By Dalinee Bangaroo, Trade Mark Attorney/Solicitor and Clint Fillipou, Principal Partner

11 September 2026

Running a business can be challenging, especially in the current economic climate. Team resourcing is especially challenging for small businesses, knowing when to hire and when to cut headcount is an inexact science, and small business owners often make redundancy decisions based on practical considerations: declining sales, rising costs, changing business needs or otherwise. However, while small businesses with fewer than 15 employees at a given time may be exempt from certain rules (like statutory redundancy pay obligations), being a small business does not mean an employer can bypass the procedural requirements that apply when making an employee redundant.

The recent Full Bench decision of the Fair Work Commission (Commission) in Orientile Pty Ltd v Carson Q Zhang [2026] FWCFB 162 provides an important reminder that small businesses must comply with the same redundancy consultation obligations as larger employers when undergoing a redundancy process.

The case also demonstrates that even if an employer has legitimate business reasons for reducing its workforce, failing to have a meaningful consultation with the affected employee can result in the dismissal not being a ‘genuine redundancy’ under the Fair Work Act 2009 (Cth) (FW Act).

Case background

Orientile Pty Ltd (Orientile) operated a small business selling imported tiles where Mr Zhang had worked for almost 15 years as a sales representative. The business had expanded during 2024, including through the purchase of a second warehouse and the employment of a third sales representative.

By early 2025, however, Orientile considered that its financial position had deteriorated. Sales had slowed and operating costs had increased. The business concluded that it could no longer afford three sales representatives and decided to reduce the sales team to two.

On 28 February 2025, the owner of Orientile, Mr Gao, called Mr Zhang into a meeting and informed Mr Zhang that his position had been made redundant. Mr Zhang was told that his employment was being terminated because of the redundancy. At the time of Mr Zhang’s dismissal, the business employed only nine employees.

The Commission found the redundancy was not genuine and ordered compensation totalling $31,652.93 plus superannuation (which represented a 4-week period during which a consultation process could have occurred and then a further 12 weeks’ salary). Although small businesses are exempt from statutory redundancy pay under section 119 of the FW Act, the Commission used the scale as a guide due to Mr Zhang’s period of employment.

In the first instance, Orientile argued that the redundancy was genuine for the purposes of the FW Act, section 389, and it was not required to undertake redundancy consultation and could rely solely on the Small Business Fair Dismissal Code (Code). These arguments were not successful.

What does the law require?

A dismissal constitutes a genuine redundancy under section 389 of the FW Act if the following three key elements are met:

1. The person’s job is no longer required to be performed by anyone due to changes in the business’s operational requirements;
2. The employer must comply with any applicable obligation in a Modern Award or enterprise agreement to consult about the redundancy; and
3. Redeployment within the employer’s business or an associated entity would not have been reasonable in all the circumstances.

Accordingly, one of the first steps an employer should take before implementing a redundancy is to identify the industrial instrument applying to the employee and carefully review its consultation provisions, in addition to any other applicable obligations in the relevant Modern Award or the employee’s employment agreement. The requirement to engage in consultation that is meaningful and not perfunctory is to ensure that all affected personnel have a chance to be heard, and make suggestions, and be part of the process that is going to profoundly affect them and those around them.

The Appeal

In this case, Mr Zhang was not consulted before the decision was made and was not provided with written information about the proposed change, its expected effects or possible measures to avoid or reduce its impact. The other sales representatives were also not consulted about the proposed reduction.

In the appeal, the Full Bench took a relatively straightforward approach. It observed that all three requirements in section 389 needed to be satisfied.

It was sufficient to decide the case on the consultation requirement because Orientile had clearly failed to comply with the consultation clause of the applicable Storage Services and Wholesale Award 2020 (Award), under which Mr Zhang’s employment was covered. Relevantly, the clause required employers to engage their employees in consultation when a major workplace change was proposed. The evidence established that the first communication concerning Mr Zhang’s dismissal occurred on the day he was dismissed. Mr Gao had not previously consulted him about the proposed reduction in staffing.

The Full Bench emphasised that the consultation process is intended to give employees a meaningful opportunity to understand the proposed change, raise concerns and suggest ways of avoiding or reducing its adverse effects. Consequently, the Full Bench found that Orientile had not complied with the Award, and the dismissal was not a genuine redundancy for the purposes of section 389.

Key takeaways for small business employers

The appeal emphasised that small business employers are not exempt from redundancy consultation obligations under the FW Act or any Modern Awards and therefore must check the applicable award consultation provisions before making any redundancy decision.

For small businesses, the redundancy process does not need to be unnecessarily complicated. However, it should be structured and not convened or executed in a major hurry. Where required by the applicable award, contract or law, employers must provide information about major workplace change, its expected effects and relevant matters that may affect the employees. Employees should be given a meaningful opportunity, before a final decision is made, to suggest ways of avoiding or reducing the impact of the redundancy. The employers should properly document their consideration of those suggestions to qualify any dismissals as genuine redundancies and avoid unfair dismissal findings.

Employers must also consider section 389 of the FW Act which contains a separate requirement concerning reasonable redeployment within the employer’s business or an associated entity. This should also be actively considered and well-documented.

For employers, the safest approach is therefore to treat consultation as an integral part of the redundancy decision-making process, rather than as a formality to be completed immediately before termination.

Contact Us

It is important to remember that that no matter how large your business is, its size does not justify, alter or otherwise diminish the definition or procedural requirements of a genuine redundancy. Therefore, there is no such thing as ‘small business exception’ to redundancy consultation requirements. For further information or to discuss the decision, consultation and award obligations or any matters specific to your workplace please contact one of our experts.