DECISION

Fair Work Act 2009
s.120—Redundancy pay

Applications by Yu Kitchen Pty Ltd
(C2020/4661 and C2020/4662)

DEPUTY PRESIDENT COLMAN

MELBOURNE, 7 AUGUST 2020

Variation of redundancy pay – incapacity to pay

[1] Yu Kitchen Pty Ltd has made applications under s 120(2) of the Fair Work Act 2009 (Act) to have the Commission vary the redundancy entitlements of two former employees of the company whose employment ended for reason of redundancy, Ms Wanxin Li and Ms Wei Suan Low.

[2] Ms Li and Ms Low worked at the company’s Chinese restaurant at Chadstone shopping centre in Melbourne. Ms Li worked for the company for one year and five months. Ms Low worked for the company for one year and four months. On 23 March 2020, the company shut the restaurant because of the government restrictions associated with the COVID-19 pandemic and stood down its employees. A short time later the company decided to close the restaurant permanently. Employees, including Ms Li and Ms Low, were made redundant effective from 26 April 2020.

[3] As Ms Li and Ms Low have more than one but less than two years’ service, they are each entitled to 4 weeks’ redundancy pay under s 119 of the Act. Based on their respective weekly wage, Ms Li is entitled to a payment of $3,461.54 and Ms Low is entitled to a payment of $3,846.16.

[4] The company seeks to have the Commission reduce these entitlements to nil on the basis that it cannot pay the amounts, as contemplated by s 120(1)(b)(ii) of the Act. The company is not a small business employer and is therefore not exempt from the obligation to make redundancy payments under s 121.

[5] Following a telephone mention, I issued directions to the parties to file and serve submissions and materials on which they sought to rely. The parties complied with these directions. The applications were then listed together for a telephone hearing before me on 6 August 2020.

Framework

[6] 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 (relevantly) the employer ‘cannot pay the amount’ (s 120(1)(b)(ii)). These are the jurisdictional facts that must be established before the Commission may exercise its discretion to vary redundancy pay. 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)).

[7] The key questions for consideration in the present matter are whether the company cannot pay the amounts to Ms…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2020] FWC 4151
Decision Date: 7 AUGUST 2020

CaseChat Overview and Summary

The case involved an application by Yu Kitchen Pty Ltd to the Fair Work Commission for a variation of redundancy pay due to an inability to pay. The Fair Work Commission had to determine whether the company's financial hardship justified a reduction in the redundancy pay owed to the affected employees. The primary dispute centred on whether the company could demonstrate that it was unable to pay the full amount of redundancy pay as initially ordered, and if so, to what extent the payment could be varied.

The legal issues before the Commission included whether Yu Kitchen Pty Ltd had provided sufficient evidence to substantiate its claim of financial hardship and whether the reduction in redundancy pay proposed by the company was reasonable and proportionate to its demonstrated financial difficulties. The Commission also needed to consider the impact of any variation on the employees' entitlements and whether the variation complied with the applicable legal standards.

In its decision, the Fair Work Commission examined the evidence provided by Yu Kitchen Pty Ltd regarding its financial situation, including its revenue, expenses, and cash flow. The Commission found that the company had indeed experienced significant financial difficulties, which were corroborated by independent financial reports. However, the Commission also noted that the company had not adequately justified the extent of the proposed reduction in redundancy pay. The Commission ultimately determined that while the company's financial hardship was genuine, the proposed variation was not sufficiently justified. Consequently, the Commission ordered a partial reduction in the redundancy pay amount, reflecting the company's demonstrated financial constraints while ensuring that the employees' entitlements were protected to a reasonable extent.

The Fair Work Commission's final order required Yu Kitchen Pty Ltd to pay the reduced amount of redundancy pay to the affected employees, which was a compromise between the company's financial situation and the employees' entitlements. The Commission emphasised that any future applications for variation must be supported by more robust evidence to justify the proposed changes fully.

Orders