Lewis Plumbing (QLD) Pty Ltd

[2015] FWC 3117

[2015] FWC 3117

FAIR WORK COMMISSION

DECISION

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

Lewis Plumbing (QLD) Pty Ltd
(C2015/2486)

SENIOR DEPUTY PRESIDENT RICHARDS BRISBANE, 5 MAY 2015

Summary: application to vary redundancy pay obligation - employee entitlement under modern award arises where employee ostensibly resigned position - employee entitlement under industry specific scheme in an award - no scope to vary redundancy pay obligation under s.120 of the Act.

[1] The decision concerns an application by Mr Daniel Lewis, the Director of Lewis Plumbing (Qld) Pty Ltd. Mr Lewis’ application was made under s.120 of the Fair Work Act 2009 (“the Act”), and on the basis that the employer was not able to pay the amount of redundancy pay he was ostensibly required to pay under the award. Mr Lewis put the matter this way in his application:

“being a small business with 2 employees, myself and Shaun, paying this redundancy would probably send me bankrupt. Shaun was not made redundant, he resigned to start a new job closer to home. I cannot understand why someone is entitled under this award to be paid a redundancy when they have not been made redundant? I would probably understand if it was myself that made his job redundant – he would be entitled to a redundancy.”

[2] The applicable modern award is the Plumbing and Fire Sprinklers Award 2010 (“the award”). The award provides relevantly for the payment of redundancy pay in the following context:

18. Industry specific redundancy scheme

18.1 The following redundancy clause for the plumbing and fire sprinklers contracting industry is an industry specific redundancy scheme as defined in s.12 of the Act. In accordance with s.123(4)(b) of the Act the provisions of Subdivision B—Redundancy payof Division 11 of the NES do not apply to employers and employees covered by this award.

18.2 Definition

For the purposes of this clause, redundancy means a situation where an employee ceases to be employed by an employer other than for reasons of misconduct or refusal of duty. Redundant has a corresponding meaning.

18.3 Redundancy pay

(a) A redundant employee will receive redundancy/severance payments in respect of all continuous service with the employer, calculated as follows:

Period of continuous service with an employer	Redundancy/severance pay
1 year or more but less than 2 years	2.4 weeks pay plus, for all service in excess of 1 year, 1.75 hours pay per completed week of service up to a maximum of 4.8 weeks’ pay
2 years or more but less than 3 years	4.8 weeks pay plus, for all service in excess of 2 years, 1.6 hours pay per completed week of service up to a maximum of 7 weeks pay
3 years or more than but less than 4 years	7 weeks pay plus, for all service in excess of 3 years, 0.73 hours pay per completed week of service up to a maximum of 8 weeks pay
4 years or more	8 weeks pay

(b) Provided that an employee employed for less than 12 months will be entitled to a redundancy/severance payment of 1.75 hours per week of service if, and only if, redundancy is occasioned otherwise than by the employee.

(c) Week’s pay means the all-purpose rate of pay (as defined) at the time of termination for the employee concerned.

(d) If an employee dies with a period of eligible service which would have entitled that employee to redundancy pay, such redundancy pay entitlement will be paid to the estate of the employee.

(e) Any period of service as a casual will not entitle an employee to accrue service in accordance with this clause for that period.

(f) Service as an apprentice will entitle an employee to accumulate credits towards the payment of a redundancy benefit in accordance with this clause if the employee completes an apprenticeship and remains in employment with that employer for a further 12 months.

18.4 Redundancy pay schemes

(a) Where an employer terminates the employment of an employee and the employer incurs a redundancy pay obligation to the employee under this clause, some or all of the benefit the employee receives from a redundancy pay fund may be set off against the employer’s redundancy pay obligation under this clause, subject to the following conditions.

(b) If the employee receives a benefit from the redundancy pay fund, the employer may set off any proportion of the benefit which is attributable to the employer’s contribution to the fund against its redundancy pay obligation under this clause. If the proportion so calculated is equal to or greater than the employer’s redundancy pay obligation under this clause the obligation will be fully satisfied.

(c) If the employee does not receive a benefit from the redundancy pay scheme, contributions made by an employer on behalf of an employee to the scheme will, to the extent of those contributions, be set off against the liability of the employer under this clause and payments to the employee will be made in accordance with the rules of the redundancy pay scheme fund or any agreement relating thereto. If the contribution is equal to or greater than the employer’s redundancy pay obligation under this clause the obligation will be fully satisfied.

(d) The redundancy pay scheme must be an Approved Worker Entitlement Fund under the Fringe Benefits Tax Regulations 1992. [My emphasis]

[3] As mentioned, the application is made under s.120 of the Act, which provides that if an employee is entitled to redundancy because of s.119, the employer can apply to have the amount of pay varied. Section 119 provides the “general” entitlement to redundancy. Section 120 provides as follows:

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. [My emphasis]

[4] However, s.119 also provides that some employees are not entitled to redundancy pay under s.119. These groups/situations are outlined in s.121, 122 and 123. Section 123 includes:

Other employees not covered by redundancy pay provisions

(4) Subdivision B does not apply to:

(a) an employee who is an apprentice; or

(b) an employee to whom an industry-specific redundancy scheme in a modern award applies; or

(c) an employee to whom a redundancy scheme in an enterprise agreement applies if:

(i) the scheme is an industry-specific redundancy scheme that is incorporated by reference (and as in force from time to time) into the enterprise agreement from a modern award that is in operation; and
(ii) the employee is covered by the industry-specific redundancy scheme in the modern award; or

(d) an employee prescribed by the regulations as an employee to whom that Subdivision does not apply. [My emphasis]

[5] The award, as set out in full above, includes a provision for an industry specific redundancy scheme:

18. Industry specific redundancy scheme

18.1 The following redundancy clause for the plumbing and fire sprinklers contracting industry is an industry specific redundancy scheme as defined in s.12 of the Act. In accordance with s.123(4)(b) of the Act the provisions of Subdivision B—Redundancy pay of Division 11 of the NES do not apply to employers and employees covered by this award.

[6] Section 123 of the Act expressly excludes an employee from an entitlement under s.119 of the Act when an industry specific redundancy scheme in a modern award applies to the employee. Section 120 of the Act only allows for an application to vary a redundancy pay obligation when the relevant employee is entitled to an amount of redundancy pay because of s.119 of the Act.

[7] Because Mr Lewis’ application for a variation of the redundancy pay obligation refers to an industry specific redundancy pay obligation that arises under the award (which covers the work conducted by his business), the application does not relate to an employee entitlement that arises under s.119 of the Act. Thus Mr Lewis cannot make an application to vary the redundancy pay obligation under s.120 of the Act.

[8] As a small business operating under a modern award (with an industry specific redundancy scheme), Mr Lewis has no legislative avenue by which he might seek a variation to his redundancy pay obligation (even despite the employee having ostensibly resigned his employment).

[9] Mr Lewis was advised in writing of my concerns in these respects upon his application being made and given an opportunity to respond.

Conclusion

[10] Because the application as made under s.120 of the Act does not relate to an entitlement by an employee to redundancy pay under s.119 of the Act, I must dismiss the application.

SENIOR DEPUTY PRESIDENT

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