The Fair Work Commission (FWC) has unequivocally rejected a claim for redundancy pay by the former CEO of JBWere, finding that he was not redundant within the meaning of the NAB Enterprise Agreement 2011 (Agreement).

Implications for employers

Whether a position is truly redundant or not will depend on the facts and circumstances of the particular case, as well as the applicable legislation, industrial award, enterprise agreement and/or employment contract.

However, this case suggests three things which are of interest to all employers:

  • if a redundancy is defined in the relevant instrument as occurring when a major part of a role is no longer required, then major means more than half;

  • when assessing whether a potential redeployment opportunity is to a “comparable” role, the test is objective. Relevant factors to consider may include the level of responsibility and accountability, the number of direct reports, the skills, knowledge and expertise required and the remuneration. However, subjective feelings of personal dissatisfaction, discomfort, loss of status or loss of importance will not be relevant; and

  • the adequacy of a consultation process must be seen in light of the factual circumstances.  Where it is apparent on the facts that a longer period for consultation would not have altered an employee’s actions or decisions, the reasonableness of the period must be seen in that context.

Background

Mr Heath was employed by the National Australia Bank (NAB) as the CEO of wealth management company JBWere.  Mr Heath’s employment was subject to the Agreement. Among other things, the Agreement states that redundancy occurs in:

A situation where the employee’s position is made redundant because the role being done by the employee (or the major part of it) is no longer required to be done in that location or a location with a reasonable commuting distance as a result of reorganisation, changes business practice, technological change or downturn in business.

In 2013, NAB underwent a restructure, which resulted in changes to Mr Heath’s reporting line and membership of a particular leadership team.  The position of CEO JBWere was not abolished.  For two months after the restructure, Mr Heath continued to work as CEO JBWere under the same contract. He then tendered his written resignation. 

Mr Heath subsequently notified the FWC of a dispute under the terms of the Agreement, seeking orders that he should have been retrenched by the NAB, and that the NAB should make a retrenchment payment in accordance with the Agreement. The matter did not resolve and proceeded to arbitration.

Decision

Deputy President Sams found in favour of the NAB, holding that:

  • on the question of whether Mr Heath was redundant:

    • a change to a “major part” of a role was something more than half, not (as contendcd by Mr Heath) 25% or more of the role;

    • Mr Heath had not, as he contended, lost 50% of his former role as a result of the change in leadership team and loss of leadership functions. NAB’s evidence was that all senior executives at Mr Heath’s level were expected to participate in leadership functions and the amount of time devoted to leadership functions would fluctuate depending on leadership style and the ebb and flow of particular projects and expectations.  As such, the focus should be on the “guts” of the role and the question of what a person is actually employed to do;

    • the CEO JBWere role was at no time abolished or redundant. Although modified, the post-restructure role was predominantly the same as the role Mr Heath had performed prior to the restructure.  Mr Heath was still the person ultimately responsible for managing JBWere.  Deputy President Sams stated:

In short, Mr Heath did not become ‘a king without a kingdom.’  It was not as if Mr Heath just retained the title CEO JBWere and was, in reality, performing a role he found alien and completely different to what he was used to;

  • on the question of whether Mr Heath should have accepted redeployment:

    • even if Mr Heath were redundant, the two positions rejected by him were “comparable positions”. The test of whether a position is “comparable” is an objective one, not a subjective one based on personal hypothetical views (including personal dissatisfaction, discomfort or perceptions of loss of status or importance).  Relevant considerations in determining the meaning of “comparable position” in this case included that:

      • Mr Heath had a similar level of responsibility and accountabilities within the Bank;

      • his location did not change ‘unreasonably’ or at all;

      • he would have a similar number or higher number of direct reports;

      • any new duties would be consistent with Mr Heath’s skills, experience, knowledge and expertise;

      • his remuneration … would be the same or higher; and

      • a ‘major part’ of the role will be unchanged;

  • on the question of whether NAB had consulted sufficiently with Mr Heath regarding the change:

    • 48 hours was sufficient time for Mr Heath to be given to consider his position and the roles available to him, in circumstances where it was apparent on the facts that Mr Heath had made up his mind and had no intention of changing it.  In that light, a 48 hour period to consider a role cannot be seen in isolation and was not unreasonable.  Further, Mr Heath no time requested additional time or information to consider his options.

King & Wood Mallesons acted for the NAB in this matter.

Paul Heath v National Australia Bank Ltd t/as national Australia Bank (NAB) [2014] FWC 3944