The Curious Case of Amputated Legs: When "Pay Equity" Becomes Unfair Dismissal

In the modern corporate landscape, "fairness" and "equity" are dominant buzzwords. However, a recent decision by the Fair Work Commission has served a stark warning to employers: you cannot achieve gender equality simply by slashing the wages of your higher-paid staff.

The matter of Jordan Lovini & George Padinjarethalackal Jacob v Youturn Limited [2025] FWC 3757 exposes the legal risks of unilaterally cutting wages in the name of the "greater good." It is a case study on the dangers of demotion and the specific definition of dismissal under Australian law.

A "Mistake" or a Breach of Contract?

Mr. Lovini and Mr. Jacob were long-serving Case Managers for Youturn Limited, classified as Level 5 employees under their Award since 2018 and 2019, respectively.

When new management reviewed the books, they identified a discrepancy. The organisation had hired a cohort of new Case Officers, predominantly female, and placed them on the lower Level 4. Viewing this disparity through the lens of inequality, Youturn decided the solution was not to raise the women’s pay, but to reduce the men’s classification.

Youturn unilaterally reclassified the men to Level 4, characterising the original classification as a "mistake." This resulted in a pay cut of approximately 10%, equating to a loss of over $10,000 per year. Management justified this reduction as being in the "best interests of the team" to ensure equity.

When is a Demotion a Dismissal?

The central legal question before Commissioner Hunt [for the purposes of establishing the FWC’s jurisdiction] was whether Mr. Lovini and Mr. Jacob’s reclassification to level 4 constituted a dismissal, for the purposes of a general protection claim.

Under Section 386 of the Fair Work Act, the definition of dismissal extends beyond simple termination. Relying on the precedent, Commissioner Hunt affirmed that if an employer demotes an employee and significantly reduces their remuneration (in this instance the reduction was up to $10 000 per annum), the original employment contract has effectively been terminated.

The Commission found that the consequential salary reduction was a "significant reduction," negatively impacting both superannuation and long service leave. Consequently, even though the men continued to work under protest, the law viewed them as having been dismissed.

The "Missing" Promise

The employer's defense crumbled further upon the discovery of video evidence. While Youturn’s denied knowledge of any "grandfathering" arrangements regarding the men's classification, a recording from a May 2024 staff conference contradicted this.

In the video, an executive representative was recorded explicitly stating: "rather than reduce someone's wages, we've grandfathered it." Commissioner Hunt dismissed the employer’s attempt to claim this applied only to pay rates rather than classifications as "nonsense," noting the men’s pay had risen annually in line with the Award.

"Amputating Legs"

In her ruling, Commissioner Hunt delivered a scathing critique of Youturn’s approach to gender equity. Addressing the argument that the pay cuts were necessary to cure the gender pay gap, she remarked:

"One does not break the proverbial glass ceiling by amputating the legs of the men above."

The ruling underscores a fundamental principle: equity is achieved by lifting the wages of lower earners, not by tearing down those on higher incomes in breach of their common law contracts.

The "Equity" Trap

This case serves as a vital lesson for employers navigating the complexities of pay equality. While closing the gender pay gap is a priority, it cannot be used as a defense for effectively steeping over employee rights and contractual entitlements.

Commissioner Hunt noted that there is no law preventing an employer from being generous and paying staff above the Award. However, attempting to "correct" a classification error by slashing a paycheck invites a dismissal claim.

Conclusion

The Respondent argued that cutting Mr. Lovini’s pay was in the "best interests... of Youturn as a whole." The Commission rejected this collectivist justification for contract breach.

The finding that the Applicants were dismissed moves the matter to conciliation. The outcome sends a clear message to Australian workplaces: honour your bargains. "Amputating legs" to achieve statistical parity is not only a risky strategy, but it could also be an expensive legal liability.