Elsadat and Secretary, Attorney-General's Department
[2021] AATA 2101
•5 July 2021
Elsadat and Secretary, Attorney-General's Department [2021] AATA 2101 (5 July 2021)
Division:GENERAL DIVISION
File Number: 2020/6631
Re:Mrs Samaa Elsadat
APPLICANT
AndSecretary, Attorney-General's Department
RESPONDENT
DECISION
Tribunal:Ms A E Burke AO, Member
Date:5 July 2021
Place:Melbourne
The Tribunal sets aside the reviewable decision made on 12 August 2020 and remits the matter to the Secretary with the direction that the Applicant is entitled to an advance for redundancy pay calculated in accordance with section 119(2) of the Fair Work Act 2009 (Cth).
...[sgd].....................................................................
Ms A E Burke AO, Member
Catchwords
EMPLOYMENT - fair entitlements guarantee - entitlement to redundancy payment - when did employment cease – employees governing instrument - whether Applicant was employed by a small business – whether assurance to redundancy payment was made by insolvency practitioner - the decision set aside and remitted for recalculated to include redundancy payment.
Legislation
Administrative Appeals Tribunal Act 1975 (Cth)
Corporations Act 2001 (Cth)
Fair Entitlements Guarantee Act 2012 (Cth)Fair Work Act 2009 (Cth)
Cases
Australian Pipeline Limited as Responsible Entity for the Australian Pipeline Trust v Commissioner of Taxation [2013] FCA 1372
Bower and Secretary, Attorney-General's Department [2020] AATA 4353
Bullivant and Secretary, Attorney-General's Department [2020] AATA 2047
Financial Synergy Holdings Pty Ltd v Commissioner of Taxation [2015] FCA 53
Fink and Secretary, Attorney General’s Department [2021] AATA 734
Gayed and Secretary, Department of Jobs and Small Business [2019] AATA 1132
Kable and Secretary, Attorney General’s Department [2019] AATA 3963
Mi and Secretary, Department of Employment [2016] AATA 419
Macquarie Health Corp v Commissioner of Taxation [1999] FCA 1819
Yeo and Secretary, Attorney-General's Department [2020] AATA 117REASONS FOR DECISION
Ms A E Burke AO, Member
5 July 2021
Mrs Elsadat (the Applicant) is seeking a second tier review of the decision made by the Attorney General (the Respondent) that she was entitled to a Fair Entitlement Guarantee (FEG) advance for unpaid wages, annual leave, payment in lieu of notice and long service leave, but was not entitled to a redundancy payment.
On 12 August 2020, the decision-maker at the FEG branch advised Mrs Elsadat she was entitled to an advance of FEG of $15,771.60, comprising $8,418.60 for annual leave, $7,353.00 for payment in lieu of notice (PILN) and $0.00 for redundancy.
On 29 September 2020, Mrs Elsadat requested a review of the determination. The decision-maker of the FEG review team upheld the determination that Mrs Elsadat was not entitled to any additional FEG advance, stating the reasons for the review decision:
1Section 6(5) of the FEG Act provides that a person’s redundancy pay entitlement is the amount of redundancy pay the person is entitled to under the governing instrument from the employer for the termination of employment. A ‘governing instrument’ is defined in section 5 of the FEG Act to mean a written law of the Commonwealth, a State or Territory, an award, determination, or a written instrument or agreement.
2The governing instrument applicable to your claim for redundancy pay was your employment contract. Clause 13 of your contract provides that in the event of your position being made redundant, your entitlements will be in accordance with the FW Act.
3Section 119 of the FW Act provides for redundancy pay but also notes that section 121 of the FW Act describes circumstances in which an employee does not have an entitlement to redundancy under the NES.
4Section 121(1)(b) of the FW Act provides that section 119 does not apply to the termination of an employee’s employment if, immediately before the time of termination, or at the time of when the person was given notice of termination as described in subsection 117(1) of the FW Act (whichever happened first), the employer is a small business employer.
5A ‘small business employer’ is defined in section 23 of the FW Act, as an employer that employs fewer than 15 permanent or regular and systematic employees.
6Whilst the insolvency practitioner has suggested that the FW Act refers to calculating the number of employees at a particular time but does not require calculating the number of employees on a particular day or instant; the department has determined that the plain English meaning of the phrases ‘immediately prior’ and ‘at the time,’ convey a sense of immediacy.
7In addition, section 23(4) of the FW Act expressly provides that the employees that are to be counted at a particular time include both the employee whose employment is being terminated and any other employee who is also being dismissed or whose employment is also being terminated. The use of the present tense in this provision indicates that this does not extend to include employees whose employment ceased prior to the relevant date.
8Therefore, to be entitled to payment of redundancy under the FW Act, your employer must have had at least 15 permanent or regular and systematic casual employees still employed at the time that your employment was terminated, or the time when you received written notice of the date of your termination.
9Section 23 of the FW Act provides that associated entities are to be treated as one entity when calculating the number of employees.
10You stated on your FEG claim form that your employment ended on 29 November 2019. The insolvency practitioner has also verified that your employment ended on this date.
11You also stated on your FEG claim form that you did not receive any notice of your termination of employment prior to 29 November 2019. The insolvency practitioner has not provided any information to the department to suggest that you received any formal notice of termination prior to this date, and I note this was the basis upon which you received your FEG advance in respect of PILN.
12Based on the above, the relevant date for determining whether the company was a small business employer in relation to your entitlement to redundancy pay was on 29 November 2019.
13Based on the information provided by the insolvency practitioner from the company books and records, Waratah Group Pty Ltd employed fewer than 15 employees as of 29 November 2019.
14The department notes that your former employer may have had several associated entities; however, the evidence indicates that even when counting the employees of those entities, in total, there were still less than 15 employees as at the relevant date of 29 November 2019.
15As your former employer was a small business employer as defined by section 23 of the FW Act, in accordance with section 121(1)(b) of the FW Act, you do not have a legal entitlement to redundancy pay. You therefore are not eligible for a FEG advance in respect of this matter.
On 24 October 2020, Mrs Elsadat sought a review of the FEG branch decision-maker’s determination by this division of the Tribunal. Her reasons for seeking a review were that:
The fact that the number of employees has fell below 15 by the time I finished working for Waratah Group should not affect my redundancy right for either or both of the following reasons.
1. There was a difference between the date I was made aware that my employment would be terminated and the date I actually finished work
In my initial claim with FEG, when I was asked on the application "Prior to your last day of work, were you given notice of termination of your employment?" my reply was "Yes." I was then asked on the application, "When were you given notice?" and my reply was 29/11/2019. I provided that 29 November date as this was the date on which I was notified of a confirmed time that would be my last day to finish work. In answering this question at the time of filing the application for my claim, I did not fully appreciate the distinction between being given notice of the termination of my employment and being advised of the last day I was required to work for the Administrators. I was confused as to whether to put down the 12th of November, which was the date when all the employees at the office at Laverton and at the factory at Port Melbourne where gathered to be informed by the insolvency practitioner that everybody's employment was coming to an end and the final day for each employee will be decided on a day to day basis, based on the need for them to work.
On the 12th of November, I was made aware, as were all the other employees (more than 100 in both locations of the company), that our employment was definitely coming to an end as there was no prospect of the business being sold and our employment transitioning to a new purchaser. We were also told that there would be a rolling program of finish dates which had the effect of the workforce gradually reducing in numbers. In my role as Senior Financial Accountant I was required to remain employed for a longer period than most to assist with the final payroll.
That is why I was confused when filling in the application for my claim with FEGS as to whether to put 12th November (the day of being verbally notified of termination without specifying a finish date) or 29th November when I was told (also verbally) the last day I would be finishing work with Waratah Group. Until reviewing other AAT decisions to assist with preparing this form I had not fully appreciated the difference.
In addition English is my second language. However, I clearly recall, being informed by the Administrators on 12th November, along with many of my other former colleagues, that our employment is coming to an end, and it was just a matter of days and that timing would be decided based on business needs. On the 12th November Waratah Group was not a small business employer.
Also, in my position as a Senior Financial Accountant in the company, part of my responsibilities were to do all the payroll and calculations of entitlements for all employees, I knew that everybody's employment, including mine, had been terminated and that they would be finishing up within days or no more than weeks after the 12th November address November, I just did not know what was the exact date in my case.
Mrs Elsadat was self-represented and Ms Laura Cooke of HWL Ebsworth Lawyers appeared for the Attorney General. The Attorney General lodged a set of paginated documents under section 37 of Administrative Appeals Tribunal Act 1975 (Cth) (the T-Documents) and the Applicant gave evidence at the hearing.
BACKGROUND / EVIDENCE
On 26 July 2017 Mrs Elsadat’s was offered employment with the Waratah group. The terms of her appointment were set out in a letter to her, including the following provision in respect of redundancy:
13. REDUNDANCY
In the event of your position being made redundant, your entitlements will be in accordance with the Fair Work Act 2009.
On 7 August 2017, Mrs Elsadat commenced work with Waratah Group as a Financial Accountant and was later promoted to Senior Financial Accountant. The latter position included the role of payroll accountant. Waratah Group’s core business was described as offset printing.
On 6 November 2019 Waratah Group was placed into voluntary administration. At the time, the company employed 105 staff, including Mrs Elsadat.
On 3 December 2019, Dye & Co provided creditors of Waratah Group with the following:
Executive Summary of Administrators’ Report and Conduct of Administration
The company was placed into Voluntary Administration on 6 November 2019 and Nicholas Giasoumi and I were appointed joint and several Voluntary Administrators.
The company did not own material plant and equipment. Investigations disclose that its business was operated in coordination with related entities, including related entities that did own plant and equipment.
On 15 November 2019, the first meeting of creditors was held. In respect of the formal resolution:
-No consent to act of an alternative Voluntary Administrator was received.
-Creditors resolved that a Committee of Inspection was not required.
The company continued to trade during the period 6 November 2019 to 22 November 2019, and the trade is expected to have produced a surplus.
The company has ceased to trade, after selling business assets being the company’s interests in its remaining work in progress, customer base and associated computer equipment Finsbury Green Pty Ltd on 22 November 2019 for $100,000 plus goods and services tax.
A second meeting of creditors has convened for 11 December 2019. Given that the company is insolvent and no proposal for a deed of company arrangement has been received, it is recommended to creditors that the company be wound-up.
In respect of dividend prospects if creditors resolve to wind-up the company, it is notable that for there to be any prospects of a return to ordinary unsecured creditors total recoveries excluding secured\ recoveries will need to exceed the priority claims of employees totalling $4,344,338.94.
If the liquidator is appointed, they are required to report further to creditors within 3months of their appointment.
The final report notes:
With respect to the financial outcome from trading to realising Work in Progress during the period from 6 November 2019 to 22 November 2019, notwithstanding that some payables invoices are yet to come in or be quantified (including for utilities), in respect of the trading period:
- Specific purchase sources for goods and services totalling $269,999.57.
- Authorising other supplies for ongoing requirement such as equipment leases and transport (the later estimated at $20,000.00 per week).
- Wages (inclusive of Superannuation) totalling $289,343.90 were incurred to payroll week ending Sunday 24 November 2019 by which time the majority of staff other than a small number of accountancy employees were terminated.
- Invoicing total of $979,136.66 were issued to customers.
The Administrators are thankful for the support obtained during the administration to continue to deal with the company and open trade accounts. This made it possible to continue to trade to meet the objects of the Voluntary Administration to maximise the chances that the company, or as much as possible of its business, continuing in existence, and to maximise the realisable value of the equity in the Work in Progress.
On 30 June 2020, Mrs Elsadat completed a claim form for an advance under the FEG scheme, advising the following:
Do you know the exact date you last worked for your former employer? Yes
Please provide the actual or approximate date you last worked with your former employer 29/11/2019
Is the date you last worked the same as the date your employment ended? Yes
Did you resign from your employment with your former employer? No
Who terminated your employment? Insolvency practitioner
Prior to your last day of work, were you given notice of termination of your employment? Yes
When were you given notice? 29/11/2019
What was the reason given for the termination of your employment? The company is going to liquidation
Are you still owed any employment entitlements by your former employer? Yes
Entitlement type
Redundancy
Amount owed (before tax) (Optional) 15959.08
On 3 December 2019, a company called Dye & Co advised Mrs Elsadat that:
We advise that on 6 November 2019 Nicholas Giasoumi and Shane Leslie Deane were appointed Joint and Several Administrators of the Company pursuant to section 436A of the Corporations Act 2001.
We note that your employment with the company has been terminated.
We also advise that you are disclosed as a preferential creditor in respect of the following amounts:
Unpaid wages 886.62
Annual leave 9135.95
Leave loading 0.00
Payment in Lieu of Notice 7979.54
Redundancy 15959.08
Long Service Leave 0.00
$33961.19
We further advise that the company will not have sufficient funds to enable the payment of your employee entitlements within the next three months, if at all.
In these circumstances you may be eligible to receive a payment pursuant to the Fair Entitlements Guarantee Act 2012 (“FEG”) which is administered by the Commonwealth Government, Attorney General’s Department (“that Department”). Payment from the Commonwealth Government is only available should the company enter liquidation at the second meeting of creditors. The circular relating to the second meeting detailing the options for creditors on the company’s future will be sent out early next week.
On 7 May 2020, Dye & Co advised FEG the following in respect of Mrs Elsadat’s termination date and entitlement to an FEG advance for redundancy:
I note your advice that a small business is not required to provide redundancy when it employs fewer than 15 employees.
I also note that on 22 November 2019 I terminated more than fifteen (15) employees with only two (2) employees remaining after this date, one being …. and the other being Sama Elsadat.
As a result of the above, you have determined that the above two (2) employees are no longer entitled to redundancy as there was less than fifteen employees at the time of their termination.
In these circumstances, FEG’s application of the FW Act appears egregious in nature.
All employees were notified from the start of my appointment as Joint and Several Administrator that the company would eventually cease trading and that their employment would eventually be terminated.
The company ceased to trade on 22 November 2019. The work conducted by the above two (2) employees after this date was to assist with the administration of the company, rather than the trading of the company, as the work conducted by them related to employee entitlements and debtors. Furthermore, upon nearing the company ceasing to trade both employees were on notice that their employment would be ending shortly and neither employee was employed more than approximately one and a half weeks after the company ceased trading.
I advise that the company was not a small business throughout its life and it should not be treated as such before it is placed into liquidation.
I advise the employees are entitled to redundancy.
On 18 December 2020, Dye & Co provided clarification to Mrs Elsadat about her termination:
I advise that all staff were verbally advised on 6 November 2019 that the company would be ceasing and that their employment services are terminated with a finish date to be advised dependant on job description, requirements and workflow.
I confirm that on 12 November 2019, Nicholas Giasoumi verbally confirmed the termination of all employees during his attendances at the offices of the company including the Laverton office.
ISSUES IN CONTENTION
The issue for the Tribunal to determine is whether Mrs Elsadat was entitled to an advance payment of FEG in respect of her redundancy.
LEGISLATIVE FRAMEWORK
The Fair Entitlements Guarantee Act 2012 (Cth) (the FEG Act) provides for the Commonwealth to make payments owed to employees if their employer becomes insolvent. The Commonwealth advances entitlements to the employees and then seeks to recover these advances from the insolvent employer.
Section 3 of the FEG Act clearly outlines the objectives of the Act:
The main objects of this Act are:
(a) to provide for the Commonwealth to pay advances on account of unpaid employment entitlements of former employees of employers in cases where:
(i) the employers are insolvent or bankrupt; and
(ii) the end of the employment of the former employees was connected with that insolvency or bankruptcy; and
(iii) the former employees cannot get payment of the entitlements from other sources; and
(b) to allow the Commonwealth to recover the advances through the winding up or bankruptcy of the employers and from other payments the former employees receive for the entitlements.
Section 6 of the FEG Act identifies the kinds of employment entitlements which can be included as payment:
(1)This section defines the various kinds of employment entitlements of a person whose employment by an employer has ended, by reference to the person's entitlements under the governing instrument for the employment.
Annual leave entitlement
(2)The person's annual leave entitlement is the amount the person is entitled to under the governing instrument from the employer for paid annual leave that the person:
(a) had accrued at the end of the employment; and
(b) had not taken by then.
Long service leave entitlement
(3)The person's long service leave entitlement is the amount the person is entitled to under the governing instrument from the employer:
(a) for long service leave that the person had accrued at the end of the person's employment and had not taken by then; or
(b) on account of long service leave that, had the person's employment continued until the person qualified for long service leave, would have been attributable to the period before the actual end of the person's employment.
Payment in lieu of notice entitlement
(4)The person's payment in lieu of notice entitlement is the amount the person is entitled to under the governing instrument from the employer for a shortfall in the period of notice of termination of the employment
Redundancy pay entitlement
(5)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.
Wages entitlement
(6)The person's wages entitlement is the amount of wages the person is entitled to under the governing instrument from the employer for work done, or paid leave taken, in the wages entitlement period.
Entitlement unaffected by payment
(7)The person's receipt of some or all of an amount he or she was entitled to under the governing instrument does not affect what is the person's annual leave entitlement, long service leave entitlement, payment in lieu of notice entitlement, redundancy pay entitlement or wages entitlement under this section.
Example: If:
(a) under the governing instrument, the person accrued 8 weeks of annual leave that had not been taken by the end of the person's employment; and
(b) the employer paid the person for 3 of those weeks;
the person's annual leave entitlement is the entitlement to be paid for 8 weeks annual leave
The wage entitlement period is defined in section 5 of the FEG Act:
"wages entitlement period" for a person whose employment by an employer has ended means the 13 weeks ending at the earlier of the following times (or either of those times if they are the same):
(a) the time the person's employment ended;
(b) the first time an insolvency practitioner has power (however expressed) to control or manage employment by:
(i) the employer; or
(ii) if the person was employed for a partnership by 2 or more partners--any of the partners who employed the person.
Section 117 of the Fair Work Act 2009 (Cth) (“the FW Act”) outlines the requirement for notice of termination or payment in lieu:
Notice specifying day of termination
(1)An employer must not terminate an employee's employment unless the employer has given the employee written notice of the day of the termination (which cannot be before the day the notice is given).
Note 1: Section 123 describes situations in which this section does not apply.
Note 2: Sections 28A and 29 of the Acts Interpretation Act 1901 provide how a notice may be given. In particular, the notice may be given to an employee by:
(a) delivering it personally; or
(b) leaving it at the employee's last known address; or
(c) sending it by pre-paid post to the employee's last known address.
Amount of notice or payment in lieu of notice
(2) The employer must not terminate the employee's employment unless:
(a) the time between giving the notice and the day of the termination is at least the period (the minimum period of notice) worked out under subsection (3); or
(b) the employer has paid to the employee (or to another person on the employee's behalf) payment in lieu of notice of at least the amount the employer would have been liable to pay to the employee (or to another person on the employee's behalf) at the full rate of pay for the hours the employee would have worked had the employment continued until the end of the minimum period of notice.
(3) Work out the minimum period of notice as follows:
(a) first, work out the period using the following table:
Period
Employee's period of continuous service with the employer at the end of the day the notice is given
Period
1
Not more than 1 year
1 week
2
More than 1 year but not more than 3 years
2 weeks
3
More than 3 years but not more than 5 years
3 weeks
4
More than 5 years
4 weeks
(b) then increase the period by 1 week if the employee is over 45 years old and has completed at least 2 years of continuous service with the employer at the end of the day the notice is given.
(4) A reference in this section to continuous service with the employer does not include periods of employment as a casual employee of the employer.
Section 119 of the FW Act outlines an employee’s entitlement to redundancy pay:
Entitlement to redundancy pay
(1)An employee is entitled to be paid redundancy pay by the employer if the employee's employment is terminated:
(a) at the employer's initiative because the employer no longer requires the job done by the employee to be done by anyone, except where this is due to the ordinary and customary turnover of labour; or
(b) because of the insolvency or bankruptcy of the employer.
Amount of redundancy pay
(2)The amount of the redundancy pay equals the total amount payable to the employee for the redundancy pay period worked out using the following table at the employee's base rate of pay for his or her ordinary hours of work:
Note: Sections 121, 122 and 123 describe situations in which the employee does not have this entitlement.
Redundancy pay period
Employee's period of continuous service with the employer on termination
Redundancy pay period
1
At least 1 year but less than 2 years
4 weeks
2
At least 2 years but less than 3 years
6 weeks
3
At least 3 years but less than 4 years
7 weeks
4
At least 4 years but less than 5 years
8 weeks
5
At least 5 years but less than 6 years
10 weeks
6
At least 6 years but less than 7 years
11 weeks
7
At least 7 years but less than 8 years
13 weeks
8
At least 8 years but less than 9 years
14 weeks
9
At least 9 years but less than 10 years
16 weeks
10
At least 10 years
12 weeks
Section 121 of the FW Act outlines the exclusions from the employer’s obligation to pay redundancy pay:
(1)Section 119 does not apply to the termination of an employee's employment if, immediately before the time of the termination, or at the time when the person was given notice of the termination as described in subsection 117(1) (whichever happened first):
(a) the employee's period of continuous service with the employer is less than 12 months; or
(b) the employer is a small business employer.
(2)A modern award may include a term specifying other situations in which section 119 does not apply to the termination of an employee's employment.
(3)If a modern award that is in operation includes such a term (the award term), an enterprise agreement may:
(a) incorporate the award term by reference (and as in force from time to time) into the enterprise agreement; and
(b) provide that the incorporated term covers some or all of the employees who are also covered by the award term.
Section 23 of the FW Act provides the meaning of small business employer:
(1)A national system employer is a small business employer at a particular time if the employer employs fewer than 15 employees at that time.
(2)For the purpose of calculating the number of employees employed by the employer at a particular time
(a) subject to paragraph (b), all employees employed by the employer at that time are to be counted; and
(b) a casual employee is not to be counted unless, at that time, he or she has been employed by the employer on a regular and systematic basis
(3)For the purpose of calculating the number of employees employed by the employer at a particular time, associated entities are taken to be one entity.
(4)To avoid doubt, in determining whether a national system employer is a small business employer at a particular time in relation to the dismissal of an employee, or termination of an employee's employment, the employees that are to be counted include (subject to paragraph (2)(b)):
(a) the employee who is being dismissed or whose employment is being terminated; and
(b) any other employee of the employer who is also being dismissed or whose employment is also being terminated.
CONTENTIONS
Applicant’s Submissions
Mrs Elsadat argued that she was entitled to an advance for redundancy under the FEG Act as she had been verbally informed by the insolvency practitioners on 12 November 2019 that her services had been terminated. Mrs Elsadat argued that on 12 November 2019 Waratah Group was not a small business, and therefore her governing instrument provided her with an entitlement to redundancy pay on that day.
Mrs Elsadat argued that, following Waratah Group being placed into voluntary administration, she had at all times complied with the directions of the insolvency practitioners. And she was repeatedly assured by them that she would receive her full outstanding entitlements including a redundancy payment. Mrs Elsadat also noted that she had worked as directed by the insolvency practitioners until 29 November 2019, when she completed all the work that they required to ensure they had an accurate record of all staff entitlements. Mrs Elsadat argued that she and all staff had been advised that if they left the company before the date advised to them by the insolvency practitioners, they would lose their rights to their outstanding entitlements, particularly redundancy payment.
Mrs Elsadat contended that her date of termination was 12 November 2019, not 29 November 2019, which was the last day she worked as directed by the insolvency practitioners.
Mrs Elsadat contended that she did her best to quantify the unpaid superannuation liability of the company, as well as putting together all of the employees’ entitlements for the insolvency practitioners, ensuring all the employees received their correct entitlements. Mrs Elsadat argued that she did not know that this put her at risk of not receiving her own entitlement to redundancy. Mrs Elsadat argued that she felt it was completely unfair for her not to receive her redundancy as her colleagues did, because the delegate did not consider substance over form.
Mrs Elsadat argued that the insolvency practitioners had never advised her that she would lose her right to redundancy payment if she continued to work past 12 November 2019. She argued that had she been advised of this, she would have ceased work when the rest of the staff stopped working for Waratah Group; and would have either transitioned to Finsbury Green, which had purchased part of the business, or received her entitlement to redundancy as an advance under the FEG Act.
In her reasons for seeking an appeal, Mrs Elsadat clearly outlined her argument for her entitlement to redundancy as follows:
So on better understanding the meaning of employment termination date, I am now confident that this notice was given on 12th November, at which time the Waratah Group was not a small business employer (SBE).
2.There was a verbal agreement between myself and the insolvency practitioner Nicholas Giasoumi that my redundancy entitlement would be paid as it was for my colleagues, regardless of when I finished working
During the course of my working for the company after the administrators were appointed I had several discussions and received other communications from them that amounted to an agreement with the company that I would be paid my redundancy entitlements regardless of when I finished working for Waratah Group. The effect of this agreement would be to modify the employment instrument (employment contract) to exclude the operation of the small business employer exception, because it will not apply where there is an agreement that redundancy payments will be made. Shortly after their appointment I was asked by the insolvency practitioner to stay on board to calculate the unpaid superannuation for several quarters for all employees as well as calculation of all entitlements of all employees. At first we were told they were assessing options but soon it became apparent that the business would not be sold as a whole which we were told on 12 November. I had several discussions with the Administrator and his staff and at no time was it ever discussed with me that I would not be entitled to a redundancy by being one of the last two to finish their work at the company. I had expected to be on the final list to finish up because of the nature of my job which was assisting the Administrators to exit all staff and pay them correctly. At no time was it discussed with me that I will not be paid any redundancy in the event that the number of employees decrease to less than 15 and I was never warned that this was potentially the impact of the wind-down.
We (all employees) were assured that if we stay on till our final day to finish work we would be entitled to all our entitlements of leave, notice and redundancy We were also told if we choose to resign or leave earlier, which we were free to do, then we will not be entitled to a redundancy payment. I believe that most people continued to work just to ensure they could receive their redundancy as this was the only difference in the entitlements they would be paid if we chose to resign rather than wait till we are informed of our termination and last day to finish work. I remember most employees came to work and did nothing as there was no work to be done, in fear of losing their redundancy.
Although I was personally asked to stay on till the final day to finish the work and that I should be expecting to be one of the last employees, I did so on the basis that my full entitlements would be payable, and I was never told otherwise. In the letter dated 3rd December from the insolvency practitioner, it referred to my earlier termination (although no date of termination was included) and it was indicated that I was entitled to redundancy pay of $15,959.08. I understood the effect of the various requests from the Administrator to continue to work, the verbal addresses to staff generally and to me specifically plus the effect of this letter, as amounting to an assurance that I would be entitled to a redundancy payment, as a modification or an extension of my contract with Waratah group with the amount of $15,959.08 owing. I assume that the insolvency practitioner would have known the impact of section 121 (1) (b) and never raised or discussed that with me, on the contrary we were always assured that if we stay till the end we will get our redundancy.
I assume that the insolvency practitioner when asking me to stay on, would not have overlooked a matter as vital to me as the status (SBE or not) of the employer company. I had understood that there was an agreement that in return for my ongoing service my entitlement to redundancy pay would be protected, whether or not the employer becomes a SBE. I have read the AAT decision of Bullivant and Secretary, Attorney-General's Department [2020] AATA 2047 (1 July 2020) and it appears factually similar to my case.
I believe I have a clear right under the FEG Act to claim an advance on account of redundancy pay as I was terminated by reason of an insolvency event and had an employment instrument that was extended to include a contractual right to redundancy as part of the negotiations for me to continue to assist the Administrators. I believe I have the right to the redundancy pay under the FEG Act in the amount mentioned in the insolvency practitioner's letter of 3 December 2019
In summary, Mrs Elsadat, in her written submission to the hearing, argued:
·Section 119 of the FW Act provides an entitlement to redundancy pay where a person's employment has been terminated by the employer due to the insolvency of the company. However, section 121(1)(b) of the FW Act provides that section 119 does not apply to an employee if the employer company was a ‘small business employer’ immediately before the time of the termination, or at the time when the person was given notice of the termination, as described in section 117(1). In section 117(1), only 'written notice' is mentioned. The section does not mention or imply that a notice of termination besides a written notice will be excluded from being considered a “notice of termination”. However, section 117(1) does not specify "only in writing" for a notice of termination to be effective. Accordingly, the mention of “written notice” in section 117(1) is to give evidence of termination. Considering substance over form, a verbal notice of termination followed by actual termination; or a written notice of termination would both give evidence of termination. In addition, none of the employees were provided with a written notice of termination; all were given verbal termination at the same time. If notice of termination is required to be in writing to be effective, then none of the employees were given a notice of termination. Yet, they were paid redundancy by FEG, except for two employees including the Applicant.
·Section 121(1)(b) of the FW Act provides that section 119 does not apply to an employee's employment if the employer was a 'small business employer', immediately before the time of termination, or at the time when the person was given notice of the termination under section 117(1) (whichever happened first). FEG's decision to consider Waratah Group a small business employer appears egregious in nature. Waratah Group ceased to trade on 22 November 2019. The work conducted by the Applicant in the following week was to assist in the administration of the company as requested by the Administrator, rather than the trading of the company. This is the case as the work conducted by the Applicant related to employee entitlements. Furthermore, as the company neared its cease of trade, the Applicant was put on notice that her employment was ending after she finished the work on hand. This work took only one week after the company ceased to trade, ending on 29 November 2019.
·In addition, the company was not a small business throughout its life, and it should not have been treated as such before it was placed into liquidation. It is hard to consider two employees working for one week to finalize work relating to liquidation, and under verbal notice of termination, as a company. In law, one person can be considered as a company, like Solopreneurs, but this person would be doing all the operations and trade for the business. In the case of Waratah Group, it ceased trade and production on 22 November and not a single employee remained on board in production, sales, or other trade or production-related functions. Considering substance over form, Waratah Group should not have been considered a company in the first place starting 22 November 2019.
·The Applicant understands that if she did not receive her redundancy from FEG as an advance, she should still have been entitled to her redundancy as a result of the company going into liquidation. At the same time, as a senior accountant who helped Management calculate finances before the appointment of an Administrator, and with Waratah Group having more than $22 million in liabilities and only $5 million in assets, she understands that it was unlikely that she would be able to receive any of her redundancy in the future unless it were paid though FEG.
Respondents Submissions
The Respondent contended that the FW Act was the governing instrument for the purposes of assessing Mrs Elsadat’s redundancy pay entitlement under the FEG Act. The Respondent argued that according to clause 13 of Mrs Elsadat’s employment contract, if her position was made redundant, she was not entitled to any payment except where it was required under the FW Act.
The Respondent contended that there was no dispute between the parties in relation to the identification of the governing instrument, being Mrs Elsadat’s contract of employment, which she had received as part of her letter of offer.
The Respondent argued, that for Mrs Elsadat to meet the redundancy pay requirements under section 119 of the FW Act, the Tribunal must be satisfied that her employment was terminated either:
·at the initiative of Waratah Group, because Waratah Group no longer required the job done by the Applicant to be done by anyone, except where this was due to the ordinary and customary turnover of labour; or
·because of the insolvency or bankruptcy of Waratah Group.
However, the Respondent contended that section 121 of the FW Act limits the application of section 119 in certain circumstances, including where the employer was a 'small business employer' at the relevant time that termination occurred.
The Respondent noted that the Tribunal has considered the operation of the small business employer exclusion in section 121(1)(b) of the FW Act in the context of an application for review of a decision made under the FEG Act on a number of occasions.
The Respondent referred the Tribunal to the matter of Mi and Secretary, Department of Employment [2016] AATA 419 (“Mi”). Ms Mi's employment had been terminated without notice on 4 October 2013. The Tribunal's reasons include the following discussion of the meaning for the expressions 'immediately before the time of the termination'; and 'at the time when the person was given notice' which were adopted by the Tribunal at [14]-[18]:
What exactly is meant by 'immediately before the time of the termination' and 'the time when the Applicant was given the notice' requires some statutory interpretation.
…
The two relevant expressions under consideration here are defined in neither the Fair Work Act nor the Acts Interpretation Act 2001 (Cth). Further, these expressions have not been judicially considered in the context of section 121(1). Accordingly, the relevant expressions should be attributed their ordinary meaning as best as that can be determined.
First, it is necessary to consider the word 'immediately' which is defined as follows in the Oxford English Dictionary:
(1) Without intermediary, intervening agency, or medium; by direct agency; in direct or proximate connection or relation; so as to concern, interest, or affect directly, or intimately; directly.
(2) With no person, thing, or distance, intervening in time, space, order, or succession; next or just (preceding or following, before or after); closely; proximately; directly;
(3) Without any delay or lapse of time; instantly, directly, straightway; at once.
This definition is consistent with Lord Oliver's formulation of the ordinary meaning of the expression 'immediately before' in Litster v Forth Dry Dock and Engineering Co Ltd (In Receivership) [1990] 1 AC 546 at 569:
The expression 'immediately before' is one which takes its meaning from its context, but in its ordinary signification it involves the notion that there is, between two relevant events, no intervening space, lapse of time or event of significance.
The Respondent also noted that this formulation has been quoted by a number of Australian authorities, most notably: Macquarie Health Corp v Commissioner of Taxation [1999] FCA 1819 at [100]; Australian Pipeline Limited as Responsible Entity for the Australian Pipeline Trust v Commissioner of Taxation [2013] FCA 1372 at [61]; and Financial Synergy Holdings Pty Ltd v Commissioner of Taxation [2015] FCA 53 at [19].
Secondly, the Respondent contended that the expression 'at the time when the person was given notice', on its plain words, clearly indicates a specified point in time at which notice of termination is given.
The Respondent again referred to the matter of Mi, where Ms Mi submitted that the expression 'immediately before' should be interpreted to mean the point in time immediately before Administrators were appointed to her former employer on 27 September 2013. In response to that submission, the Tribunal stated at [23]:
With some regret, I conclude that it is not open to me sitting as the decision-maker in this case to insert a different test in s 121(1) for determining the time at which an employer was a small business employer. For example, it is not open to me to insert a longer or different date, such as immediately before the time at which the employer company is placed into administration/liquidation. Sitting as the Tribunal, I am required to apply the unambiguous language chosen by Parliament and that language drives the conclusion that the relevant date to consider in this case is 4 October 2013 being both the date of the Applicant's termination of employment and the date of the notification to her of that termination. I am clearly not at liberty to look to an earlier date such as the date immediately prior to the commencement of the administration.
Thus, the critical conclusion is that the case turns on whether Auto Tuft was a small business employer on 4 October 2013.
The Respondent argued that the Tribunal went on to find that on 4 October 2013, Ms Mi's former employer was a small business employer because it employed only five employees on that date. Accordingly, the Tribunal concluded that Ms Mi did not have an entitlement to redundancy pay under section 119 of the FW Act, and therefore was not entitled to an advance on account of redundancy pay under the FEG Act.
The Respondent also referred the Tribunal to the matter of Gayed and Secretary, Department of Jobs and Small Business [2019] AATA 1132 (“Gayed”). Mr Gayed's employment with his former employer was terminated without notice on 11 October 2016. The Respondent contended before the Tribunal that Mr Gayed inferred that his last day with his former employer should be taken as 25 September 2016, when most staff were terminated, rather than on 11 October 2016. The Tribunal found that his employment was terminated by his former employer on 11 October 2016; and that his former employer was a small business employer at that time as it employed five employees. The Tribunal determined at [38] that:
Mr Gayed was therefore not entitled to redundancy pay under the FW Act, and was not entitled to an advance on account of redundancy pay under the FEG Act.
The Respondent then referred the Tribunal to the matter of Kable and Secretary, Attorney-General's Department [2019] AATA 3963 (“Kable”), where Mrs Kable's employment had been terminated without prior notice on 10 August 2017. The Respondent noted Mrs Kable’s contention that the Tribunal should assess whether her former employer was a small business employer as at 7 July 2017, when the company became unable to continue paying wages. The Tribunal stated at [37]:
The applicant feels that this outcome is unfair and that she is being penalised for her loyalty and empathy which led her to stay on longer than other employees. The applicant contends the date that should be taken into account, for the purposes of determining her FEG entitlements, is 7 July 2017. Unfortunately, the Tribunal has no discretion in this situation. The applicant continued to perform duties until her employment ended on 10 August 2017. Her other FEG entitlements have been calculated to reflect this reality. There is no scope for the Tribunal to determine that a date should be used to calculate benefits which is different from the actual date of the applicant's termination. Consequently, the decision under review must be affirmed.
The Respondent then referred the Tribunal to the matter of Yeo and Secretary, Attorney-General's Department [2020] AATA 117 (“Yeo”), where Mr Yeo's employment had been terminated by one of the Receivers and Managers appointed to his former employer on 25 January 2018. The Respondent noted that on that day, Mr Yeo had received written notice of termination in accordance with section 117(1) of the FW Act. However, Mr Yeo contended that the Tribunal should assess whether his former employer was a small business employer in November 2017, when he was given an oral notice by the former managing director that his employment would end in early March 2018. The Tribunal's reasons state at [19]-[20]:
I accept that in November 2017 Mr Yeo was, in effect, orally informed that his employment with Castel would terminate sometime in early March 2018. I do not accept, however, that his being so informed bears upon the time by reference to which the applicability of the small business exception is, in the circumstances, required to be assessed.
The meaning of the language of the relevant FWA provisions is unambiguous. Given that meaning, what occurred in November 2017 did not constitute the giving of notice of Mr Yeo's termination of employment” as described in" s 117(1) of the FWA. There “... is no scope for the Tribunal to determine that a date should be used to calculate benefits which is different from the actual date of the applicant's termination.”
The Respondent contended that this was the Tribunal’s conclusion as Mr Yeo's former employer employed only 14 employees on 25 January 2018. This meant that Mr Yeo’s former employer was a small business employer on that date, and as such, the Tribunal decided that it was correct to calculate the amount of the advance made to Mr Yeo under the FEG Act without regard to any entitlement to redundancy pay.
The Respondent then referred the Tribunal to the matter of Bower and Secretary, Attorney-General's Department [2020] AATA 4353 (“Bower”). Mrs Bower's employment with her former employer was terminated on 19 July 2019. The Respondent contended that Mrs Bower received a written notice of termination in accordance with section 117(1) of the FW Act on 16 July 2019. Mrs Bower contended that the Tribunal should assess whether her former employer was a small business employer on 5 July 2019 since it was on this day that she was verbally notified that the business would cease working on 12 July 2019, and a number of other employees were terminated. The Tribunal's reasons state at [17]-[18] and [21]:
The applicant was given notice of termination on 16 July 2019 and her employment ceased on 19 July 2019. The employment of her erstwhile fellow employees had ceased a week or two before that. As at 16 July 2019 and as at 19 July 2019 the company for which she was working, Ontime Management, and the other companies in the Ontime Group had a total of less than 15 employees. Therefore, both the company which employed her and the Ontime Group did fall within the definition of "small business employer".
It would be convenient to stretch the meaning of the word "immediately" in s 121(1) back to when the other employees were given notices of termination but that is a step too far.
…
The decision under review is affirmed.
The Respondent argued that on an application of those principles to this case’s facts Mrs Elsadat does not have a redundancy pay entitlement, as Paragraph 121(1)(b) of the FW Act provides that section 119 of that Act will not apply to the termination of the Applicant's employment if Waratah Group was a small business employer:
·immediately before the time of the termination; or
·at the time when the Applicant was given notice of the termination as described in section 117(1), whichever happened first.
The Respondent argued that the evidence demonstrates that on 29 November 2019, Waratah Group employed only two employees, including Mrs Elsadat. And therefore, based on this evidence, the Tribunal should find that Waratah Group was a small business employer on 29 November 2019.
The Respondent noted that the following evidence supported their contention Mrs Elsadat had no right to an advance of redundancy under FEG:
·Mrs Elsadat had stated in her FEG claim form that her employment with Waratah Group was terminated on 29 November 2019, and she was not given prior notice of her termination before her last day of work. However, in her Statement of Issues, she states that all staff were verbally informed that their employment was terminated on 12 November 2019.
·Mrs Elsadat had also provided a letter from Shane Leslie Deane dated 18 December 2020, which confirms that on 12 November 2019, 'Nicholas Giasoumi verbally confirmed the termination of all employees during his attendances at the offices of the company including the Laverton office'. However, the insolvency practitioner confirmed Mrs Elsadat’s employment was terminated on 29 November 2019. There was no information to indicate that she had received prior written notice regarding the day of her termination.
·The delegate was satisfied that Mrs Elsadat employment with Waratah Group ended on 29 November 2019; and that at that time, Waratah Group had fewer than 15 employees. This was based on supporting information and documents, including:
oinformation provided by the insolvency practitioner that the Applicant's employment ended on 29 November 2019;
othe absence of any information to indicate that the Applicant received prior written notice of the day of the termination; and
oinformation provided by the insolvency practitioner that on 29 November 2019, Waratah Group and any associated entities employed fewer than 15 employees.
The Respondent contended that section 117(1) of the FW Act requires an employer to give an employee written notice of the day of the termination (which cannot be before the day the notice is given). The Respondent also argued that the evidence from the insolvency practitioner shows that Mrs Elsadat’s date of termination was 29 November 2019. There was no evidence that the Mrs Elsadat received written notice of which date her employment with Waratah Group would be terminated prior to 29 November 2019. Mrs Elsadat was therefore not given notice of her termination 'as described in' section 117(1) of the FW Act before 29 November 2019.
The Respondent contended that since Mrs Elsadat was given notice of the day of termination on the same day as her employment was terminated, it follows that the Tribunal must consider whether Waratah Group was a small business employer on 29 November 2019. The Respondent argued that, pursuant to section 23 of the FW Act, Waratah Group was a small business employer on 29 November 2019 if it employed fewer than 15 employees at that time. In summary, section 23 relevantly provides that for the purpose of calculating the number of employees at a particular time:
·all employees employed by Waratah Group at that time are to be counted;
·casual employees are not to be counted unless they had been employed by Waratah Group on a regular and systematic basis at the time;
·associated entities are taken to be one entity;
·the Applicant is to be included in the count; and
·any other employee whose employment is also 'being terminated' is to be counted. The use of the present continuous tense is a clear indicator that employees whose employment had already been terminated before 29 November 2019 are not to be included in the count.
The Respondent contended that, as with various other Tribunal decisions, including Mi, Gayed, Kable, Yeo and Bower, the Tribunal is not permitted to apply the small business employer exclusion at the time the Applicant was given a verbal notice of termination. As such, the Tribunal cannot accept Mrs Elsadat’s contention that her termination date should be assessed as 12 November 2019, which is the date she alleges that Mr Nicholas Giasoumi verbally terminated the employment of all employees.
The Respondent argued that there is no scope for the Tribunal to determine that a date, which is different from the actual date of Mrs Elsadat’s written notice of termination (and the termination itself), should be used to assess entitlements; noting that her entitlement to payment in lieu of notice had been calculated with reference to that date. Accordingly, The Respondent argued that the Tribunal must confine itself to an assessment of whether Waratah Group was a small business employer on 29 November 2019. Arguing that all of the available evidence supports a finding that the company was a small business employer at that time. As such, the Respondent argued that section 121(1) of the FW Act operates to exclude the application of section 119 of that Act from Mrs Elsadat’s termination of employment. Therefore, Mrs Elsadat should not be entitled to an advance on account of redundancy pay under the FEG Act.
The Respondent noted Mrs Elsadat in her Application for Tribunal Review suggested the circumstances in the Tribunal's decision in the matter of Bullivant and Secretary, Attorney General's Department were factually similar to her own. The Respondent argued the parties in that case accepted that Ms Bullivant was employed under a written contract of employment, which was silent as to redundancy pay; and that at the time immediately before her employment ended, her employer was a small business employer for the purposes of the FW Act. However, the Tribunal accepted Ms Bullivant's evidence that 'she was promised by the insolvency practitioners that if she remained with the company, she would receive her redundancy pay entitlements.' The Tribunal also accepted that in the circumstances of that particular case, 'the agreement provides the basis for a FEG advance in respect of redundancy pay' calculated in accordance with section 119(2) of the FW Act. Ultimately, the Tribunal found that the agreement was not subject to the small business employer exclusion.
The Respondent argued that the facts in Bullivant can be distinguished from those in the present case because there is no evidence of any agreement between Mrs Elsadat and the insolvency practitioners that she would be entitled to redundancy pay. To the contrary, the Respondent argued the liquidators' staff advised the Department that no undertaking or promise was made to Mrs Elsadat that she would be entitled to a redundancy pay.
The Respondent argued Mrs Elsadat’s entitlement to a redundancy pay was governed by the FW Act throughout the course of her employment and always subject to the small business employer exclusion. The Respondent argued that there did not appear to be any changes to the terms and conditions of that entitlement upon the appointment of the Administrators.
CONSIDERATION
The Tribunal considered Mrs Elsadat was rightly aggrieved, as her loyalty to the company and her agreement to assist the insolvency practitioners in the dying days of the business resulted in the loss of her redundancy entitlement.
In summary, Mrs Elsadat has argued that she was entitled to an advance for redundancy under FEG as she had been verbally informed by the liquidators on 12 November 2019 that her services had been terminated. Mrs Elsadat argued that on 12 November 2019 Waratah Group was not a small business, and therefore her governing instrument provided her with an entitlement to redundancy pay on that day. Mrs Elsadat expressed her dismay at the unfairness of a system, which saw her colleagues receive their entitlement to redundancy whilst she did not, especially in light of her willingness to stay on to ensure her colleagues entitlements were calculated appropriately.
However, the Respondent argued that Mrs Elsadat’s date of termination was 29 November 2019, by which time Waratah Group was a small business employer. Accordingly, the small business employer exemption under the FW Act applied to Mrs Elsadat’s termination of employment, whilst the exemption did not apply to other employees who had been terminated on 12 November 2019 when the business had more than 15 employees.
The Tribunal sympathised with Mrs Elsadat’s contention that her situation was unfair, because whilst her former colleagues received their entitlement to redundancy, she had missed receiving a redundancy payment of over $15,959.08, performing work to ensure all her former colleagues received their correct amount of unpaid entitlements. The Tribunal observed, however, that the unfairness may not have arisen as a sole consequence of the operations of the FEG Act or the determination of the delegate.
The Tribunal observed that Mrs Elsadat’s underpayment, in the first instance, was as a consequence of her former employer, Waratah Group, not having sufficient reserves to ensure all staff entitlements could be paid. The situation Mrs Elsadat finds herself in is the direct result of her employer’s lack of foresight and planning. Good businesses surely must ensure that they can pay staff entitlements at all times, regardless of other trading factors. Indeed, an unacceptable by-product of the FEG scheme is that many businesses no longer ensure they have sufficient reserves to cover workers’ entitlements.
Mrs Elsadat’s grievance has arisen as a result of the actions of the insolvency practitioners, since they asked her and one other colleague to work beyond 22 November 2019, to assist them finalise the calculation of staff entitlements for a company they were winding up. The actions of Dye & Co created the perfect storm of turning the business into a small business employer, triggering the objects of section 119 of the FW Act. Dye & Co did so without providing any evidence that the terms and conditions of Mrs Elsadat’s governing instrument had been changed to protect her rights to redundancy pay on their appointment as Administrators; nor did they advise the staff who had agreed to stay on that there may be unintended consequences of doing so.
The Tribunal’s task is to arrive at the correct and preferable decision on the basis of merits review, within the confines of the law governing the determination. The Tribunal, in making a determination of Mrs Elsadat’s eligibility for the inclusion of a redundancy payment to her FEG advance, needed to determine several factors: the date of her termination, the terms in her “governing instrument”, and promises made by the insolvency practitioners to Mrs Elsadat.
Date of Termination
The Tribunal found that whilst Mrs Elsadat was advised verbally by the insolvency practitioners that her services were to be terminated on 12 November 2019 due to the company’s insolvency, her actually date of termination, and her last day of paid employment for the Waratah Group was 29 November 2019. The Tribunal found, as in Mi and Kable, that it had no discretion to look to a date other than Mrs Elsadat’s date of termination, being 12 November 2019. The Tribunal concluded that there was no avenue available for it to determine that the date Mrs Elsadat was advised verbally that her job would be terminated could be utilised to calculate her entitlement under the FEG Act. Indeed, as Mrs Elsadat herself has noted, the insolvency practitioners advised staff they would be notified of their actual last day on a case-by-case basis, to assist with the winding up of the business. The Tribunal concurred with the findings of Senior Member Damien O'Donovan in Kable at [37]:
Unfortunately, the Tribunal has no discretion in this situation. The applicant continued to perform duties until her employment ended on 10 August 2017. Her other FEG entitlements have been calculated to reflect this reality. There is no scope for the Tribunal to determine that a date should be used to calculate benefits which is different from the actual date of the applicant's termination. Consequently, the decision under review must be affirmed.
The Tribunal found Mrs Elsadat continued to perform her duties for Waratah Group as directed by the insolvency practitioners, receive wages, pay income tax and accrue benefits for an additional week after the insolvency practitioners had spoken to staff and after the majority of staff either went to work for Finsbury Green or were terminated.
The Tribunal understood Mrs Elsadat’s confusion around her date of termination, noting that the numerous decisions cited earlier have all grabbled with the notion of the date of termination and immediate effect. Whilst other Members have found the language of the relevant FW Act provisions is unambiguous, this does not address confusion caused to applicants seeking advancement for redundancy under FEG. Where the legislation utilises section 117 of the FW Act to define date of termination, it also deals with payment in lieu of notice if notice is not given. The section does not actually deal with the vexed question of when a business becomes a small business, which is the crux of many applicants’ concern. In the eyes of Mrs Elsadat, this is unfair, especially when they see their colleagues receive an entitlement to redundancy, but they do not. The date of termination and notice of termination are two very different things under the FEG Act. Generally, when an employer goes into receivership, all staff are advised at the same time that they are going to be made redundant, and staff rightly conclude this to be notification of the date of redundancy. This would therefore mean that the staff have met the test as set out in section 117 of the FW Act. However, it is not the employees’ date of termination which is essential to an entitlement to redundancy under FEG, but rather the employees’ last day of paid employment which should be considered. The notion that a staff member can have different rights to their colleagues because of the vagaries of end dates to ostensibly assist insolvency practitioners is, to the mind of the Tribunal, an unfair outcome of the legislation and an issue legislator need to address.
The Tribunal considered that Mrs Elsadat was given oral notice of termination before the actual date of her termination, which is standard practice in many workplaces. However, this notice was advice that all staff would be made redundant in the future, and each would be advised individually when their last day of work was, as was the case for Mrs Elsadat. She continued to do work to assist the insolvency practitioners, then on 29 November 2019, was terminated as she had no more work to perform. This is her date of termination. As other members have found before me, sadly, there is no scope for the Tribunal to determine that a date which is different from the actual date of Mrs Elsadat’s termination should be used to calculate benefits.
The Tribunal noted there may also be some unintended consequences for Mrs Elsadat if her termination date was calculated as at 12 November 2019 instead of 29 November 2019. This is because her FEG advance would need to be recalculated to reduce her leave entitlement and payment in lieu of notice, as these could not be accruing if she had already been terminated.
The Tribunal therefore found that Mrs Elsadat’s employment was terminated on 29 November 2019; at which time Waratah Group was a small business employer.
Governing Instrument
The Tribunal must next consider Mrs Elsadat’s “governing instrument”. The correlation between the governing instrument and the finding Mrs Elsadat was employed by a small business at the time of termination, is that section 121 of the FW Act operates to exclude the application of section 119 of the FW Act. As such, Mrs Elsadat would not be entitled to an advance on account of redundancy pay under the FEG Act, as her Employment Agreement clearly stated: In the event of your position being made redundant, your entitlements will be in accordance with the Fair Work Act 2009.
Mrs Elsadat did not dispute the terms of her employment agreement, only commenting that as a new arrival in Australia at the time she accepted the terms of her employment agreement with Waratah Group, she was not aware that her redundancy entitlements would be impacted if her employer became a small business employer.
The Tribunal found Mrs Elsadat’s employment agreement provided her redundancy entitlements as governed by the FW Act. As such, she had no right to an advance on account of redundancy pay under the FEG Act as her employer was a small business at the time of her termination.
Promises made by the insolvency practitioners
In light of the recent determination in Bullivant, which Mrs Elsadat has referred to as analogous to her situation, and the Tribunal’s recent determination in Fink and Secretary, Attorney-General's Department [2021] AATA 734 (“Fink”), the Tribunal considered the promises made by the insolvency practitioner to employees of Waratah Group in respect of the redundancy entitlements.
The Tribunal considered the following:
Mrs Elsadat advised:
There was a verbal agreement between myself and the insolvency practitioner Nicholas Giasoumi that my redundancy entitlement would be paid as it was for my colleagues, regardless of when I finished working.
During the course of my working for the company after the administrators were appointed I had several discussions and received other communications from them that amounted to an agreement with the company that I would be paid my redundancy entitlements regardless of when I finished working for Waratah Group. The effect of this agreement would be to modify the employment instrument (employment contract) to exclude the operation of the small business employer exception, because it will not apply where there is an agreement that redundancy payments will be made. Shortly after their appointment I was asked by the insolvency practitioner to stay on board to calculate the unpaid superannuation for several quarters for all employees as well as calculation of all entitlements of all employees. At first we were told they were assessing options but soon it became apparent that the business would not be sold as a whole which we were told on 12 November. I had several discussions with the Administrator and his staff and at no time was it ever discussed with me that I would not be entitled to a redundancy by being one of the last two to finish their work at the company. I had expected to be on the final list to finish up because of the nature of my job which was assisting the Administrators to exit all staff and pay them correctly. At no time was it discussed with me that I will not be paid any redundancy in the event that the number of employees decrease to less than 15 and I was never warned that this was potentially the impact of the wind-down.
We (all employees) were assured that if we stay on till our final day to finish work we would be entitled to all our entitlements of leave, notice and redundancy We were also told if we choose to resign or leave earlier, which we were free to do, then we will not be entitled to a redundancy payment. I believe that most people continued to work just to ensure they could receive their redundancy as this was the only difference in the entitlements they would be paid if we chose to resign rather than wait till we are informed of our termination and last day to finish work. I remember most employees came to work and did nothing as there was no work to be done, in fear of losing their redundancy. Although I was personally asked to stay on till the final day to finish the work and that I should be expecting to be one of the last employees, I did so on the basis that my full entitlements would be payable, and I was never told otherwise. In the letter dated 3rd December from the insolvency practitioner, it referred to my earlier termination (although no date of termination was included) and it was indicated that I was entitled to redundancy pay of $15,959.08. I understood the effect of the various requests from the Administrator to continue to work, the verbal addresses to staff generally and to me specifically plus the effect of this letter, as amounting to an assurance that I would be entitled to a redundancy payment, as a modification or an extension of my contract with Waratah group with the amount of $15,959.08 owing. I assume that the insolvency practitioner would have known the impact of section 121 (1) (b) and never raised or discussed that with me, on the contrary we were always assured that if we stay till the end we will get our redundancy.
The insolvency practitioners advised the following:
·The administrators are thankful for the support obtained during the administration to continue to deal with the company and open trade accounts. This made it possible to continue to trade to meet the objects of the Voluntary Administration to maximise the chances of the company, or as much as possible of its business, continuing existence, and to maximise the realisable value of the equity in the Work in Progress.
·We advise that on 6 November 2019 Nicholas Giasoumi and Shane Leslie Deane were appointed Joint and Several Administrators of the Company pursuant to section 436A of the Corporations Act 2001.
We note that your employment with the company has been terminated.
We also advise that you are disclosed as a preferential creditor in respect of the following amounts:
Unpaid wages 886.62
Annual leave 9135.95
Leave loading 0.00
Payment in lieu of notice 7979.54
Redundancy 15,959.08
Long Service Leave 0.00
$33961.19
We further advise that the company will not have sufficient funds to enable the payment of your employee entitlements within the next three months, if at all.
·I note your advice that a small business is not required to provide redundancy when it employs fewer than 15 employees.
I also note that on 22 November 2019 I terminated more than fifteen (15) employees with only two (2) employees remaining after this date, one being …. and the other being Sama Elsadat.
As a result of the above, you have determined that the above two (2) employees are no longer entitled to redundancy as there was less than fifteen employees at the time of their termination.
In these circumstances, FEG’s application of the FW Act appears egregious in nature.
All employees were notified from the start of my appointment as Joint and Several Administrator that the company would eventually cease trading and that their employment would eventually be terminated.
The company ceased to trade on 22 November 2019. The work conducted by the above two (2) employees after this date was to assist with the administration of the company, rather than the trading of the company, as the work conducted by them related to employee entitlements and debtors. Furthermore, upon nearing the company ceasing to trade both employees were on notice that their employment would be ending shortly and neither employee was employed more than approximately one and a half weeks after the company ceased trading.
I advise that the company was not a small business throughout its life and it should not be treated as such before it is placed into liquidation.
I advise the employees are entitled to redundancy.
·I advise that all staff were verbally advised on 6 November 2019 that the company would be ceasing and that their employment services are terminated with a finish date to be advised dependant on job description, requirements and workflow.
I confirm that on 12 November 2019, Nicholas Giasoumi verbally confirmed the termination of all employees during his attendances at the offices of the company including the Laverton office
The Respondent contended that a file note from the FEG dated 14 September 2020, recorded a telephone conversation with Dye & Co as part of the review into Mrs Elsadat’s claim. The Respondent argues that this conversation clearly indicated that no undertaking had been given to Mrs Elsadat in respect of her redundancy entitlement. The note records:
Outbound call to IP – IP advise that no undertaking was made to employees that they would be paid redundancy – he advised the claimants were sent a letter indicating amounts that the books and records indicated that they were entitled to – he said any redundancy figures were based on the NES and no undertaking was provided to employees that the IP would pay redundancy.
The Tribunal found there was conflicting evidence indicating whether the insolvency practitioner had provided assurances to Mrs Elsadat that her entitlement to redundancy would be protected regardless of her end date. The Tribunal found no probative evidence before it which indicated that any remedial action was taken by the insolvency practitioner to ensure Mrs Elsadat’s Employment Agreement, being her governing instrument, was amended to remove refence to the exclusion of the ‘small business employer’ provision in respect of redundancy.
The Tribunal noted the striking similarities between Mrs Elsadat’s situation and those of Ms Bullivant in Bullivant, where Senior Member P A Fairall, found from [41]:
I am mindful of the strictures contained in the observations of the Full Court in Beezley v Repatriation Commission [2015] FCAFC 165. North, Tracey and Mortimer JJ stated:
In any case before a merits review tribunal (or a first instance decision-maker), a decision can only be made on the basis of relevant and probative material. The material must be probative of the matters for which the statute provides: see Minister for Immigration and Ethnic Affairs v Pochi [1980] FCA 85; 44 FLR 41 per Deane J. If an applicant does not provide evidence and information sufficient to meet the statutory requirements, an applicant is unlikely to have the statutory power exercised in her or his favour. And unless and until a decision-maker is satisfied, or persuaded, that the requirements are met, then no occasion to exercise the power in favour of an applicant arises. In that sense, as a practical matter, it is not incorrect to say that a person “must satisfy” the requirements in the statute. To say that is not to impose an onus of proof on an applicant, but rather to recognise the operation of the legislative scheme under which the person seeks a benefit or interest... (authorities omitted).
It is important to bear in mind the requirement that a decision can only be made on the basis of relevant and probative material.
With that exhortation in mind, I make the following observations on the material before the Tribunal.
It is clear that on 8 September 2016, when administrators were appointed to the Company, it was not a SBE. It had over 50 employees. At that point, the applicant had an undoubted right, if terminated by reason of an insolvency event, to make a claim for a FEG advance in respect of redundancy pay. Given that her contract was silent on redundancy pay, her entitlement to redundancy pay was governed by the FWA.
I am prepared to accept, on the basis of the applicant’s evidence, that discussions took place with the insolvency practitioners shortly after they were appointed on 8 September 2016.
Unfortunately, none of the insolvency practitioners gave evidence about the nature of relevant discussions with employees during the critical period.
The applicant’s recollection was imprecise. She could not say with whom she met or when, or indeed, exactly what was discussed. She was vague on matters of details. She did not diarise the discussions or make any note about them.
It is permissible for the Tribunal to consider all the circumstances of the case in forming a judgment about what understanding, if any, the parties reached in September or October of 2016.
On the basis of the applicant’s evidence, I accept that the applicant was encouraged to stay on, and reassured that her entitlements would be met.
There is nothing in the applicant’s evidence to suggest that the potential impact of section 121(1)(b) was explicitly raised or discussed. But the insolvency practitioners would have known, as an elementary matter, that if an employer is a SBE immediately before an employee receives a notice of termination, then section 121(1)(b) of the FWA will generally defeat a FEG redundancy claim. It does not matter if the employer was once a large employer and became an SBE during the course of administration.
I note that, until 17 October 2016, when the Company became a SBE, the applicant had a clear right under the FEG to claim an advance on account of redundancy pay if she was terminated by reason of an insolvency event. There is no evidence that, in the discussions about “staying on”, either the applicant or the insolvency practitioners referred explicitly to what the position would be if the company became a SBE by reason of a drop off of staffing levels. The applicant did not recall any such conversation. But given that any discussion about future staffing took place within the context of a staffing reduction program, it is open to infer that this was within the contemplation of the insolvency practitioners.
The evidentiary significance of the liquidator’s letter of 19 September 2018
Is the letter evidence of an agreement of the kind suggested by the applicant, formed in the week’s prior to her termination on 31 October 2016? On one hand, it suggests no more than this, that the liquidator, looking back, simply assumed that the applicant’s entitlements were governed by the FWA, and did not consider the implications of section 121(1)(b) of the FWA. In essence, this is the proposition put by the respondent’ solicitor in written submissions.[17]
However, it does not follow from this that the insolvency practitioners, at the time they discussed the possibility of staying on with the applicant, and with other employees, overlooked a matter as vital to the applicant as the status of the employer company. I would be reluctant to make such a finding.
Where an insolvency practitioner undertakes to specific employees that, in return for ongoing service their entitlements to redundancy pay will be protected (whether or not the employer becomes a SBE), section 121(1)(b) of the FWA is necessarily excluded from the agreement. Otherwise, a promise along such lines would be dishonest or at the very least negligent. If the Company is, or becomes, an SBE, and the governing instrument for employee entitlements is the FWA, then such an undertaking would be worthless.
To the extent that the applicant did respond to some inducement from the insolvency practitioners, it was on the footing that she would be protected if she was terminated after the company fell below the 15 staff threshold. This would have been an additional benefit not provided for under her existing contract of employment, which simply incorporated the FWA provisions, including the SBE exclusion.
The evidence is sufficient to support the applicant’s claim that the insolvency practitioners gave to the applicant an undertaking to protect her redundancy entitlements if she stayed on.
If the promise was given before 17 October 2016, the present issue does not arise, because the company was not a SBE. If the undertaking was given on or after 17 October 2016, then a fortiori, the promise made would and could not be subject to the small business exclusion. In either case, the governing instrument for determining redundancy pay is the undertaking giving rise to an agreement within section 5 of the FEG Act, and not the FWA.
Although her memory of events was somewhat tainted by the passage of time, the applicant was overall a credible and sincere witness. I accept her evidence that she was promised by the insolvency practitioners that if she remained with the company, she would receive her redundancy pay entitlements. I accept that in the circumstances of this particular case, the agreement provides the basis for a FEG advance in respect of redundancy pay. The basis for calculating that redundancy pay is in accordance with section 119(2) of the FWA, as set out in the Liquidator’s letter of 19 September 2018.
DECISION
The correct or preferable decision is to set aside the reviewable decision made on 6 May 2019, and to remit the matter to the Secretary with the Direction that the applicant is entitled to an advance for redundancy pay calculated in accordance with section 119(2) of the FWA.
The Tribunal has quoted the decision in Bullivant at length to note the similarities in these events. The evidence before the Tribunal was that various actions by the insolvency practitioners led Mrs Elsadat to believe her entitlement to redundancy would be preserved, and indeed, only paid if she stayed until the date she was terminated.
I must respectfully disagree with Senior Member Fairall when he stated at [53]:
However, it does not follow from this that the insolvency practitioners, at the time they discussed the possibility of staying on with the applicant, and with other employees, overlooked a matter as vital to the applicant as the status of the employer company. I would be reluctant to make such a finding.
The Tribunal finds it completely plausible that insolvency practitioners routinely overlook the vital factor of the size of a business, and the impact that this size may have on employee’s rights to redundancy. This is particularly the case when they ask or indeed, as the Tribunal suspects in this matter, direct employees to stay on to assist them in their task of winding down the business. It should be observed that the insolvency practitioner will receive the fees for their services, whilst many employees lose their right to redundancy payments because of this continual oversight by insolvency practitioners.
As in the matter of Bullivant, the Administrators of Waratah Group had advised staff, including Mrs Elsadat, that regardless of their end date, they would be entitled to their redundancy payments. Mrs Elsadat evidence was that staff had been told there would be rolling end dates, based on the skills of individual staff members, and the extent that these skills were required to assist with the winding up of the company. Her evidence also stated that she understood her redundancy entitlement would be preserved at all times if she continued working until she was terminated.
As with Bullivant and the matter of Fink, the insolvency practitioner had provided staff with a termination letter which included an amount for redundancy. Mrs Elsadat, like the applicant in Fink, had an employment agreement which included a reference to redundancy entitlements, whilst Ms Bullivant’s contract was silent in respect of redundancy. In the matter of Bullivant, the Senior Member accepted the Applicant’s word that she had been promised her redundancy entitlements, and on that basis, assumed her employment contract had been altered accordingly without sighting any actual agreement. With Fink, there was no evidence that assurances had been given to staff that their redundancy entitlements had been preserved; nor were their contracts altered to remove any ambiguity in their terms and conditions. In this case, the Tribunal has clear evidence Mrs Elsadat was assured on numerous occasions that her redundancy entitlements would be preserved. However, her employment agreement had not been altered to reflect that assurance.
The Tribunal notes that the Respondent relies on a file note recorded by FEG, of a communication with a staff member of the insolvency practitioners. The Respondents believes that this file note indicates that Dye & Co had not assured Mrs Elsadat that she would receive her entitlement to redundancy. The Tribunal did not read the file note to indicate this. Instead, the Tribunal understood the note to imply that the insolvency practitioners had not undertaken that they would be liable for Mrs Elsadat’s redundancy payments. Given that Mrs Elsadat and one other colleague were indeed undertaking work in their final week to assist Dye & Co with winding up the company, it would not seem far-fetched for Mrs Elsadat to assume that she was employed by the insolvency practitioners at this time, and that they were responsible for her salary and redundancy entitlement, not FEG. However, this was obviously not the case.
The Tribunal accepts that based on the evidence of Mrs Elsadat and the insolvency practitioners, and echoing the finding of Senior Member Fairall at [56] of Bullivant that: “The evidence is sufficient to support the applicant’s claim that the insolvency practitioners gave to the applicant an undertaking to protect her redundancy entitlements if she stayed on.”
Section 6(5) of the FEG Act clearly states that “a 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.” The Tribunal has found that the Mrs Elsadat was terminated on 29 November 2019, at which time Waratah Group was a small business. Furthermore, her Employment Agreement was her governing instrument, which stated at Clause 13: “In the event of your position being made redundant, your entitlements will be in accordance with the Fair Work Act 2009.” Given these facts, the Tribunal would, but for the finding in Bullivant, have found that, in accordance with section 121(1) of the FW Act, the employees terminated are excluded from the application of section 119 of that Act, as they were employed by a small business employer. As such, the Tribunal would have concluded that Mrs Elsadat was not entitled to an advance on account of redundancy pay under the FEG Act.
However, the Tribunal has found, as Senior Member Fairall did in Bullivant, that Mrs Elsadat’s entitlements to redundancy had been assured by the insolvency practitioners if she stayed on to assist them in winding down the company. The Tribunal has found further that this undertaking overrode Mrs Elsadat’s employment contract; and she was therefore, entitled to an advance on account of redundancy pay under the FEG Act.
DECISION
The correct or preferable decision is to set aside the reviewable decision made on 12 August 2020, and to remit the matter to the Secretary, with the Direction that the Applicant is entitled to an advance for redundancy pay, calculated in accordance with section 119(2) of the FWA. The Tribunal decides accordingly.
I certify that the preceding 84 (eighty-four) paragraphs are a true copy of the reasons for the decision herein of Ms A E Burke AO, Member
...........[sgd].............................................................
Associate
Dated: 5 July 2021
Date of hearing: 29 March 2021 Applicant: Self-Represented Solicitors for the Respondent: Ms Cooke, HWL Ebsworth Lawyers
0
12
0