, we’ll break down exactly what section 389 Fair Work Act means for your workplace, outline the steps you need to take when making roles redundant, and share practical tips to stay compliant with the law. If you’re unsure where to begin, don’t worry – we’re here to clarify the process and help you handle redundancies confidently and legally.

What Is Section 389 of the Fair Work Act?

Before diving into the details, let’s start with the fundamentals: what is s 389 Fair Work Act and why does it matter?

Section 389 of the Fair Work Act 2009 (Cth) sets out the requirements for a “genuine redundancy.” Essentially, if you’ve made an employee’s job redundant and meet the requirements in this section, that employee is not considered to have been unfairly dismissed under the law.

This is extremely important, because unfair dismissal claims can expose your business to potential compensation orders, forced reinstatement of staff, or reputational damage. By following section 389 Fair Work Act, you create a strong legal foundation for making tough calls while treating your staff fairly.

Section 389 Fair Work Act – The Three Key Requirements

Under the Act, a dismissal will be a “genuine redundancy” if:

• The employer no longer requires the job to be done by anyone due to operational changes;
• The employer has complied with any consultation obligations under an award or enterprise agreement; and
• It was not reasonable to redeploy the employee within the employer’s business or associated entities.

Let’s look deeper at each requirement, so you can see how s 389 Fair Work Act works in the real world.

How Does Section 389 Fair Work Act Apply to My Business?

Whether you run a small retail store or a large office, these requirements apply whenever you need to make redundancies. Ignoring them risks legal action, so here’s what you should consider at every stage.

1. There Must Be a Genuine Change in Operational Needs

A redundancy is only genuine if you no longer require anyone to do the specific job. Common triggers include restructuring, new technology that automates work, downturns in business, or relocating operations.

It’s not enough just to want to dismiss a particular employee – the position itself must no longer be needed. If you hire someone else into an identical role shortly after a redundancy, this could be seen as evidence the redundancy was not genuine.

2. Consultation Obligations Must Be Followed

Most Modern Awards and Enterprise Agreements have rules about consulting with employees before making them redundant. Failing to do this, even if there is a business reason for the redundancy, could mean you haven’t met the requirements of section 389.

Consultation usually involves:

• Notifying the affected employee(s) as soon as possible
• Providing information about the changes and reasons behind them
• Discussing the impact of the changes on employees
• Genuinely considering any suggestions the employee(s) make (for example, alternative ways to avoid or reduce the number of redundancies)

If your employees are covered by a Modern Award or Enterprise Agreement, always check the consultation provisions (usually near the end of the document or in a redundancy-related clause).

3. It Must Not Be Reasonable to Redeploy the Employee

Before proceeding with a redundancy, you’re required to consider whether the impacted employee could reasonably be redeployed, either within your business or an associated entity (such as a related company in a corporate group).

Redeployment isn’t just moving an employee to an identical job – it includes offering similar roles they could reasonably perform, with suitable training if necessary. If there’s a vacant position available, even in a different location or with different duties, you may be expected to offer this as an alternative (as long as it’s reasonable in the circumstances).

To comply with s 389 Fair Work Act, keep notes of your decision-making process and any efforts made to identify redeployment options. This documentation can be crucial if a dispute arises.

When Does Section 389 Not Apply?

You should be aware there are situations where a dismissal won’t be protected by section 389, even if you’ve labeled it a redundancy.

• If the redundancy is not genuine (for example, performance issues are disguised as redundancy)
• If you haven’t followed your consultation obligations in an Award or Enterprise Agreement
• If you fail to consider reasonable redeployment options

Employees who believe their dismissal is not a genuine redundancy can still make an unfair dismissal claim with the Fair Work Commission. That’s why it’s vital to follow each requirement of s 389 Fair Work Act closely, document your process, and seek advice if in doubt.

Step-by-Step: How To Manage Genuine Redundancy Under Section 389 Fair Work Act

Making someone redundant can be stressful – both for you and your team. By following a clear process, you reduce your risk and maintain fairness:

Step 1: Identify the Operational Change

Clearly document why the role is no longer required. Is it a restructure, a business downturn, adoption of new software, or something else?

Step 2: Check Awards and Enterprise Agreements

Review any applicable Modern Awards or Enterprise Agreements to identify consultation duties. These are legally binding, so don’t skip this step.

Step 3: Notify and Consult Employees

Let the affected employees know in writing of the proposed changes and that their role may be made redundant. Open a genuine discussion about options and consider any employee feedback.

Step 4: Explore Redeployment Opportunities

Take reasonable steps to identify any suitable positions – within your business or associated entities – that impacted staff could perform. If any are available, offer them to the employee.

Step 5: Finalise and Carry Out the Redundancy

If no reasonable redeployment is possible, provide the employee with formal notice of redundancy. Be sure to pay the correct redundancy entitlements plus any unused annual or long service leave.

Step 6: Keep Records

Documentation is essential. Keep records of your operational reasons, employee communications, and your efforts to consult and redeploy.

Step 7: Support Departing Employees

Provide departing staff with necessary paperwork (such as a separation certificate), and consider offering outplacement services or support, if appropriate. This isn’t a legal requirement, but it’s best practice for your reputation and team wellbeing.

Legal Compliance and Common Pitfalls to Avoid

Understanding s 389 Fair Work Act is just the start. Employers sometimes stumble over technicalities that can undermine a genuine redundancy, so watch for these common traps:

• Failing to consult properly: Not following Award or EBA procedures can negate a genuine redundancy – even if your operational reasons are sound.
• Disguising performance terminations as redundancies: This exposes you to unfair dismissal claims. Handle performance issues separately from genuine redundancies.
• Not considering redeployment seriously: Skipping over vacancies or failing to inform staff of other roles means you haven’t met one of the core tests of section 389.
• Ignoring other legal obligations: Don’t overlook notice periods, final pay, accrued leave payments, or record-keeping requirements under the Fair Work Act.

By knowing what counts as a genuine redundancy under section 389 Fair Work Act, and sticking to a transparent process, you reduce your business’ legal exposure and demonstrate fairness to your staff.

Key Legal Documents for Redundancies and Employment

Handled correctly, redundancies are just one part of managing workforce changes. Having the right legal documents can support your compliance and reduce misunderstandings:

• Employment Contracts: Define expectations and include clauses on termination and redundancy (see our guide to employment contracts).
• Redundancy Letters: Clearly communicate redundancy decisions and outline the entitlements and support.
• Redundancy Document Suite: A collection of template letters, process checklists, and FAQ sheets to guide you through the legal steps (get help with our redundancy document suite).
• Workplace Policies: Have policies that cover restructuring, redeployment, and consultation obligations, so staff know what to expect.
• Separation Certificate: Required for the employee to claim Centrelink benefits.

Not every document will be relevant in every situation, but reviewing your standard employment contracts and policies before any restructure is always smart. You may also want to check our resources on navigating termination of employment and employee legal rights around ending employment.

What Other Laws and Considerations Apply When Making Redundancies?

Genuine redundancy is just one aspect of the legal landscape. When making changes to your workforce, it’s important to bear in mind:

• Anti-Discrimination Laws: Make sure decisions aren’t influenced by unlawful factors, like age, disability, race or pregnancy (see our anti-discrimination guide for businesses).
• Minimum Notice and Redundancy Pay: Required by the National Employment Standards in the Fair Work Act. Entitlements differ depending on the employee’s tenure and your business size.
• Record-Keeping: Employers must keep accurate records of all calculations, communications and payments relating to redundancies.

Some employees may not be covered by unfair dismissal protections (for example, if you’re a small business with fewer than 15 employees and have followed the Small Business Fair Dismissal Code), but section 389 Fair Work Act is still a key reference for best practice.

Common Scenarios and FAQs

What Counts as "No Longer Requiring the Job"?

Scenarios might include closing down a whole department, outsourcing a function, automating manual work, or experiencing a business downturn. As long as the role is genuinely gone from the structure and not simply renamed or shifted to another employee, it can be classed as a genuine redundancy.

Do I Have to Offer Any Available Position, Even if It's at a Lower Level?

Section 389 Fair Work Act requires you to offer any “reasonable” redeployment. If the employee is capable (with some training) of moving into a lower-level or different position, you should offer it. If the employee refuses, the redundancy can usually proceed – but document the offer and their response.

What Happens If I Don't Follow the Consultation Process?

If you don’t consult as required by an Award or Enterprise Agreement, the redundancy will likely not be viewed as “genuine” even if your operational reasons are valid. This puts you at risk of an unfair dismissal application.

What Records Should I Keep?

Keep copies of correspondence, consultation invitations and notes, lists of alternative roles reviewed, and how you decided on the final outcome.

Key Takeaways

• Section 389 of the Fair Work Act is your guide to ensuring redundancies are genuine, fair, and compliant.
• To meet the test, remember: the role itself must be genuinely redundant, you must consult as required, and redeployment must not be reasonable or possible.
• Consultation with employees is not optional – it’s a legal requirement if they’re under an Award or Agreement.
• Your redundancy process should be consistent, well-documented, and focused on fairness (not as a shortcut for performance issues).
• Having the right legal documents, like employment contracts and redundancy letters, makes managing change easier and more transparent.
• If in doubt about whether your redundancy process meets section 389 Fair Work Act standards, getting legal advice can save a lot of trouble later.

If you would like a consultation on employment law compliance or need advice about genuine redundancy under s 389 Fair Work Act, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.