The Industrial Magistrate’s Court has ordered an employer to pay a severance payment to its previous Chief Executive Officer (CEO), finding that the termination of his employment constituted a redundancy. 

Background 

The claimant was employed as a CEO of the respondent’s steel product manufacturing business, Combined Metal Industries (CMI), from 1 June 2015. On 23 March 2020, the respondent terminated the claimant’s employment with CMI. 

On 23 March 2020, the respondent advised the claimant that the business could no longer afford the claimant’s remuneration, and if he would not accept a reduction in remuneration, his employment would be terminated. The claimant indicated that he did not wish to resign, but nor would he accept a reduction in pay. A letter terminating the claimant’s employment was sent the same day.

 The managing partner of the respondent took over the claimant’s duties, with some assistance from an outside consultancy, however no person held the title of CEO until August 2021. 

Contentions 

The claimant brought a claim in the Industrial Magistrate’s Court for the sum of $38,461.54 in severance pay, on the ground that the termination of the employment was a redundancy. 

The respondent submitted that, as part of the claimant’s role continued to be performed by another employee after his departure, that the respondent showed an intention to have the role of CEO continue, and that it was not liable to pay a redundancy payment. 

Findings 

Her Honour, Industrial Magistrate O’Donnell, held that the fact that the respondent offered to pay the claimant a lower salary did not mean that the termination of his employment, when he declined the lower remuneration, was not due to redundancy. Her Honour further held that the respondent’s ‘wish’ for the role to continue, did not prevent the termination of employment constituting a redundancy.

Her Honour found that demonstrating that parts of the claimant’s job were being performed by other employees within the employer’s business, was not sufficient to avoid an obligation to pay severance pay.  Rather, an issue was whether there were any duties left for the employee to perform.

Her Honour noted that the claimant, at the meeting on 23 March, had requested a salary proposal. Her Honour considered that the failure by the respondent to provide the claimant with a salary proposal, indicated that the respondent had decided that it no longer wished the role of CEO to be performed by anyone.

Her Honour noted that there was doubt as to whether the respondent properly complied with any consultation obligations before terminating the claimant’s employment.  However, noting that the claim had not been brought on this basis, her Honour made no finding on this issue.

Her Honour found that the termination of the claimant’s employment was a redundancy, and that the respondent was liable to pay severance pay to the claimant.

The decision can be read here.