Bargain Bicycles Pty Ltd T/A Reid Cycles

[2016] FWC 8039

[2016] FWC 8039

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.120—Redundancy pay

Bargain Bicycles Pty Ltd T/A Reid Cycles
(C2016/5642)

COMMISSIONER GREGORY MELBOURNE, 10 NOVEMBER 2016

Variation of redundancy pay.

Introduction

[1] Bargain Bicycles Pty Ltd T/A Reid Cycles (“Reid Cycles”) recently decided that it could no longer afford to continue to employ Mr Barry Vater, who had worked in a position in the warehouse for a period of just over 2 years. Based on the provisions contained in the National Employment Standards (“NES”) Mr Vater would be entitled to a redundancy payment equivalent to 6 weeks’ pay, given his length of service.

[2] However, Reid Cycles has now made application to reduce the redundancy entitlement otherwise due to Mr Vater on two grounds. Firstly, it submits it obtained “other acceptable employment” for him. Secondly, it submits the financial circumstances confronting the business make it difficult for it to pay the redundancy amount.

[3] Ms Mira Dixon, the Operations Manager at Reid Cycles, and Mr Bruce Reid, a Director of the business, appeared on behalf of Reid Cycles. Mr Barry Vater appeared on his own behalf. All parties appeared by telephone.

The Issues to be Determined

[4] Section 119 of the Fair Work Act 2009 (Cth) (“the Act”) provides a statutory entitlement to redundancy pay, with the applicable amount determined by the employee’s length of continuous service. As indicated, Mr Vater’s period of continuous service with Reid Cycles entitles him to 6 weeks redundancy pay.

[5] However, s.120 of the Act provides the Commission with a discretion to reduce or remove an entitlement to redundancy pay, on application, should the Commission consider it appropriate. Section 120 states in full:

“120 Variation of redundancy pay for other employment or incapacity to pay

(1) This section applies if:

(a) an employee is entitled to be paid an amount of redundancy pay by the employer because of section 119; and

(b) the employer:

(i) obtains other acceptable employment for the employee; or

(ii) cannot pay the amount.

(2) On application by the employer, the FWC may determine that the amount of redundancy pay is reduced to a specified amount (which may be nil) that the FWC considers appropriate.

(3) The amount of redundancy pay to which the employee is entitled under section 119 is the reduced amount specified in the determination.”

[6] In the present matter Reid Cycles submits it should be relieved of any obligation to make any redundancy payment to Mr Vater, both because it obtained “other acceptable employment” for him, and it because it “cannot pay the amount.”

[7] Therefore, is it appropriate to reduce the redundancy pay entitlement otherwise due to Mr Vater and, if so, by what amount?

The Submissions and Evidence

[8] Reid Cycles submits, firstly, that the business operated at a substantial loss as at 30 June 2016 and currently has substantial debts. The application continues to set out details of the amounts due to its trade creditors, its tax liability, and its trade finance debt, as at September of this year. It also indicated that the decline in the Australian dollar has placed additional strain on the business because of the additional costs associated with purchasing product from its suppliers in Asia.

[9] It also indicated that its financial situation was being reviewed each month by its major lender and, as a consequence, it was endeavouring to constrain costs and expenditure, wherever possible. In response to a question from the Commission it was also indicated that the business currently employs a total of 60 employees.

[10] Reid Cycles also submits that it sought to limit the impact of its decision to make Mr Vater redundant by doing what it could to find him work elsewhere. In its submission it discussed various options with him before deciding it was required to make his position redundant.

[11] It provided a copy of the letter of termination given to Mr Vater, dated 12 September 2016. That letter indicated, in part, that Reid Cycles had endeavoured to find other employment for Mr Vater with two job agencies, and that opportunities were currently available to obtain work through those agencies. The letter also indicated that Reid Cycles had been able to obtain full-time work for Mr Vater as a warehouse assistant with another business by the name of EasyTurf, and the Distribution Manager at Reid Cycles could provide further details to Mr Vater about this opportunity if he was interested in following it up. This potential opportunity apparently came about because the owner of the EasyTurf business was known to Reid Cycles because EasyTurf was located near to premises that Reid Cycles had previously occupied.

[12] Reid Cycles also provided a copy of a letter from Mr Andrew McKay on Easy Turf letterhead, which indicated that Mr James Reid from Reid Cycles had recommended Mr Vater to the business, and Mr McKay had agreed to offer him a full-time role as a consequence. However, the letter indicates that Mr McKay was never contacted by Mr Vater.

[13] Mr Vater indicated in his submissions that he was concerned after being told his position was to be made redundant, particularly because of his existing financial commitments. He said he therefore decided to act quickly to obtain work that he knew was available through other contacts, and subsequently obtained employment in his original profession of truck driving.

[14] He said the positions that might have been available through the job agencies that were referred to were not long-term work opportunities. He also said he was not aware about whether the potential employment opportunity with EasyTurf involved a long-term, ongoing position. He said this was a particular concern because of his recent experience with Reid Cycles. He also indicated that, in any case, he was not provided at any time with any further detailed information about this position, and what it involved.

[15] Mr Vater indicated, in conclusion, that he had found other work as a result of his own initiative, and believed he was now entitled to the redundancy payments provided for under the NES.

Consideration

[16] It is obvious that both parties in these proceedings are disappointed with what has occurred. Reid Cycles would obviously prefer to be able to continue to employ Mr Vater, and he is obviously disappointed about losing a job he enjoyed. In addition, both parties provided limited submissions and evidence in support of their respective positions, and neither made specific reference to the relevant statutory provisions or case law. It is accordingly appropriate to have regard to that legislation and the authorities that have considered what the Commission should have regard to in coming to a decision in this matter.

[17] The provisions in s.120 of the Act have been considered in a number of previous decisions of the Tribunal. The question of what “obtains” requires was considered by a Full Bench in Australian Chamber of Manufactures v Derole Nominees Pty Ltd (Derole Nominees). It held, firstly, that it cannot mean obtain “…in the fullest sense possible” 1 because one employer is incapable of affecting a contract of employment with its employees and another employer, and the word must be given “some lesser meaning.”2 The Full Bench concluded:

“Viewed in this way it will be seen that the intention is not to impose an absolute test on the employer’s ability to “obtain” alternative employment but rather it refers to action which causes acceptable alternative employment to become available to the redundant employee. The employer must be a strong, moving force towards the creation of the available opportunity.” 3

[18] In Datacom Systems Vic Pty Ltd v Rasiq Khan; Siddharth Desai 4the Commission also expressed the view that the word “obtains,” in the context of s.120, should be given a very broad interpretation.

[19] The Federal Court also concluded in FBIS International Protective Services (Aust) Pty Ltd v Maritime Union of Australia that “obtains” should be applied on the basis that the alternative employment “must be the result of the conscious, intended, acts of the person concerned, as distinct from, for example, coming into possession of something by gift or inheritance.” 5

[20] The test to be applied in determining what is “acceptable employment” has also been considered in some detail in a number of previous decisions. It is, firstly, a test to be applied objectively and not just by whether the employee wishes to take on the role being offered. “Acceptable” also means it must meet the relevant standard. The decision in Derole Nominees found that the considerations such as the work being of like nature, the location, the pay arrangements, the hours of work, seniority, fringe benefits, workload and job security are all relevant considerations in this context.

[21] The authorities also make clear that the onus of establishing that the alternative is “acceptable” rests with the applicant employer. They also indicate that, in the exercise of its discretion, the Commission may decide to remove a redundancy benefit obligation entirely, or instead reduce it. It has also been established that the employment being offered need not be identical in nature, and in this context the following conclusions of Senior Deputy President Watson in Feltex Australia Pty Ltd v Textile, Clothing and Footwear Union of Australia 6are noted:

“I accept the proposition advanced by Feltex Australia that acceptable alternative employment is not necessarily identical employment and that the AIRC has previously found alternative employment to be acceptable notwithstanding inconvenience to employees and some detrimental alteration to the terms and conditions of employment.” 7

[22] The Commission also found in Datacom that:

“Other employment does not cease to be “acceptable” merely because it is on terms that are less advantageous to that of the terminating position. Tontine makes it clear that there are matters of degree involved.” 8

[23] The authorities in regard to incapacity to pay are more limited and it is noted, for example, that an application to reduce the redundancy pay obligation on this basis was rejected in Moltoni Waste Management v Fairs and Ors[2012] FWA 5590.

[24] I turn, firstly, against this background to deal with the claim to reduce the redundancy entitlement based on the submission that Reid Cycles “cannot pay the amount.” While the evidence and submissions it relies upon in regard to its financial circumstances fall well short of what might be considered to be a “forensic examination,” I have no reason to doubt that the business is dealing with a very difficult financial situation at this time, and is doing whatever it can to reduce its costs and expenditure in a way that could be expected of a prudent business operation dealing with similar circumstances.

[25] However, I am also satisfied that Reid Cycles continues to be a substantial business and note, by way of example, that its submissions indicate it continues to employee 60 employees. In these circumstances the total amount of the 6 week redundancy entitlement due to Mr Vater would represent only a fraction of that total monthly wage bill.

[26] Therefore, I am not satisfied that it can be said the business “cannot pay the amount” due to Mr Vater, and he should therefore be deprived of his entitlement on that basis. Reid Cycles are obviously taking great care to reduce expenditure, wherever possible, but for the reasons indicated I am not satisfied this provides justification to reduce or remove Mr Vater’s redundancy entitlement.

[27] I now turn to consider whether it can be said that Reid Cycles has obtained “other acceptable employment” for Mr Vater. The termination letter provided to him makes reference to the efforts made by the business to assist him find work elsewhere. It refers, firstly, to two job agencies who have the potential to place him in comparable work elsewhere. Mr Vater dismissed this option on the basis that it would only involve short-term and limited tenure placements, at best.

[28] I agree with Mr Vater in this regard. I am not satisfied that it can be said Reid Cycles was a strong moving force in creating the employment opportunities in this context, or that it can be said the work involves “other acceptable employment.” It appears instead, in terms of this option, that it is ultimately up to the job agency, a third party, to obtain work for Mr Vater in another business and, in any case, that work might only be short term or intermittent in nature.

[29] The position in regard to the potential option of work at EasyTurf can be viewed differently. The submissions provided on behalf of Reid Cycles about the possibility of work at EasyTurf indicate this opportunity came about because Reid Cycles had a relationship with the owner of that business because they had previously occupied adjacent premises. There does not appear to be any dispute that the work was similar in nature as well, in that it involved work in a warehouse, and the conditions of employment were also apparently comparable. In addition, it was never suggested that the work site was located far away from where Mr Vater lived.

[30] Reid Cycles also provided a copy of a letter which it submits was provided by the owner of EasyTurf confirming the business was prepared to offer employment to Mr Vater, but that no contact was ever received from him to follow up this opportunity. Reid Cycles did not provide sworn evidence to support what was contained in the letter, although Mr Vater did not take issue with its contents.

[31] Reid Cycles submits it took the initiative to try and limit the impact of its decision to make Mr Vater redundant by actively seeking options for him to obtain work elsewhere. I have already made reference to why the opportunity at EasyTurf was identified. Reid Cycles provided details about that potential opportunity to Mr Vater in the letter of termination provided to him, but ultimately left it to him to decide whether he wished to find out more about the possibility of obtaining employment with that business. This initially required him, based on the content of the termination letter, to contact the Distribution Manager at Reid Cycles to obtain further details about the relevant contact at EasyTurf.

[32] Mr Vater decided not to pursue this possible option. It is not surprising that as soon as he found he had lost his job at Reid Cycles he decided to pursue what he believed was the best possible option of finding work elsewhere. He indicated that through some prior contacts he was able to find work elsewhere, almost immediately, in his original profession of truck driving.

[33] In combination, the fact that Mr Vater never pursued the possible option of obtaining work at EasyTurf, and the fact that Reid Cycles did not provide sworn evidence to support the fact of that possible option being available to Mr Vater, makes it difficult to finally determine this matter. Nevertheless, I am satisfied it is reasonable to conclude Reid Cycles was, at least, a proactive moving force in finding “other alternative employment” for Mr Vater, even though this possible option was never pursued by him. Therefore, I am satisfied that it can be concluded in all the circumstances that Reid Cycles did obtain “other acceptable employment” for Mr Vater within the meaning of s.120 of the Act.

[34] Section 120(2) of the Act gives the Commission a discretion in terms of the amount of any reduction in redundancy pay. I am satisfied, firstly, that it is appropriate to make some reduction in the amount of redundancy pay due to Mr Vater. However, given the matters I have referred to in this decision I am satisfied, in all the circumstances, it is not appropriate to remove Mr Vater’s redundancy entitlement entirely, but it is instead appropriate to reduce that entitlement to an amount equivalent to 2 weeks’ pay. An order to this effect will be issued in conjunction with this decision.

COMMISSIONER

Appearances:

M Dixon and B Reid by telephone for Bargain Bicycles Pty Ltd T/A Reid Cycles.

B Vater appeared by telephone on his own behalf.

Hearing details:

2016

Melbourne:

October 21.

 1 (1990) 140 IR 123,127.

 2   Ibid.

 3   Ibid at 128.

 4   [2013] FWC 1327.

 5 [2015] FCAFC 90 at [20].

 6   PR974699.

 7 Ibid at [89].

 8 Above n 4, at [9].

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