Dietzel and Secretary, Attorney-General's Department

[2021] AATA 3640

Dietzel and Secretary, Attorney-General's Department [2021] AATA 3640 (13 October 2021)

Division:GENERAL DIVISION

File Number:           2020/8484

Re:Randolph Dietzel

APPLICANT

AndSecretary, Attorney-General's Department

RESPONDENT

DECISION

Tribunal:R Cameron, Senior Member

Date:13 October 2021

Place:Melbourne

The Tribunal affirms the decision under review.

.....[sgd]...................................................................

R Cameron, Senior Member

Catchwords

FAIR ENTITLEMENTS GUARANTEE – whether applicant entitled to redundancy pay – date of termination – whether employer was a small business employer as defined by the Fair Work Act 2009 (Cth) – clauses of the contract – redundancy pay policy – decision affirmed

Legislation

Fair Entitlements Guarantee Act 2012 (Cth)
Fair Work Act 2009 (Cth)

REASONS FOR DECISION

R Cameron, Senior Member

13 October 2021

INTRODUCTION

1. The Applicant seeks review of a decision made by a delegate of the Respondent on 26 November 2020 (“The reviewable decision”).[1] The reviewable decision varied a previous decision which found that the Applicant was eligible for an advance under the Fair Entitlements Guarantee Act 2012 (“FEG Act”) in the sum of $18,698.98.

   [1] Document T36 of the T documents.

2. Critically, for the purposes of this application, the reviewable decision determined that the Applicant was not entitled to a Fair Entitlements Guarantee (“FEG”) advance for redundancy pay. The Applicant claims that he is entitled to such a payment at the FEG rate of $2,451 per week for 13 weeks, making a total of $31,863.[2]

   [2] Reference is made to the Applicant's response to the Respondent's Statement of Facts, Issues and Contentions, dated 9 June 2021, at page 12.

   ISSUE FOR DETERMINATION BY THE TRIBUNAL

3. The issue for determination by the Tribunal is whether the Applicant is entitled to a FEG advance for redundancy pay in the sum of $31,863 or any other sum and, if so, what amount.

   SOME RELEVANT FACTS

4. The Applicant was employed by a company known as Verdicorp (Australia) Pty Ltd (“Verdicorp”) as and from 15 July 2010. Curiously, there were two contracts of employment executed by the parties on the same day, namely 24 July 2010. Both those contracts were in evidence before the Tribunal. The first contract provides that the Applicant was employed by Verdicorp as “Advanced Technology and Development Manager”.[3] The second contract provides that the Applicant was employed as Verdicorp’s “General Manager.[4]

   [3] That contract was document T3 of the T documents.

   [4] That contract was document T25 of the T documents.

5. Both contracts consisted of a “Letter of Offer of Employment” which was signed by both parties. Attached to each letter was a document in the identical form entitled “Standard Terms of Employment (Executive Status)” (“Standard Terms of Employment”). The Standard Terms of Employment consisted of 15 pages and addressed an array of subject matters. Importantly, for the purposes of this application, Clause 19 “Resignation and Termination” provided that either party may terminate the employment for any reason by giving the period of 90 days’ notice in writing. It also contained a clause which provided as follows:

   “If their position is made redundant, they will be paid notice in accordance with this contract and any additional severance payment as determined by Verdicorp’s redundancy policy or applicable legislation in place from time to time”.

6. The Applicant continued working for Verdicorp until 14 May 2018. His employment was terminated that day by a letter in writing signed by one Russell Baird, a director of Verdicorp. The Tribunal is satisfied that the Applicant was terminated on 14 May 2018. The letter of termination was in evidence before the Tribunal.[5] Although it purported to assert that the Applicant’s role became redundant on 28 February 2018, there was no written notice in evidence before the Tribunal of such termination. The Applicant in his FEG claim recorded that his employment was terminated on 14 May 2018.[6] He also made this concession in his response to the Respondent’s Statement of Facts, Issues and Contentions and also whilst he was in the witness box.

   [5] The letter of termination signed by Baird is document T3 at page 27 of the T documents.

   [6] The claim is part of document T3 at pages 9 to 17 of the T documents.

7. Verdicorp was wound up in insolvency by an order of the Federal Court of Australia on 18 October 2019.[7]

   [7] T3, page 26 of the T Documents.

8. On 21 October 2019, the Applicant made a claim under the FEG scheme for amounts in respect of unpaid wages, annual leave, payment in lieu of notice redundancy and long service leave.[8]

   [8] T3, page 13 of the T Documents.

9. A decision was made on 10 February 2020 by a delegate of the Respondent that the Applicant was entitled to an advance under the FEG Act in the amount of $18,698.98 before tax. The amount calculated included unpaid wages, payment in lieu of notice and long service leave entitlements. It did not include an entitlement to redundancy payments. It should be noted that the decision found that the employment of the Applicant with Verdicorp was terminated on 28 February 2018. This was based upon the delegate’s construction of the termination letter of 14 May 2018.

   THE FEG SCHEME

10. It is not necessary for the purposes of these reasons to embark on a lengthy excursion into the FEG scheme. The object of the FEG Act is to enable former employees of, amongst other things, companies in liquidation to recover from the Commonwealth amounts of unpaid employee entitlements.

11. Section 6(5) of the FEG Act provides that amongst the several kinds of employee entitlements is a redundancy pay entitlement. Specifically, the section provides:

    “The person’s redundancy pay entitlement is the amount of redundancy pay the person is entitled to under the governing instrument from the employer for termination of the employment.”

12. Section 5 of the FEG Act defines the term “governing instrument” for employment to include, amongst other things, a written law of the Commonwealth, an award, a written instrument or an agreement (whether a contract or not).

    THE APPLICANT’S CONTENTIONS

13. The Applicant approached the matter by adopting several different contentions.

14. He said there was a “redundancy policy” in place for the purposes of Clause 19, “Resignation and Termination”, of the Standard Terms of Employment that was agreed to by Veridicorp and him. He said it was discussed by the parties at various times both before and after the execution of the employment agreement on 24 July 2010. Additionally, he pointed to some signed documents that he produced in evidence and in particular a page of the document headed “Employment Agreement Between Randolph Dietzel and Veridicorp”, “Schedule B (parts 4-5)”.[9] The document produced in evidence before the Tribunal had handwriting on it which the Applicant identified as his. He said that the handwriting was made by him prior to the execution of the employment agreement on 24 July 2010. The document contained a redundancy provision of 4 weeks payment for each year of service calculated on a pro rata basis and being capped at the equivalent of two years’ salary. It was not signed.

    [9] It forms part of exhibit "A1".

15. The Applicant also contended that, on a true and proper construction of the Standard Terms of Employment, there was a provision for 90 days’ redundancy to be paid. This approach to construction had two limbs to it.

16. He relied upon the provision in Clause 19 where the termination of the employment required the giving of 90 days’ notice in writing. In effect he said the 90 days also applied by implication, if not expressly, to a situation where an employee was made redundant.

17. A further limb of this approach involved the construction of Clause 22 of the Standard Terms of Employment which is entitled “Post-Employment Restrictive covenants”. Under the heading “The Specified Period for restrictive covenant is” a reference is made to the restrictive covenant not being “binding beyond any term, beyond that of which... a redundancy payment provision … would reasonably cover”. In short, he contended that when this clause is read with Clause 19 and properly construed, it was the foundation or platform for a payment of three months’ redundancy.

18. Finally, the Applicant contended that on two previous occasions where employees were made redundant, they were paid redundancy payments. Therefore, this was evidence that a redundancy policy existed (whatever it may be) and it was equally applicable to the situation that he faced upon the termination of his employment on 14 May 2018.

19. The Applicant argued for some time, and including before the delegate who made the reviewable decision, that if his employment contract with Verdicorp did not contain a redundancy policy then he was entitled to redundancy under the relevant provisions of the Fair Work Act 2009 (“FWA”). It should be observed that section 119 of the FWA gives an employee an entitlement to redundancy pay. It is a “governing instrument” for the purposes of section 6(5) of the FEG Act. However, under section 121(1)(b) of the FWA, that entitlement does not apply to the termination of an employee’s employment if, immediately before the time of termination, or at the time when notice was given, the employer was a “small business employer”. A small business employer is defined in section 23 of the FWA as one who employs fewer than 15 employees at the relevant time.

20. Regrettably for the Applicant, the evidence was that by the time of his termination on 14 May 2018, Verdicorp and its associated entities collectively employed less than 15 people. In his response to the Respondent’s Statement of Facts, Issues and Contentions, the Applicant conceded this point.[10] He also made such a concession when he was in the witness box. The Tribunal should also observe that this concession was borne out by the evidence that was before it, which did not establish that Verdicorp and its associated entities employed more than 15 people as at 14 May 2018.[11] By reason of this fact the employer Verdicorp was a small business employer and thereby excluded from the obligation to pay redundancy pay under the relevant provision (section 121(1)(b)) of the FWA.

    [10] The concession is made in paragraph 1 of that document.

    [11] For instance, there was a list of employees furnished by a director of Verdicorp to the delegate of the Respondent which was in evidence at document T23, page 257 of the T documents.

21. Therefore, the sole question for determination by the Tribunal is whether the Applicant’s contract of employment with Verdicorp encompassed in the Standard Terms of Employment (Executive Status) an obligation to pay redundancy to the Applicant upon termination of his employment on 14 May 2018.

    CONSIDERATION

22. The Tribunal finds that there was no redundancy policy within the meaning of Clause 19 of the Standard Terms of Employment. The document produced by the Applicant which included Schedule B (parts 4-5) was never adopted or agreed to by Verdicorp.[12]

    [12] It is part of exhibit A1.

23. Also, such document came into existence prior to the execution of the contract of employment on 24 July 2010. The Applicant agreed with this when in the witness box. This being so, in any event, if it otherwise had some force or effect, such clause is captured by Clause 26 “General provisions” of the Standard Terms of Employment. Clause 26 contains the following:

    “This contract supersedes and replaces all prior representations and agreements concerning the Executive’s employment with Verdicorp”.

24. If Schedule B (parts 4-5) was of any force or effect by the time the Standard Terms of Employment were executed, it was superseded by operation of the provision contained in Clause 26 “General provisions” of that agreement and, therefore, does not apply.

25. It should also be observed that the Applicant conceded in the witness box that there were ongoing discussions concerning the proposed inclusion of an entitlement to redundancy in the employment agreement as well as an employee share option scheme which remained unresolved. The Applicant also conceded in the witness box that there was a discrepancy between the content of those ongoing discussions and what was in the written agreement. He stated that the intention of the parties was to merge the existing Standard Terms of Employment which the parties had signed, with further details to be agreed concerning redundancy and employee share options. A final document as contemplated, was never drawn up and executed.

26. The Applicant also acknowledged, when in the witness box, that there was no redundancy policy in place at the time that the contract of employment was signed. He also readily conceded that there was no written contract or agreement governing redundancy entered into between the parties after the letters of offer and attached Standard Terms of Employment were entered into on 24 July 2010.

27. Although he did not give any evidence to the Tribunal at the hearing of the application, Verdicorp’s director steadfastly denied to the Delegate that an agreement had been reached with the company that the Applicant was entitled to a three-month redundancy payment as distinct from 90 days’ notice in writing.[13] This was also consistent with the comment in the letter of termination of 14 May 2018, whereby he said it was the company’s intention to include one month’s redundancy pay in his termination package as an ex-gratia payment.[14] This again indicates that there was no legal obligation to make redundancy payment upon termination to the Applicant.

    [13] See document T25.

    [14] T24, T25 and T33 of the T Documents.

28. Given all these matters, the Tribunal finds that the “governing instrument” for the purposes of section 6(5) of the FEG Act was the contract of employment which included the Standard Terms of Employment referred to earlier.

29. The Tribunal cannot accept that on a true and proper construction of the Standard Terms of Employment, the contention that the requirement to give 90 days’ notice in writing also gives rise to a 90-day redundancy entitlement. There is no doubt that, on a true and proper construction of the relevant portion of Clause 19, in the event that a person was summarily terminated without receiving 90 days’ notice in writing, they would be entitled to payment in lieu of such notice.

30. However, entitlement to payment in lieu of notice, is a completely different concept to that of a redundancy, whether that entitlement arises pursuant to the agreement itself, or under the relevant provisions of the FWA. The text of Clause 19 of the Standard Terms of Employment simply does not cast a sufficiently wide dragnet to oblige Verdicorp to make an additional payment in the event that the employee is made redundant. It should be borne in mind that the original decision under the FEG Act determined that the Applicant was eligible for a FEG advance which was calculated by reference to, amongst other things, a payment in lieu of notice.

31. As for the contention that Clause 22 of the Standard Terms of Employment concerning Post-Employment Restrictive Covenants in some way lays the foundation or platform for payment of redundancy, or perhaps more accurately, an entitlement to it, the Tribunal cannot agree. Whilst it is true that the clause does refer to a “redundancy payment”, it does not in any way cast upon the employer Verdicorp an independent and enforceable obligation to make a payment, the quantum of which or means of calculating it, in any event, are undefined. At best for the Applicant, the clause properly construed simply determines that the period of any post-employment restrictive covenant will not exceed the period for which a redundancy payment has been made. It is simply a means of determining how long a post-employment restraint may last and nothing more.

32. As for the fact that payments may have been made for the redundancy of two previous employees, the Tribunal cannot find that this amounts to a “policy” within the meaning of Clause 19 of the Standard Terms of Employment. The Tribunal was not appraised of what the terms were of the two previous employees’ employment with Verdicorp. The Applicant was employed under a separate contract of employment. Any entitlement to redundancy has to be found in the terms of the Applicant’s contract of employment with Verdicorp. The Tribunal has found that there was not an entitlement. Even if the company had made redundancy payments to these employees when it was not obliged to do so, it does not give rise to an independent obligation on the employer to make a redundancy payment on termination.

33. For these reasons, the Applicant did not, at the time of his termination on 14 May 2018, have an entitlement to a redundancy payment under the terms of the governing instrument which was the Standard Terms of Employment. He is therefore not entitled to a FEG advance in the sum of $31,863 or any other amount.

    CONCLUSION

34. By reason of the foregoing matters, the reviewable decision is affirmed.

I certify that the preceding 34 (thirty-four) paragraphs are a true copy of the reasons for the decision herein of R Cameron, Senior Member

........[sgd]..........................................

Associate

Dated: 13 October 2021

Date of hearing:

14 September 2021

Applicant:

Self-represented

Advocate for the Respondent:

Solicitor for the Respondent:

Claire Campbell

HWL Ebsworth Lawyers