Stripped of his supervisor role and pay: was that a dismissal?

What happened

Leigh Priest started with Albury Blue Logistics, a transport business with a head office in Albury and a warehouse and trucking yard in Laverton North, in late 2011. He worked in the warehouse as a forklift driver. In mid-2013 he became the depot's "Metro Supervisor", paid an extra $80 a week on top of his award wage.

Mr Priest said the change came when a manager asked him "would you like to run the depot?", and that from then on he received freight, filled out manifests, did administration and directed drivers. The company said the supervisory work was intermittent, done only when the Depot Manager was away. What both sides agreed on was that the $80 was paid continuously for about four years.

In September 2017 Mr Priest was called to a meeting without being told what it was about. In a conference call on 20 September 2017 two managers told him the payment would stop, his supervisory duties were over, and a newly hired employee would take them on. The company conceded that the decision had already been made before the call. A letter the next day said the allowance would cease on 27 September 2017.

Mr Priest said the meeting made him ill and he left work early that day. He gave the company medical certificates covering his absence until 3 November 2017. On 11 October 2017 he applied to the Fair Work Commission for an unfair dismissal remedy. The company objected that he had not been dismissed at all: he still had a job as a forklift operator and truck driver.

Was a demotion a dismissal?

Unfair dismissal protection only applies if a person has been "dismissed". Section 386 of the Fair Work Act 2009 (Cth) says that includes employment terminated on the employer's initiative. It also says a demotion is not a dismissal if it does not involve a significant reduction in pay or duties and the person stays employed. Commissioner Wilson reasoned that, read the other way, a demotion that does involve a significant reduction may be a dismissal.

The Commissioner found the Metro Supervisor arrangement had become an ongoing, permanent part of Mr Priest's employment. There was no persuasive evidence it was only ever temporary. Removing it was a demotion.

Was the cut significant? Mr Priest earned $857.86 for a 38 hour week, and losing $80 cut that by slightly more than 9%. For a low wage worker, the Commissioner held, that was significant. It did not matter that the loss of duties was less clear, because the section asks about pay or duties, not both.

Finally, the company's unilateral change to the substance of his contract meant his employment as Metro Supervisor had been terminated on the employer's initiative. He had been dismissed.

Why the dismissal was unfair

Under s 387 the Commission weighs a list of factors, starting with whether there was a valid reason related to the worker's capacity or conduct. A valid reason is one that is "sound, defensible and well-founded".

The company had concerns about Mr Priest's dealings with customers, his handling of staff conflict, his leadership and his timekeeping. The Commissioner found these were "generalised, non-specific" and not a valid reason. Nor were they put to him as reasons for the change: he was told only that a permanent supervisor was being appointed. He had no warning about his performance and no chance to respond, because the decision was made four or five days before the call.

The business had 105 employees and an HR and Compliance Manager, so its size did not excuse the process. The Commissioner found the dismissal unjust because the reasons were not identified to Mr Priest before the decision and he had no opportunity to correct what concerned the company.

How much was awarded

The company said his old job was still there, but Mr Priest did not want to go back. The Commissioner was not satisfied that enough trust and confidence could be restored, so reinstatement was inappropriate and compensation was ordered instead.

The amount was limited. The Commissioner thought that even with a fair process Mr Priest would probably have reacted the same way, so estimated he would have stayed only six more weeks. He had applied for about 44 jobs, but the company had tried several times to contact him about returning at the lower rate and he had not responded. That failure to mitigate his loss (take reasonable steps to reduce it) cost him $500.

The result was six weeks' pay ($5,147) plus 9.5% superannuation ($489), less $500: a total of $5,136, split between $4,691 to Mr Priest before tax and $445 to his super fund.

What this means for you

If your employer strips you of a role, an allowance or a large part of your duties, and the change significantly cuts your pay, that may be a dismissal even though you still have a job. An employer planning a demotion for performance reasons should put specific concerns to the worker and listen before deciding.

This case also shows the limits of compensation. Refusing every offer of work from the same employer without a good reason can reduce what you receive. Time limits are short: an unfair dismissal application must be lodged within 21 days of the dismissal taking effect.