Home - When is a role redundant even if the salary and classification remain the same?

UpdatesMay 15, 2013

When is a role redundant even if the salary and classification remain the same?

Redundancy generally refers to a situation in which an employer no longer requires a role. This may arise following an organisational restructure.

By Charles Power

Redundancy generally refers to a situation in which an employer no longer requires a role. This may arise following an organisational restructure. The question of whether part or all of a role is still required following a restructure requires examination of its impact on all of the key features of the role, including its title, reporting lines and the level of autonomy and responsibility.Case Law: Gamboni v Bendigo and Adelaide Bank Ltd (2013)

In Gamboni v Bendigo and Adelaide Bank Ltd, an executive of Bendigo and Adelaide Bank Ltd succeeded in establishing to the Victorian Court of Appeal that a 2009 reorganisation meant that the bank no longer required a major part of his work or his position. This was despite the fact that the executive retained his salary and status as a senior manager. As a result, the executive was found to be entitled to a redundancy payment under the bank’s redundancy policy.

The policy, which formed part of the executive’s employment contract, defined ‘redundancy’ as:


“a situation where the work being done or position held by an employee, or a major portion of it is no longer required…because of reorganisation (whether internal, external, group wide or at Business Unit level)”.

The executive headed a unit managing a portfolio of large commercial property loans and construction finance loans secured by first mortgages over income producing commercial property. His position was entitled ‘Senior Manager, Property Finance’.

The executive’s role was affected by an internal reorganisation in 2009. As result, the executive’s role changed to that of Senior Manager, Business Banking.

The Court noted that important features of the executive’s pre-reorganisation position did not survive the reorganisation. Those features included:

In the new role, the executive was to provide finance to a range of different markets, including the commercial property market, sourced from a range of different areas. This was despite the fact that the executive did not have any business banking experience and was not trained to provide financial product advice under an authorisation from the bank.

The unit ceased to exist as a standalone department within the bank and its work was absorbed within the Business Banking Unit. The executive would no longer be the head of a separate business unit and would no longer have the status or the responsibilities associated with such a position.

The Court observed that the number of people reporting to a position and their seniority has a bearing on the status of that position. Prior to the reorganisation, a manager and a lending officer reported to the executive. After the reorganisation, only a lending officer would report to him.

The Court commented that, while a reduction of a single person may not appear significant in absolute terms, in this case, it was a 50% reduction in the number of executive’s subordinates and it also represented a loss of the most senior staff member. This loss diminished the status of the position and affected the quality of the work that he would be able to perform.

The executive’s employment contract appeared to authorise the implementation of the change. The contract contained the following provision:


“Your role, levels of responsibility, reporting lines and duties may be significantly varied throughout your service with the Bank. It is agreed that irrespective of any such variations, by negotiation or otherwise, the terms and conditions set out in this Agreement will continue to apply as contractual provisions, unless otherwise amended in writing.”

However, the Court of Appeal ruled that this provision did not prevent the application of the Policy to executive when changes were made to his role.

The Court awarded the executive $187,261.50 plus interest of $47,566.99.

 

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