Retail manager wins unfair dismissal case after refusing to take $26,000 pay cut

A Sydney retail manager has won an unfair dismissal case after the Fair Work Commission found she was unfairly dismissed for refusing to accept a $26,000 pay cut.

Angela Johnson was dismissed from fashion retailer URBRANDS in April after she refused to accept a cut in remuneration from a base salary of $80,000 plus a car, to a base salary of $54,000 and no car.

Justice Boulton found it was harsh and unreasonable for Zehut Pty Limited, which trades as URBRANDS, to terminate Johnson’s employment and awarded 14 weeks’ pay as compensation.

Johnson had agreed to move from a head office role to a “lower position” at a poorly performing Chatswood store in 2013 to try to improve the store’s performance. She agreed to stay on the same remuneration package and after 11 months the store’s turnover increased by about 19%, making it one of URBRANDS’ top six stores outlets.

The company’s director then told her that her salary was to be brought into line with other store managers and Johnson was informed if she did not accept the new pay structure, she would have to resign.

Boulton found Johnson’s refusal to accept the proposed reduction in remuneration did not provide a valid reason for termination.

“The respondent is a sizeable employer and would be expected to have procedures in place for dealing with terminations of employment,” said Boulton.

“The respondent employs dedicated human resource staff but it would seem that they were not involved in the discussions, negotiation or decision relating to the termination of the applicant’s employment.”

Boulton said a more appropriate way of dealing with the issues relating to Johnson’s remuneration package could have been found if URBRANDS had opted to use the expertise of its human resources staff.

M+K Lawyers partner Andrew Douglas told SmartCompany an employer employs a worker as a job, not a person. As such, any change to the job can be seen as a termination.

“It usually isn’t a problem because it usually happens as a promotion,” says Douglas. “But when you demote someone, they cease to have the same job and that is termination.”

While Douglas says there are clauses that allow employers to alter job descriptions, it is never something that can be put in a contract, and an employer must seek to fairly renegotiate a contract with an employee.

He says URBRANDS did not have a valid reason for dismissal, and did not demonstrate an attempt to find Johnson suitable alternative work to cover a possible claim for redundancy.

“For SMEs, the lesson is simple. If you hire someone to do a job, then you change that job to lower pay or conditions, you want to have a better argument, such as part of a restructure, and there has to be a consultation process and the employee has to accept it,” Douglas says.

SmartCompany contacted URBRANDS but did not receive a response prior to publication.

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