When is a redundancy strategy truly “genuine”? Why your contractors may be the key to your next unfair dismissal claim.

The High Court of Australia recently handed down a landmark decision in Helensburgh Coal Pty Ltd v Bartley [2025] HCA 29 (‘Helensburgh Coal’), evolving the legal landscape of redundancy and unfair dismissal.

For years, Australian employees have operated on the assumption that a redundancy was “genuine” if the specific role was no longer required or no vacant positions were available for redeployment. However, the rule in Helensburgh Coal clarifies that the Fair Work Commission (FWC) has the authority to look beyond “vacant chairs” when assessing the reasonableness of redeployment.

If your business has a blended workforce, with a combination of permanent employees and external contractors, this judgment is a wake-up call for you.

The Facts

The dispute originated at the Metropolitan Coal Mine (the ‘Helensburgh Mine’), operated by Helensburgh Coal Pty Ltd (‘the Helensburgh Company’), and located in Helensburgh, south of the Royal National Park. The Helensburgh Mine predominately produced coking coal. Following the COVID-19 Pandemic, global demand for coking coal dropped precipitously. As such, the Helensburgh Company resolved to restructure its operations, with the dismissal of 90 employees, including 47 forced redundancies. During this period of operations, the Helensburgh Company continued to engage external contractors from companies such as Nexus Mining and Menster Pty Ltd, to perform “ongoing and sustaining” work at the mine.

The dismissed employees argued that their dismissals were not cases of “genuine redundancy”, because it would have been reasonable to redeploy them into the work that was being performed by the contractors. At the core of the dispute was whether the FWC, in undertaking its inquiry of the complaint, was permitted to ask if the employer could have made changes to its workforce, such as replacing contractors with employees, to facilitate redeployment.

Understanding Section 389: What is a “genuine redundancy”?

To understand the High Court’s ruling, we must turn our attention to section 389 of the Fair Work Act 2009 (Cth) (the ‘FWA’), which defines “genuine redundancy” with a two-part test. Under section 389(1) (‘the positive requirement’), a dismissal is a case of genuine redundancy if the employer no longer requires the employee’s job to be performed by anyone because of changes in the operational requirements of the enterprise.

However, under section 389(2) (‘the negative requirement’), a dismissal will not be a genuine case of redundancy if it would have been “reasonable in all the circumstances” for the person to be redeployed within the employer’s enterprise or an associated entity. Although the operational changes in this case were not disputed, the entire appeal centered on the scope of the ‘reasonableness’ inquiry.

Were there really no job vacancies?

The Helensburgh Company argued that because there were no vacant positions available at the time of the dismissals, redeployment was impossible. They contended that the FWC should not be permitted to “reconstruct” their business model to force the termination of third-party commercial contracts. The High Court rejected this narrow interpretation, and in doing so established several key principles for all business leaders to consider:

1. The term “redeploy” is broader than “fill a vacancy”. The High Court held that the ordinary meaning of “redeploy”, being to rearrange, reorganise or transfer, inherently contemplates some degree of reorganisation. The FWA does not assume that a job must be “readily available” or “vacant” in order for redeployment to be considered “reasonable”.
2. A “counter-factual” hypothetical test should be considered in determining if a redeployment is “reasonable”. Under section 389(2), the FWC is directed to consider a hypothetical situation to ask whether, at the time of the dismissal, what could have been done to keep the employee employed within the enterprise.
3. The term “in all the circumstances” should be applied broadly. The negative test under section 389(2) asks if it ‘would have been reasonable in all the circumstances for the person to be redeployed’. “All the circumstances” was construed by the High Court as “unmistakably broad”, preventing the opportunity for exclusions or exceptions, such as the use of contractors, from the FWC’s assessment.

The legal definition of “enterprise”

A significant aspect of the High Court’s ruling was the definition of “employer enterprise”. Under the FWA, an enterprise is a “business, activity, project or undertaking”. The High Court held that this includes not just a fixed list of assets, but the policies, plans and decisions of the business.

So what does this mean? An employer’s enterprise includes the policies and practices in relation to the use of labor, including the choice to use a blended workforce of employees and contractors. It is because these business decisions form part of an "enterprise" that the FWC is entitled to evaluate whether it would have been reasonable for an employer to adjust those business choices, including reducing reliance on contractors to facilitate the redeployment of its own staff.

When is it unreasonable to “insource”?

Although the High Court’s decision in Helensburgh Coal has opened the door for the FWC to consider contractor roles, this should not be construed as a blanket mandate that contractors must be fired to save employees. The test remains one of reasonableness, which is an objective question for the FWC to determine.

Some of the factors that may influence whether it is considered reasonable to replace a contractor include:

1. The nature of the work. In Helensburgh Coal, the work performed by contractors did not require a specialised skill set that existing employees lacked. Had the work undertaken by the contractors been highly specialised, it is less likely that a court would consider it reasonable to redeploy existing employees without such a skill set.
2. The ongoing obligations of the working relationship. The High Court observed that the contractors were engaged on “as needs” purchase orders, meaning that there was no ongoing obligation to request their services.
3. The operational impracticability of restructuring. Employers can argue that changing roles fulfilled by contractors for employees is a “fundamental change” to their business model or would cause “operational inconveniences”. However, the FWC can inquire whether these inconveniences could be reasonably managed.

Standard of Review – Identifying Errors

The High Court also considered the standard of appellate review that was used by the Full Bench of the FWC. The Helensburgh Company argued that the Full Bench should have applied a ”correctness standard” (that is, whether the decision was right or wrong), rather than the more deferential House v The King standard.

The High Court found it unnecessary to decide which standard was correct, as any failure to apply the right standard would be an “error within jurisdiction”, rather than a “jurisdictional error”. The Court held that as long as the Full Bench properly understood its role was to identify errors, than the specific standard of review used did not invalidate the decision.

Key Takeaways for Employers

If you use contractors in your business model, the “business as usual” approach to redundancy is no longer legally sufficient. There are a number of issues that employers in this instance should consider:

1. Audit your workforce. Employers should identify which roles in their business are performed by contractors and whether permanent employees have the skills and competencies to perform that work.
2. Review contractor agreements. Employers should determine if contracts are on an “as needs” basis or have long-term fixed commitments. Highly flexible arrangements increase the likelihood that the FWC will find insourcing to be reasonable.
3. Document Business Strategy. Employers should ensure that they have a robust, evidence-based justification for using contractors. In Helensburgh Coal, the Helensburgh Company was criticized for having “little evidence of substance” regarding the necessity or cost-benefits of their contractor mix.
4. Perform a “reasonableness” pre-check. Before a redundancy, employers should ask: could we reasonably reduce our contractor headcount to accommodate these employees? If the answer is yes, be prepared to explain why doing so would be unreasonable or operationally impracticable.

The High Court has made it clear that the unfair dismissal scheme aims to balance the needs of businesses with those of employees, emphasising job preservation and reinstatement. Employers can no longer assume a redundancy is “genuine” simply because no internal vacancies exist, particularly when contractors are performing similar work within the same enterprise.

Given the complexity of the “unmistakingly broad” range of circumstances the FWC may now consider, it is vital to have a legally sound redundancy strategy. Whether you are planning a restructure or facing a claim, employers should seek legal advice. Shire Legal can assist any employers that require assistance with their industrial relations or employment law. matters.