AIER ENewsletter - April 2012
Australian Institute of Employment Rights Inc. – News
Making a case for socially responsibly restructuring

Lisa Heap AIER Executive Director

Organisations, making difficult decisions regarding their future as a result of current economic circumstances should consider the broader social costs of their actions and engage their workforce and the broader community in discussions about options for change.

Newspaper reports regarding the recent decision of Toyota to lay-off workers at its Altona plant suggest there are some key principles that are worthwhile re-enforcing when looking at how to responsibly handle restructuring arising from financial crisis or industry down turn. 

The first principle that needs to be championed is often overlooked in practice.  It is that taking away someone’s job is not something that should be entered into lightly.   

The second principle is that decisions with potentially catastrophic consequences for individuals, families and in some instances whole communities, should be taken in conjunction (not just in consultation) with those (including members of families and communities) who will be affected.  

The Australian Institute of Employment Right’s (AIER’s) Australian Charter of Employment Rights  provides at Charter Right 7:

7 Protection from Unfair Dismissal

Every worker has the right to security of employment and to be protected against unfair, capricious or arbitrary dismissal without a valid reason related to the worker’s performance or conduct or the operational requirements of the enterprise affecting that worker. This right is subject to exceptions consistent with International Labour Organization standards.

The Charter identifies four (4) key policy considerations supporting this right to job security [1]. Firstly, a person’s right to human dignity.  Human dignity in the workplace is promoted and maintained by fair and equitable treatment and by the preservation of equality and non-discrimination in the application of principles relevant to termination of employment generally.  As the foundational principle for the International Labour Organization’s (ILO’s) formation recognises, labour is not a commodity and cannot be dispensed with as though it were. 
Secondly, society generally accepts that deprivation of liberty, of the right of residence (permanently in a country) and of entitlements to property ownership should occur only after a fair process and for proper reason. Similarly, job security, or a right to remain employed without unjust or capricious interference, should not be altered or interfered with in the absence of a valid reason and a fair and due process.
Thirdly, a job generates not only income and livelihood but also social contact and networks as well as perceptions and feelings that the employee is making worthwhile contributions to the economy and society.   Frequently, employment confers standing – within the workplace and within society as a whole.  Although it is not a purely economic relationship, the income supports not only the wage earner but also any dependants he or she may have. Thus, depriving a person of a job may have wide-ranging effects on a family and any dependants, ultimately affecting their tangible rights such as access to basic living standards as well as health and education. Security in employment recognises such rights and the far-reaching implications of failing to provide them.

Fourthly, workers and employers owe each other a reciprocal duty of good faith. Just as the duty imposes obligations on the employee to achieve mutually agreed objects of the relationship during the course of employment (and, for some duties, after the end of the relationship), the duty should require employers to act fairly towards their workers in matters related to the termination of employment.
These arguments do not support an absolute right to a job and that job security is not such an overriding goal that employment can never be affected.  Employers retain a right to bring employment to an end but the right is neither unfettered nor absolute. The employer alone cannot determine when a worker should be deprived of a job. The policy arguments supporting job security mean workers have a right to work, or to remain in their positions, unless dismissed on justified grounds and by a fair process. To put the proposition another way, dismissal should be based on proper, justifiable cause and not be arbitrary.  This includes during times of economic crisis.
For the process to be fair, an organisation seeking to lay – off hundreds of workers needs to critically examine its motivations and the criterion used for selecting workers.  Any hint of malintent is likely to lead to ongoing disputes and potentially litigation.  It also likely to result in a fracturing of the relationship between the organisation and those workers left (not terminated) who whilst saved this time might be left with a bad taste in their mouth.   This at a time when the organisation can little afford workers to be distracted, less committed and unmotivated. 
It is not appropriate here to comment in detail on the specifics of the Toyota Altona case, however, public comments from Toyota representatives regarding the criteria used including performance issues and sick leave absences ring alarm bells.  As does media reports regarding the process to inform workers of the decision to terminate their employment.   

In the midst of the global financial crisis  and faced with many organisations potentially panicking and behaving badly, the ILO published detailed advice regarding how organisations (enterprises) could act in a socially responsible manner.

In summary this advice includes a two step process.  Step 1 involves genuinely reviewing all options for change.  Step 2 involves handling lay – offs in a considered manner and as a last resort, including identifying in detail, and in conjunction with those affected by the potential lay-off, measures to mitigate its adverse consequences. 

Measure to mitigate include options beyond the provision of a redundancy payment such as:

  • Counselling in order to adjust to the change and in order to identify other possible alternative work/career options and skill assessments for future employment opportunities
  • Establishing mechanisms for priority of rehire if or when the organisation is able to re-engage workers
  • Introduction of voluntary early retirement schemes. This can include mechanisms that allow for phased retirement
  • Support for entrepreneurship by assisting those employees who may wish to launch their own initiative.
The ILO recommends that objective criteria be set regarding the selection of employees to be laid off, that this criteria be set in advance and discussed and that it be well documented

It also recommends that: 

  • Selection criteria should be weighted appropriately
  • Selection criteria should correspond to the business needs of the employer 
  • The criteria be capable of being objectively assessed (such as skills, qualifications, training experience)
  • The criteria must not discriminate on invalid or unfair grounds including age, sex, pregnancy, carer/family responsibilities, race, marital status, disability, religion, political opinion, national extraction or social origin, temporary absence from work due to illness, absence from work during maternity leave and union membership or activity. 
  • Communicating the decision to lay-off employees should be done sensitively and directly with those employees whose job will be lost. This is a very stressful time and this should be appreciated.
  • A mechanism for resolving grievances and disputes be established and be given the chance to operate prior to the termination of employment. 

In the current environment all organisations  should review their processes and practices around restructuring.  These practices and processes should be infused with the aim of achieving job security for all.  Lay-offs should be seen as a strategy of last resort.   Organisations should be encouraged to engage a broad group of stakeholders in the dialogue regarding measure to mitigate the need for lay-offs and if lay-offs are required as a last resort this engagement should continue to develop objective criteria and fair processes.   

[1]These principles are  extracted and summarised from a more detailed Chapter on protection from unfair dismissal and employment security written by Professor Marilyn Pittard contained in Bromberg M & Irving M (2007) Australian Charter of Employment Rights, AIER/Hardie Grant Books, Melbourne


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