Australia Genuine Redundancy After Helensburgh Coal: Auditing Contractors Under s 389
Checking open job requisitions no longer satisfies Fair Work Act section 389(2). After Helensburgh Coal [2025] HCA 29, HR must audit whether contractor work can reasonably be insourced.
- Jurisdiction
- Australia · Fair Work Act 2009 (Cth) ss. 385, 389 & [2025] HCA 29
- Employer threshold
- National system employers · Unfair-dismissal eligible staff (6 mos / 12 mos small business)
- Decision trigger
- Redundancy affecting permanent roles while external contractors or labour hire remain engaged
- Review cadence
- Reviewed on Fair Work Commission Full Bench post-Helensburgh determinations
Direct operational answer
Under section 389(2) of the Fair Work Act 2009 (Cth), as unanimously construed by the High Court of Australia in Helensburgh Coal Pty Ltd v Bartley [2025] HCA 29, a dismissal is not a genuine redundancy if it would have been reasonable in all the circumstances to redeploy affected employees by reducing contractor or labour-hire engagements and insourcing transferable work. Using the hr.cafe redeployment audit record, HR tests every active contractor engagement before issuing termination notices.
What the High Court Changed on 6 August 2025
For fifteen years, Australian HR packs treated the open-requisitions spreadsheet as conclusive proof of section 389(2) redeployment checks. In Helensburgh Coal Pty Ltd v Bartley [2025] HCA 29, all five participating High Court justices dismantled that narrow shortcut.
Examine the exact facts behind the ruling. At the Metropolitan Coal Mine in New South Wales, Helensburgh Coal restructured operations during a coking-coal downturn, dismissing permanent mine workers (22 contested dismissals reached the appellate litigation) while retaining two external mining contractor firms performing ongoing work on site. When the dismissed workers filed unfair-dismissal applications under Part 3-2 of the Fair Work Act 2009 (Cth), Helensburgh invoked the section 385(d) / section 389 "genuine redundancy" jurisdictional objection. Management argued that section 389(2)—which asks whether it would have been "reasonable in all the circumstances for the person to be redeployed within the employer’s enterprise or the enterprise of an associated entity"—only allowed the Fair Work Commission (FWC) to look at existing vacant positions, barring the FWC from asking whether the company should terminate or scale back external contractors.
On 6 August 2025, the High Court unanimously dismissed the employer’s appeal in Helensburgh Coal Pty Ltd v Bartley [2025] HCA 29. Look at the three operational holdings every people operations lead must internalise:
- "Redeployed" does not mean "slotted into a pre-existing vacancy": Section 389(2) asks whether there was work within the employer’s enterprise (or an associated entity) that could reasonably have been performed by the otherwise redundant employees—including work currently allocated to external contractors or labour hire.
- "In all the circumstances" permits broad structural scrutiny: The FWC is explicitly empowered to inquire into whether the employer could reasonably have altered how it used its workforce—such as not renewing expiring purchase orders, exercising termination-for-convenience clauses, or insourcing non-specialist contractor tasks—to keep permanent employees employed.
- Losing the section 389 shield opens full unfair-dismissal exposure: If an employer fails section 389(2) (just as if it fails section 389(1)(b) award/enterprise-agreement consultation), the dismissal is legally not a genuine redundancy. The jurisdictional bar disappears, exposing the business to reinstatement orders under section 391 or compensation up to 26 weeks’ pay (capped at half the high-income threshold) under section 392—per claimant! Across a 20-person restructure, that turns a routine resize into seven-figure litigation and back-pay exposure.
Why "Consider Contractors" Is Not Enough: The Six FWC Evidentiary Factors
The High Court did not create an automatic ban on keeping contractors during redundancies. Instead, it turned contractor retention from a protected managerial prerogative into an evidence-tested reasonableness inquiry at the date of dismissal.
Notice the balance inside Helensburgh Coal. Retaining a contractor can still be completely reasonable—provided HR and procurement build contemporaneous, contract-by-contract proof before issuing termination letters rather than inventing post-hoc excuses in witness statements six months later. Across the FWC’s multi-year hearings in Bartley and subsequent High Court guidance, six concrete factors separate defensible contractor retention from a failed genuine-redundancy defence:
- 1. Contractual Commitment & Exit Penalties: Is the external vendor engaged on an ad-hoc daily/weekly purchase order or casual labour-hire call-off that can end on 7 days’ notice at zero penalty—or is it a binding three-year fixed-price master services agreement carrying liquidated early-termination damages? Daily/weekly call-off contractors performing generalist work are almost impossible to defend keeping while sacking permanent staff with matching skills.
- 2. Specialist Skills, Licences & Proprietary Equipment: Does the contractor supply specialised heavy machinery, proprietary diagnostic software, or statutory high-risk licences your redundant employees do not hold and cannot obtain within a short, reasonable retraining period?
- 3. Permanence vs. Short-Horizon Project Tail: Is the contractor finishing a three-week commissioning sprint that disappears next month, or performing ongoing, steady-state BAU operations expected to run all year?
- 4. Associated Entities Scope (Corporations Act s. 50AAA): Remember section 389(2)(b) explicitly extends across associated entities. Stopping your audit at Subsidiary A’s cost centre while Subsidiary B across the road engages 15 labour-hire temps in identical roles fails section 389(2)(b) outright.
- 5. Retraining & Competency Gap Duration: If a permanent technician needs a two-week internal induction to take over a contractor’s routine maintenance run, FWC members regularly treat that brief transition as reasonable; if the role requires a two-year engineering degree or complete trade requalification, insourcing is not reasonable.
- 6. Employee Consultation Input (s. 389(1)(b)): When affected staff or unions point to specific on-site contractors during award/EA consultation, brushing the question off with "vendor spend is a commercial matter outside HR consultation" guarantees an adverse FWC finding.
Post-Helensburgh Section 389(2) Redeployment & Contractor Audit Matrix
| Workforce / Vendor Stream | Audit Data Required Before Consultation | Insourcing Reasonableness Test | Defensible Outcome & Evidence to File |
|---|---|---|---|
| 1. Open Vacancies (Enterprise + s. 50AAA Associated Entities) | Full group requisition report across all Australian entities, including lower-graded and different-location roles. | Could the affected employee perform the role immediately or with short-horizon induction/retraining? | Offer even lower-paid or interstate vacancies in writing (never assume an employee will reject a step-down role). |
| 2. Casual Labour-Hire & Temp Agency Staff | Headcount, shift hours, notice period (often 24h–7d), hourly charge rate, and duties performed on site. | High insourcing expectation where duties overlap permanent skills and agency call-offs carry zero break fee. | Stand down interchangeable labour-hire seats first and redeploy permanent staff—or document hard skill/location incompatibility. |
| 3. Ongoing Embedded Service Contractors (SOW / MSA) | Contract expiry date, termination-for-convenience clause, break penalties, and vendor-owned equipment list. | Weigh remaining lock-in term, break costs, and whether work requires capital plant the employer does not own. | Attach redacted MSA term/break-fee clauses and specialist plant schedule to the written s. 389(2) redeployment memo. |
| 4. Short-Term Specialist / Peak Surge Vendors | Project end date, statutory certifications required, and non-recurring deliverable scope. | Insourcing usually unreasonable if work ends within weeks or requires external accreditation taking months. | Record exact project sunset date and licence gap comparing employee skills matrix against SOW requirements. |
| 5. Consultation Alternatives Raised by Employees | Written log of every contractor/job-share/insourcing proposal raised by employees or unions under s. 389(1)(b). | Employer must genuinely consider and give reasoned operational responses before finalising dismissal decisions. | Issue written consultation response addressing each named contractor cohort with specific operational and contractual facts. |
Worked Pre-Redundancy Scenario: How Procurement Data Changes the Exit List
HR cannot run a post-Helensburgh redundancy check without pulling the accounts-payable vendor and labour-hire register first. Walk through how a 10-role warehouse and maintenance proposal shifts once procurement data is audited.
Suppose a Melbourne food-manufacturing group proposes making 10 permanent roles redundant: 6 afternoon-shift forklift/dispatch operators and 4 preventative-maintenance fitters. On Friday morning, the HRBP checks the HRIS requisition board: 0 open permanent vacancies across all three Victorian sites. Under pre-2025 practice, HR would have opened consultation expecting 10 exits.
Instead, the HRBP pulls the active contractor and labour-hire ledger across the company and its associated cold-storage subsidiary 12 kilometres away:
- Cohort A (Dispatch / Forklift): The cold-storage subsidiary currently engages 4 casual labour-hire forklift drivers averaging 38 hours/week for the past seven months on a 24-hour cancellation rate card. All 6 redundant permanent operators hold current LF high-risk work licences. Result: HR insources those 4 ongoing seats at the associated entity and offers formal redeployment (applying objective selection criteria across the 6 permanent operators), cutting forced dispatch redundancies from 6 down to 2.
- Cohort B (Maintenance Fitters): An external refrigeration specialist company has 3 technicians on site twice weekly under a 36-month OEM warranty and ammonia-plant compliance contract with 19 months remaining, specialist leak-detection calibration rigs, and restricted refrigeration licences none of the 4 mechanical fitters hold (requiring an 18-month apprenticeship/licensing pathway). Result: HR documents the 19-month contractual lock-in, OEM warranty condition, specialized plant, and 18-month licensing barrier in a contemporaneous file note—establishing solid, objective proof why insourcing Cohort B was not reasonable in all the circumstances under section 389(2).
Copy-Ready Section 389(2) Contemporaneous Redeployment & Insourcing Record
Many turning points at the Fair Work Commission come down to whether the employer evaluated contractors before dismissal or reconstructed excuses after receiving Form F2. Complete and sign this record prior to any termination decision.
CONTEMPORANEOUS SECTION 389(2) REDEPLOYMENT & CONTRACTOR INSOURCING ANALYSIS
Legal Basis: Fair Work Act 2009 (Cth) s. 389(1)–(2) & Helensburgh Coal Pty Ltd v Bartley [2025] HCA 29
Date Completed (Must Precede Final Dismissal Decision): [DD Month YYYY]
1. Affected Employee & Skills Profile
- Employee Name, Role & Site: [Name | Classification | Award/EA Coverage | Site]
- Tickets, Licences & Skills: [List trade qualifications, licences, and transferable capabilities]
- Retraining Horizon Tested: [Up to X weeks internal induction/upskilling assessed]
2. Audit of Open & Upcoming Positions (Employer + s. 50AAA Associated Entities)
- Entities Audited: [Parent Pty Ltd, Ops Subsidiary A Pty Ltd, Logistics Subsidiary B Pty Ltd]
- Vacant Roles Identified: [List ALL open roles including lower-graded/interstate seats + offers made]
3. Audit of External Contractor & Labour-Hire Work Across Enterprise & Associated Entities
- Engagement #1: [Vendor Name — e.g., Agency Labour Hire, 4 FTE equivalents, Warehouse Ops]
* Contract Term & Exit Right: Rolling weekly PO; 7-day termination at zero break cost.
* Skill / Plant Comparison: Matches affected employee LF licence; company-owned forklifts used.
* s. 389(2) Determination: REASONABLE TO INSOURCE -> 4 contractor seats displaced and offered as redeployment.
- Engagement #2: [Vendor Name — e.g., Specialist Refrigeration / IT Managed Service]
* Contract Term & Exit Right: Fixed-term MSA expiring [Date]; $[Amount] early break fee / OEM warranty tie.
* Skill / Plant Comparison: Requires [Licence/Proprietary Tooling]; >[12] months external requalification.
* s. 389(2) Determination: NOT REASONABLE TO INSOURCE -> Retained; objective evidence attached at Tab B.
4. Consultation Verification (s. 389(1)(b))
- Award / EA Clause Applied: [Modern Award / Enterprise Agreement Clause #]
- Employee Proposals Tested: [Summary of alternatives raised by employee/union & reasoned response]
- Decision Sign-Off: [Operations Director] & [Head of People] — [Date]Lock HR, Procurement, and Operations Into One Pre-Termination Gate
HR rarely owns third-party SOWs or site maintenance purchase orders—which is why hidden contractor cohorts ambush employers at FWC hearings. Require joint Procurement, Operations, and HR sign-off before issuing any redundancy proposal.
Expand every pre-redundancy checklist to audit all s. 50AAA associated entities, offer even step-down vacancies in writing, and record employee consultation responses on contractor alternatives.
Deliver a live extract of every active labour-hire agency order and service-contractor SOW (showing notice periods, break fees, and expiry dates) before HR opens redundancy consultation.
Assess transferable permanent-worker skills honestly against contractor tasks—displacing interchangeable casual labour hire first rather than protecting off-headcount contractor budgets.
Primary statutes, regulations, and enforcement dockets
- Helensburgh Coal Pty Ltd v Bartley [2025] HCA 29 (6 August 2025) — High Court of Australia — Unanimous High Court judgment holding that Fair Work Commission s. 389(2) redeployment inquiries extend to whether contractor work could reasonably be insourced.
- Fair Work Act 2009 (Cth), ss. 385, 389, 390–392 — Federal Register of Legislation — Statutory definition of genuine redundancy (s. 389), associated-entity redeployment duties (s. 389(2)), and unfair-dismissal reinstatement/compensation remedies.
- Fair Work Commission — Genuine Redundancy Benchbook (Unfair Dismissals) — Official tribunal benchbook detailing operational changes, modern-award/enterprise-agreement consultation duties, and reasonable redeployment principles.
- Fair Work Ombudsman — Redundancy & Redeployment Employer Obligations — Statutory guidance on genuine redundancy requirements, NES redundancy pay scales, and award consultation rules.
Practitioner questions on the edge cases
Does Helensburgh Coal mean an Australian employer can never make permanent staff redundant while using external contractors?
No. The High Court did not impose a blanket ban on retaining contractors. Instead, it held that the Fair Work Commission may examine contractor arrangements as part of "all the circumstances" under section 389(2). Where contractors supply specialist skills, proprietary equipment, short-term peak surge capacity, or sit under binding long-term contracts with heavy exit penalties, retaining them can remain entirely reasonable if properly evidenced.
Should we skip offering a vacant junior role at 25% lower pay if we assume a senior redundant manager will feel insulted?
Never skip offering lower-graded, lower-paid, or interstate vacancies. Established Fair Work Commission Full Bench authority holds that employers should not presume an employee will refuse a lower-paid or relocated role to avoid unemployment; put every potentially suitable vacancy in writing and let the employee decide.
What counts as an "associated entity" under section 389(2)(b) of the Fair Work Act?
Section 12 of the Fair Work Act adopts section 50AAA of the Corporations Act 2001 (Cth), encompassing parent companies, sister subsidiaries, and controlled group entities. If your group operates multiple Australian trading entities, restricting your vacancy and labour-hire check to a single payroll ABN routinely forfeits the genuine-redundancy defence.
If an employee wins in the Fair Work Commission because we failed section 389(2), do they keep their redundancy severance pay?
If the FWC orders reinstatement with continuity of service and lost pay under section 391, or calculates unfair-dismissal compensation under section 392, any statutory NES or enterprise-agreement redundancy severance already paid is brought into account and offset against compensation or repaid/adjusted upon reinstatement so there is no double recovery—but legal costs, management time, and back-pay exposure still hit hard.
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