What happens to redundancy pay when an employee refuses redeployment?

Russell Kennedy reviews a recent decision involving the Chief Executive of JB Were

When an employer makes a position redundant, they have to attempt to redeploy an affected employee to any suitable vacant position within the organisation to avoid the risk of unfair dismissal (and perhaps breaching the award or enterprise agreement covering the employee).

But what happens when an employee refuses redeployment?  Ordinarily, the employer must still make the redundancy payment, although the employer can apply to the Commission to reduce its redundancy pay obligations.

A recent case gives an indication of how the Commission might view such an application.

Paul Heath v National Australia Bank Ltd [2014] FWC 3944

When the National Australia Bank took over JBWere in July 2009, Mr Heath was appointed as JBWere’s Chief Executive and Managing Director. 

However, in 2013 the NAB underwent a significant restructure and Mr Heath’s reporting line and duties were changed.  In April 2013 he was given the choice between retaining his Chief Executive position, and accepting the position of Executive General Manager, Wealth Advice. 

Mr Heath applied to the Fair Work Commission under the dispute resolution provisions in JBWere’s enterprise agreement, arguing that the Chief Executive position was being made redundant and that he was entitled to redundancy pay. This required the Commission to consider whether Mr Heath’s position had actually been made redundant, and also whether Mr Heath had unreasonably refused to be redeployed to the Executive General Manager role.

Was Mr Heath’s Chief Executive role made redundant?

Mr Heath argued that role was redundant because his status had been reduced through changes to his reporting line.  Mr Heath also claimed that the status of the role was diminished because he had less responsibility over JBWere’s finances, strategies and governance.

However, the Commission said the focus should be on the job a person performs, and not solely on their reporting lines or accountabilities. In that respect, it decided that Mr Heath’s Chief Executive role was predominantly the same as what he had been performing since 2009 as he ultimately remained responsible for managing a business unit of the NAB. In the Commission’s view, Mr Heath had not become “a king without a kingdom”.

The Commission accordingly held that Mr Heath’s Chief Executive position at JBWere was not redundant.

Was Mr Heath offered reasonable redeployment?

The Commission then decided that the Executive General Manager role Mr Health turned down was comparable to his Chief Executive role.  In forming this view, the Commission identified that the roles:

  • involved comparable levels of responsibility;
  • required similar skills and expertise; and
  • offered similar remuneration.

Factors such as whether an employee likes or dislikes a particular role, or feels that a role is less important or carries a lower status within an organisation, are unlikely to be relevant in deciding whether two roles are truly comparable.  The Commission commented that an “exaggerated view of one’s self worth is not a reasonable basis to pick and choose what job you are prepared to take”. 

Accordingly, the Commission concluded that even if Mr Heath’s Chief Executive position had been made redundant, he would still not be entitled to redundancy benefits under JBWere’s enterprise agreement because of his refusal to accept the Executive General Manager position.

Lessons for employers

Organisational restructures are often complicated and it is important that employers comply with their consultation and redundancy obligations. Employers should always take advice to avoid the consequences of making the wrong decision.

An employer must provide redundancy pay to an employee who refuses a reasonable redeployment opportunity unless the Commission orders otherwise.  Employers may be able to rely on the Heath decision to support an application to the Commission to reduce their redundancy obligations in such circumstances.

This case also highlights that dispute resolution procedures in awards and enterprise agreements may enable employees to challenge their redeployment and redundancy entitlements even if they have not yet been dismissed.

However, employees must also be wary about refusing redeployment opportunities from their employer with a view to securing a generous redundancy package, particularly if key elements of the position remain necessary and unchanged. Otherwise, they may lose both their job and their entitlement to redundancy pay.