Leeton Kitchens & Cabinets

[2018] FWC 2493

[2018] FWC 2493

FAIR WORK COMMISSION

DECISION

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

Leeton Kitchens & Cabinets
(C2018/875)

Building services
COMMISSIONER CAMBRIDGE	SYDNEY, 15 MAY 2018

Variation of redundancy pay.

[1] This Decision is made in respect of an application taken under s. 120 of the Fair Work Act 2009 (the Act). The application was made by Leeton Kitchens & Cabinets (ABN: 76 431 003 391) (the employer). The application was lodged with the Fair Work Commission (the Commission) at Sydney on 14 February 2018.

[2] The application seeks a determination of the Commission to reduce the amount of redundancy pay that would otherwise represent an entitlement derived from s. 119 of the Act and payable to Andrew Joseph Violi (the employee). The application seeks to reduce the employee’s redundancy entitlement from 8 weeks to 1 weeks’ pay. The reduction to the employee’s redundancy entitlement has been advanced on the basis that the employer is not able to pay the full redundancy entitlement of 8 weeks.

[3] On 8 March 2018, the matter was the subject of a Mention and Directions proceeding conducted by the Commission via telephone. At the proceedings held on 8 March, Mr Steven Lashbrook and Mr Graham Lashbrook, two proprietors of the employer, represented the employer, and the employee represented himself. During the proceedings held on 8 March, it became apparent that there was potentially little contest in the factual circumstances that gave rise to the application.

[4] In the circumstances, the Commission issued Directions for the Parties to file and serve their respective documentary cases in accordance with a timetable that concluded with the Parties providing advice as to whether either Party sought a Hearing of the matter, or alternatively, if the respective Parties were content for the matter to be determined upon the filed documentary material. The Parties filed documentary material in accordance with the timetable, and on 27 April 2018, each of the Parties indicated their respective position regarding any requirement for a Hearing. The employer did not believe that a Hearing was required, as it sought to avoid the costs and time away from work, and it was content for the matter to be determined upon the filed documentary material. Conversely, the employee stated that he would “welcome a formal Hearing.”

[5] Upon examination of the filed material I have decided that a Hearing would be unnecessary and it would cause avoidable cost and inconvenience particularly to the employer. In the absence of significant contest or complexity the matter can be determined by analysis and consideration of the filed documentary material that has been provided by both Parties.

Relevant Factual Circumstances

[6] The employment of the employee ceased on 22 December 2017. The employer had provided the employee with an extended notice period of seven weeks rather than the three weeks period stipulated as the minimum notice period in s. 117 of the Act. The employer provided the extended notice period as a deliberate attempt to assist the employee.

[7] Initially the employer mistakenly believed that the employee was not entitled to any redundancy pay. However, following examination of the relevant provisions of Division 11 of Part 2-2 of the Act, and the terms of the Modern Award which covered the employment of the employee, the Joinery and Building Trades Award 2010 (MA 000029), the employer came to the realisation that the employee was entitled to redundancy pay. Consequently, there was no dispute that the employee was entitled to a payment equivalent to 8 weeks remuneration derived as redundancy pay pursuant to s. 119 of the Act.

[8] Upon recognition by the employer of the employee’s entitlement to redundancy pay, the employer made the application under s. 120 of the Act, seeking to have that amount reduced from 8 weeks to one.

Consideration

[9] In this instance the application made by the employer to have the Commission make a determination to reduce the redundancy pay which the employee was entitled to receive under s. 119 of the Act, was advanced on the basis that the employer was not able to pay the full redundancy entitlement. Consequently, the matter for determination by the Commission involves the question as to whether the employer has established incapacity to pay the full redundancy entitlement.

[10] Established incapacity to pay is one basis for variation of redundancy pay provided for in s. 120 of the Act. Section 120 of the Act is in the following terms:

“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.”

[11] Consequently, the application in this instance has been made on the basis that there is satisfaction of subsection 120 (1) (b) (ii) of the Act. In this regard, the onus is on the employer to prove that it cannot pay the amount of redundancy pay to which the employee is entitled to under s. 119 of the Act.

[12] The employer provided documentary submissions which it said demonstrated that it did not have the financial means to pay the full redundancy entitlement to the employee. The submissions made by the employer attached various financial documents (the financial documents) which were prepared by the employer’s accountants, the firm of Bancrofts who are Certified Practising Accountants. The financial documents provided by Bancrofts included trading accounts summaries, profit and loss statements, and balance sheets for the year ending 30 June 2016, together with comparative data for the FY 2015. The employer requested that the financial documents remain confidential.

[13] The Commission has examined the financial documents and considered all of the submissions and other material provided by the employer. Without revealing the detail of the financial position of the employer, the financial documents confirm that the employer has experienced and continues to face, certain financial difficulties. However, the financial documents and all other material provided by the employer has not established that the employer cannot pay the full redundancy amount. In particular, it is relevant to note the following extract from a statement made by Bancrofts dated 23 March 2018:

“I believe that the partnership has been under financial hardship and payment of redundancy would aggravate the situation. Payment of redundancy by instalment would help ease the financial burden.”

[14] This statement and the accompanying financial documents confirm that it is not the case that the employer cannot pay the redundancy amount to which the employee is entitled. It is clear that payment of the full entitlement by instalment, something to which the employee indicated his agreement, may have represented a reasonable and sensible accommodation of the employer’s financial circumstances. However, subsection 120 (2) of the Act provides that the Commission may determine that the amount of redundancy pay is reduced to a specified amount. The Act does not provide for the Commission to vary redundancy pay in any manner other than that prescribed by subsection 120 (2).

[15] Consequently, the Commission does not have the power to determine payment of a redundancy entitlement by way of instalments. The Commission is constrained to make a determination that reduces the redundancy pay to a specified amount and it can only do so in circumstances where it has been established that the employer cannot pay the amount (or if the employer obtains other acceptable employment for the employee).

[16] In this case, the employer has not established that it cannot pay the redundancy entitlement of the employee. The employer will no doubt have difficulty in making that payment, and it is to some extent regrettable that the Commission does not have the power to make a determination that would involve payment of that amount by way of instalments. However, there has been a significant delay since the termination of the employment, and this delay would provide some alleviation of the impact of payment on the financial position of the employer.

[17] In conclusion, the employer has not established that it cannot pay the full amount of the redundancy entitlement due to the employee. Therefore the application has not satisfied the requirements of subsection 120 (1) (b) (ii) of the Act. The employee is entitled to the full redundancy pay equivalent to 8 weeks remuneration, and the Commission is not empowered to provide for payment of that amount by way of instalments.

[18] The application has not satisfied the requirements of subsection 120 (1) (b) (ii) of the Act and the application is dismissed accordingly. An Order dismissing the application will be issued separately.

COMMISSIONER

Final written submissions:

Employer: 28 March 2018 and 26 April 2018.

Employee: 18 April 2018.

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