Fisher & Lindsay Pty Ltd T/A Child's Play Early Learning Centre

[2015] FWC 6658

[2015] FWC 6658

FAIR WORK COMMISSION

DECISION

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

Fisher & Lindsay Pty Ltd T/A Child's Play Early Learning Centre
(C2015/4641)

COMMISSIONER WILSON MELBOURNE, 29 SEPTEMBER 2015

Variation of redundancy pay.

[1] Fisher & Lindsay Pty Ltd T/A Child’s Play Early Learning Centre has made an application to the Fair Work Commission for a variation to the redundancy pay to be paid to a former employee, Ms Linda Bergman.

[2] The material before me shows that Ms Bergman worked with the Child’s Play Early Learning Centre as the Centre Cook, being formally employed as a Children’s Services Support Worker, within the terms of the Children’s Services Award 2010. 1 Whereas the application refers to Ms Bergman being employed for 1 year and 6 months, other material before me suggests that is incorrect, with the later material submitted by the Child’s Play Early Learning Centre showing that Ms Bergman commenced employment on 29 May 2011, but signing a contract of employment that is dated 6 January 2014.

[3] From this material, I am satisfied that Ms Bergman has most likely completed more than 4 years and less than 5 years employment with Child’s Play Early Learning Centre.

[4] The applications are made pursuant to s.120 of the Fair Work Act 2009 (the Act), which provides the following;

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

(1) This section applies if:

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

(b) the employer:

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

(ii) cannot pay the amount.

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

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

[5] Child’s Play Early Learning Centre submission is that it cannot afford to make a redundancy payments to Ms Bergman, since the “[b]usiness is currently suspended from operation”. The company has not obtained other acceptable employment for Ms Bergman.

[6] Whereas the business had an unspecified number of other employees, it has not made a redundancy variation application in relation to those employees, and I do not have material before me about what has happened to those employees, or whether they have been paid redundancy payments, if in fact they were entitled to them.

[7] The reason for the application being made is that the SA Government regulator, the Registration and Standards Board of South Australia, suspended the operating license of the centre for 45 days until 7 August 2015. Suspension of the license left the Centre with no choice than to cease trading. That in turn led it to terminate the services of Ms Bergman.

Consideration

[8] Having been employed by Child’s Play Early Learning Centre for more than 4 years and less than 5 years employment, Ms Bergman would be entitled to a redundancy payment of 8 weeks pay. 2 The contract of employment signed by the parties in 2011 referred to Ms Bergman working a minimum of 15 hours per week. A payslip relating to the pay period ending 28 June 2015 refers to Ms Bergman having worked 16 ordinary hours at the rate of $19.64. The application made by child’s play Early learning Centre refers to Ms Bergman working 20 hours per week at the rate of $19.64 per hour, a total $392.80 per week. On the assumption that Ms Bergman’s usual working hours were in the order of 20 per week, the redundancy pay due to Ms Bergman would be $3142.40

[9] The material submitted by the Applicant in the course of proceedings before me included a Profit and Loss Statement for the period July 2014 to June 2015, and a Balance Sheet as at June 2015. Both are unaudited.

[10] The Profit and Loss Statement refers to Child’s Play Early learning Centre making an operating loss of $1,811 for the Financial Year 2015, after adjustments for Federal and State Government grants. The most significant expense faced by the Centre was for wages and superannuation, totalling $270,932. That amount is about 62% of the overall fees charged by the Centre which were $435,202. The Balance Sheet shows Net Assets of $34,691, after taking account of trading liabilities and approximately $55,000 attributable to payroll liabilities and superannuation liabilities.

[11] The Commission has previously noted that the operation of s.120 does not just reduce an obligation on an employer to pay redundancy pay, but it also has the effect of reducing the employee’s entitlement to that payment, meaning that the employee cannot enforce the payment through any other means. 3

[12] In considering this matter, I take into account an earlier decision of the Commission on the subject of a reduction of redundancy pay for reason of incapacity to pay, in which the following observations were made;

“[20] In PYL Nominees Pty Ltd as Trustee of the Lesina Family Trust t/as Mundi Clothing Co Rafaelli C rejected an application by PYL Nominees to reduce the amount of redundancy pay to nil based on incapacity of the employer to pay. Rafaelli C found:

[28] I accept that Mundi faces financial difficulties. However, I also note the following:

- the possibility that Mundi is or will be insolvent and the effect that any order may have on the status of employees as potential creditors;

- the impact of any order on the employees rights under GEERS;

- the fact that reducing the entitlements of these employees will have no beneficial effect on other employees. This is not a case where reducing the payments to some, may enhance the prospects of other employees being able to remain in employment;

- the service of the employees and their relatively low level of remuneration.

[21] After considering all of the material before him, Rafaelli C ‘decided in all of the circumstances to give greater weight to the predicament of the employees.” 4 (references omitted)

[13] Further, it is accepted that granting this application would require an exercise of discretion on the part of the Commission.

[14] Having considered the circumstances of Child’s Play Early Learning Centre including the financial material provided to me, and Ms Bergman’s circumstances, I am not persuaded that the Commission’s discretion should be exercised on this occasion.

[15] The financial material provided to me by the Applicant shows that, at least at June 2015, the Centre had available to it financial resources of some scale, albeit rather modest. While there are pressures evident within the Profit and Loss Statement and the Balance Sheet, the potential payment of a redundancy benefit to Ms Bergman does not appear to push the Applicant’s financial circumstances to a wholly new or unexpected situation. In all likelihood, the requirement to pay redundancy pay to Ms Bergman would equate to slightly less than 10% of the overall Net Assets of the business.

[16] While plainly the circumstance in which Child’s Play Early Learning Centre found itself of having its operating licence suspended by the South Australian regulator is very significant it is, nonetheless, an externality which would have a much greater effect on the business than the requirement to make payment of the redundancy pay. That is, the fact that the operating licence was suspended, was the dominant factor to which the company needed to respond. A consequence of that was no doubt the dismissal of Ms Bergman. However it would appear on the basis of the material before me that a requirement to make a redundancy payment to her would not put the business in a materially worse position than it was already in.

[17] For Ms Bergman’s part, she has unexpectedly found herself dismissed after more than 4 years service, with the consequence that she has lost the opportunity to earn income. At such time as she gains further employment, she will not have the benefit, for some time at least, of accrued leave, or the continuous service that would otherwise build an eventual entitlement to long service leave.

[18] The evidence before me does not disclose that there is no capacity to pay Ms Bergman the redundancy pay that she would otherwise be due. In addition, there is no evidence that an exercise of discretion to reduce Ms Bergman’s redundancy pay to nil would enhance the prospect of other employees being able to remain in employment.

[19] Accordingly I find that the application must be refused.

[20] An Order consistent with the foregoing will be issued at the same time as this decision.

COMMISSIONER

 1   MA000120

 2   Fair Work Act 2009, s.119; Children’s Services Award 2010, cl.12

 3   Moltoni Waste Management v P Fairs and others[2012] FWA 5590, at [18]

 4   Ibid, at [20] – [21]

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