Eudunda Community Children's Centre Inc

[2013] FWC 5552

[2013] FWC 5552

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.120 - Application to vary redundancy pay for other employment or incapacity to pay

Eudunda Community Children's Centre Inc
(C2013/5052)

Children's services
COMMISSIONER STEEL	ADELAIDE, 9 AUGUST 2013

Application for variation of redundancy pay.

[1] This decision is issued for expedition and at the request of the applicant. It was completed without transcript but from the member’s notes. The Commission reserves the right to issue further reasons if required.

[2] The Eudunda Community Children's Centre Inc (ECCC) made application pursuant to s.120 of the Fair Work Act 2009 for variation of redundancy pay filed on the 9 July 2013. This matter is a second application by the applicant for relief of the liability to make redundancy payments to their ex-employees on the closure of their facility and an incapacity to pay such provisions.

[3] The first application was dismissed by Hampton C in decision of 26 June 2013 on the basis of no reasonable prospect of success of the application in the absence of any desire by the applicant to pursue the matter. 1

[4] In this matter the applicant represented by Ms Judy Partington submitted that the ECCC was financially unviable and had subsequently closed making its employees redundant. The former employees have subsequently received all other employee provisions with the exception of “redundancy pay provisions”. The centre has further settled all debts with creditors with the exception of the Regional Council of Goyder (RCG), which holds a mortgage or loan on the ECCC building. The ECCC has been involved in a process of surrendering the building asset to the RCG to settle that debt. The ECCC has no unfettered assets or cash reserves to meet the employees’ redundancy pay and no prospect of meeting such a claim. On the occasion of the transfer of the building asset to the RCG, the ECCC shall voluntarily wind itself up as a registered association. On this basis the applicant seeks that their liability for such redundancy pay be varied and extinguished by the Commission.

[5] Ms Rachel Meinhardt appeared as a former employee representing herself and Ms Larissa Harrison of United Voice appeared representing her membership. Both objected to the application.

[6] Ms Meinhardt would have a claim to an amount in excess of $5,241 for redundancy pay. She acknowledged the reasons for closure of the business and its effect in that she had no access to the federal government “GEERS Scheme” as the employer was not insolvent. If the application was granted and the redundancy pay liability extinguished, the affected employees would still have no access to the “GEERS Scheme” even if the employer ultimately declared itself insolvent.

[7] Ms Harrison submitted that the application was not in the public interest and that it provided no advantage to the employer, save that it obviated the need to declare insolvency. Ms Harrison also submitted that it was not in the employee’s interests to grant the application as it would deny them access to the “GEERS Scheme” and they derived no benefit from such a decision. In fact it was prejudicial to the employees as their claims for their right to redundancy pay would be extinguished.

[8] The Commission had the benefit of public information as to the deliberations of the RCG on this matter and a letter from the RCG to the ECC of 1 August 2013. The letter of 1 August 2013 indicated the debt owing to the RCG was $193,270.61 as of 31 July 2013.

[9] The documents accessed also included RCG Ordinary Meeting of Council minutes and attachments for the 16 July 2013 which itemised the following:

• The process of the purchase of the ECCC building was continuing.



• The ECCC board had agreed to a RCG resolution to sell the ECCC building to the RCG as is (walk in walk out) for an amount equal to the amount of the ECCC debt and the winding up of the ECCC with the assistance of the RCG.



• The RCG had engaged lawyers to assist them in that process.



• The ECCC had advised the RCG of a potential cost in terms of claimed redundancy payments of employees that were not envisaged in previous discussions.



• The RCG was aware the ECC was applying to the Fair Work Commission for variation of those redundancy pay entitlements.



• Discussions were to continue on the purchase on the 15 July 2013.

[10] Hence the assets of the ECCC were not sold or transferred as of the 16 July 2013.

[11] The legal advice to the council dated 14 June 2013 indicates as follows:

• The transaction contemplated required the ECCC to not be insolvent.



• The purchase by the RCG will clear the loan and pay out the other creditors of the ECCC in full.



• The Council would pay to the RCG an amount that covers the outstanding loan repayments and the outstanding payments to creditors, such as employees’ entitlements.



• Following settlement the ECCC do all things necessary to voluntarily wind itself up.



• It is noted that if any creditor of ECCC applies for the ECCC to be wound up, the voluntarily wind up by ECCC cannot proceed. By inference, the intended transaction may then be peripheral to the court action by creditors.

[12] Lastly, a further minute indicates that the RGC has contemplated a lease to a new tenant of the ECCC building after it is transferred to their possession, indicating a viable return in regard to the loan settlement amount.

Consideration

[13] The Commission has considered all the material available in this matter and has concluded that all parties have acted without malicious intent, but in regard to their prudential requirements as officers and board members.

[14] It is clear that the intention to sell the ECCC building to the RCG has been an ongoing strategy to remove the debt of the ECCC and to return a viable asset to the community. It seems also that the employee provisions were considered at some earlier time to be met within such a transaction; however the applicability of a redundancy pay for employees was not contemplated.

[15] When it was realised that such benefits were identified the strategy has not been altered to address those items save that the ECCC is making this application to have that liability extinguished.

[16] Given that the parties are still in discussion as to the eventual sale of the building and those discussions did contemplate employee entitlements previously as well as the existence of this application, the Commission considers it is premature of the applicant to submit that it cannot meet the redundancy pay due to former employees.

[17] Further the Commission identifies in the above information a potential benefit to the applicant in that it removes the remaining debt provision and hence the potential issue of insolvency, which it is at pains to avoid in its discussions and strategy with the RCG.

[18] In contrast the absence of insolvency by the ECCC excludes the concerned employees from access to the “GEERS Scheme” and this application if granted may ultimately extinguish their right to redundancy pay from any realised assets of the ECCC or the “GEERS Scheme.”

[19] For those reasons I decline the application. The employer’s application is hereby dismissed.

COMMISSIONER

Appearances:

Ms J Partington for the applicant

Ms R Meinhardt in person (former employee)

Ms L Harrison for United Voice

Hearing details:

Adelaide

2013:

8 August

 1   [2013] FWC 4095

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