Application by Perspective Recruitment Pty Ltd

[2020] FWC 6686

[2020] FWC 6686

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.120—Redundancy pay

Application by Perspective Recruitment Pty Ltd
(C2020/8515)

DEPUTY PRESIDENT COLMAN MELBOURNE, 14 DECEMBER 2020

Variation of redundancy pay – incapacity to pay, other employment – application dismissed

[1] Perspective Recruitment Pty Ltd (company) has made an application under s 120(2) of the Fair Work Act 2009(Cth) (Act) to have the Commission vary the redundancy entitlement of a former employee of the company, Ms Madeline Irvine, whose employment ended for reason of redundancy.

[2] Ms Irvine worked as an administration/marketing coordinator on a permanent part-time basis, working 20 hours a week over 4 days. Her position was made redundant effective from 29 October 2020. Ms Irvine has more than four years’, but less than five years’ service with the company, and is therefore entitled to 8 weeks’ redundancy pay under s 119 of the Act, which, based on her weekly wage, amounts to a gross payment of $5,600.

[3] The company seeks to have the Commission reduce Ms Irvine’s redundancy entitlement to nil on the basis that it cannot pay the amount, as contemplated by s 120(1)(b)(ii) of the Act. Alternatively, the company contends that it obtained ‘other acceptable employment’ for Ms Irvine for the purpose of s 120(1)(b)(i), and that her redundancy payment should therefore be reduced to one week’s pay. The company is not a small business employer as defined in s 23, as it employs over 150 employees, most of whom it deploys to work for its clients. It is therefore not exempt from the obligation to make redundancy payments under s 121 of the Act.

[4] At a telephone mention on 9 December 2020, the parties requested that I determine the application on the papers, on the basis that they had already filed written materials. During the mention I asked the parties some questions about their respective positions, to which they provided answers. I decided to determine the application on the papers.

Framework

[5] Section 120 of the Act confers on the Commission a discretion to reduce the amount of redundancy pay to which an employee would otherwise have been entitled under s 119. Section 120(1) states that the section applies if an employee is entitled to be paid an amount of redundancy pay under s 119, and the employer either ‘obtains other acceptable employment for the employee’ (s 120(1)(b)(i)), or ‘cannot pay the amount’ (s 120(1)(b)(ii)). These are the alternative jurisdictional facts that must be established before the Commission may exercise its powers under the provision. Section 120(2) then states that the Commission ‘may determine that the amount of redundancy pay is reduced to a specified amount (which may be nil) that the FWC considers appropriate’. If the Commission makes an order under s 120(2), the amount of redundancy pay to which the employee is entitled is the reduced amount specified in the determination (see s 120(3)).

[6] The principal questions for consideration in the present matter are first, whether the company ‘cannot pay’ the redundancy amount to Ms Irvine, secondly, whether it obtained ‘other acceptable employment’ for Ms Irvine, and thirdly, if the answer to either of these questions is yes, whether I should exercise my discretion to reduce the amount of Ms Irvine’s redundancy pay.

Incapacity to pay

[7] The company’s primary contention is that it cannot pay the amount of Ms Irvine’s redundancy entitlement. It submits that the company is operating on the basis of invoice financing, and that the financing facility is currently in an overdraft position. The invoicing facility has also become costlier, as debtor payment terms have been extended during the pandemic. The company submits that many of its clients that had delivered good margins, such as tourism operators, have ceased to trade, and that the company has been unable to generate new business to offset the associated losses.

[8] The company submits that its trading account currently holds minimal funds, that it has various debts, including a debt to the ATO, and that it is effectively operating at a lost but has been ineligible for Job Keeper support. The company acknowledges that it has been advertising positions but maintains that it will not earn revenue from new recruits unless they can be placed with clients, the prospect of which is uncertain. The company contends that it remains in a very difficult financial position. Ms Parker, the company’s human resources manager, said at the mention hearing that for the current week the company had an operating deficit of $850.

[9] I accept that the company is in a difficult financial situation, however the existence of an overdraft and of various debts does not establish an incapacity to pay. The trading account submitted by the company shows peaks and troughs in cash flow, which largely reflect the payment of invoices by clients on the one hand, and the company’s expenditure on payroll on the other. However, the running balances for the months of October and November have remained positive, sometimes in the amount of several thousands, sometimes only in the hundreds of dollars. I appreciate that there are cash flow difficulties. Nevertheless, I am not persuaded that the company ‘cannot pay’ Ms Irvine’s redundancy entitlement.

[10] Ms Irvine submitted a letter dated 26 October 2020 in which the company advised her that it was proposing to make her position redundant and offered to pay her a gross sum of $11,200 in exchange for a comprehensive settlement and release agreement, which would involve Ms Irvine resigning from her employment. The principal subject matter of the proposed settlement was Ms Irvine’s claim for back payment of wages in respect of a stand down that had occurred earlier in the year, which had been considered by the Commission, in a separate proceeding under s 526 of the Act, to have been defective (see [2020] FWC 5231]). The parties had been in discussions about how Ms Irvine’s claim for back payment of wages should be resolved. (It should be noted that only a court can order back payment of wages, and in any proceedings for unpaid wages a court would determine for itself whether the stand down was implemented in accordance with s 526. The decision of the Commission in the s 526 matter does not establish the existence of any debt owed by the company to Ms Irvine.)

[11] Ms Irvine did not accept the company’s offer. On 29 October 2020, the company sent Ms Irvine a letter confirming that her employment would end on that date for reason of redundancy, that she would be paid three weeks in lieu of notice, and that the company would make an application to the Commission under s 120 to vary her redundancy entitlement.

[12] At the mention, I asked Ms Parker whether the company’s financial position had changed between late October and the present. She replied that there had not been much change since that time. The financial documentation submitted by the company does not bear out a significant deterioration in the company’s position over the last six weeks. In these circumstances, it appears to me that if the company was able to offer Ms Irvine a payment of $11,200 in late October, it should be able to make a payment of half that amount to her now. It is not relevant that the offer of $11,200 was directed principally at the settlement of Ms Irvine’s claim for back payment of wages. The fact is that the company had the capacity to pay Ms Irvine the sum of $11,200 some six weeks ago, and the company’s financial position has not significantly changed since then. I appreciate that the company may now be provisioning a certain amount to meet Ms Irvine’s claim for wages during the stand down. However, the company currently has a clear debt to Ms Irvine under s 119 of the Act in the amount of 8 weeks’ redundancy pay. The company was evidently able to pay that debt six weeks ago. In my view it can still do so now.

[13] Because I am not persuaded that the company cannot pay the amount, there is no basis for me to reduce it under s 120(1)(b)(ii).

Other acceptable employment

[14] The company’s alternative contention was that it had obtained ‘other acceptable employment’ for Ms Irvine. The company submitted that the employment in question was a proposed arrangement whereby Ms Irvine would perform the same duties, but for 5 hours per week, reduced from her usual 20 hours a week. Ms Irvine contends that this ‘other employment’ was not acceptable to her.

[15] The question of whether alternative employment is acceptable for the purpose of s 120(1)(b)(i) must be considered objectively. The question is not simply whether it is acceptable to the employee. There is some doubt about whether Ms Irvine was in fact offered ‘other’ employment in this case. At least on one view, she was simply offered a reduction in hours in her existing employment. In any event, the proposed alternative involved a very substantial reduction in hours and corresponding pay, and I do not consider that it can be described as other ‘acceptable’ employment. I note that other office-based employees of the company agreed to a reduction in hours, whereas Ms Irvine declined to do so, but the agreement of other employees does not necessarily make the proposed arrangement ‘acceptable’. In some cases, it may be that an offer of an alternative role on reduced hours and pay might be objectively acceptable because of the difficult financial circumstances of the business, but I am not persuaded that this is so in the present case, given the scale of the reduction in hours and pay that was proposed.

[16] Even if I had concluded that the offer of reduced hours did objectively constitute ‘other acceptable employment’, I would not have exercised my discretion to reduce Ms Irvine’s redundancy pay in the circumstances. Ms Irvine was presented with a proposal that would see her avoid redundancy by accepting a very substantial reduction in her work and pay. In my view, Ms Irvine’s decision to decline such an offer should not result in the forfeiture of her statutory redundancy payment.

[17] Ms Irvine was entitled to decline the alternative arrangements proposed by the company. Of course, the foreseeable consequence of her decision to do so was that the company would dismiss her, because it simply no longer needed a position based on twenty hours a week. That position was redundant. The company was entitled to dismiss Ms Irvine and it did so. This in turn gave Ms Irvine a right to 8 weeks’ redundancy pay under s 119 of the Act. I consider that in the present circumstances there is no basis for the Commission to reduce the amount under s 120.

Conclusion

[18] The company’s application under s 120 is dismissed.

DEPUTY PRESIDENT

Date of final submissions: 9 December 2020

Determined on the papers

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