Mary Street Trading Pty Limited T/A Leonard's Bar & Bistro v Mr Alex Kebby, Mr Samuel Whittaker, Mr Stuart Marsters
[2024] FWC 2668
•11 NOVEMBER 2024
| [2024] FWC 2668 |
| FAIR WORK COMMISSION |
| DECISION |
Fair Work Act 2009
s.120 - Application to vary redundancy pay for other employment or incapacity to pay
Mary Street Trading Pty Limited T/A Leonard’s Bar & Bistro
v
Mr Alex Kebby, Mr Samuel Whittaker, Mr Stuart Marsters
(C2024/5851)
| COMMISSIONER DURHAM | BRISBANE, 11 NOVEMBER 2024 |
Variation of redundancy pay – application dismissed.
This is an application by Mary Street Trading Pty Ltd (the Applicant/Leonard’s) in respect of redundancy payments to Mr Alexander Kebby, Mr Samuel Whittaker and Mr Stuart Marsters (the Respondents). The Applicant formally operated under the trading name Leonard’s Bar & Bistro until December 2023. This application is made under Section 120(1)(b)(ii) of the Fair Work Act 2009 (FWA). The Applicant has applied to reduce the entitlements of the Respondents as three former employees to nil, on the grounds that they do not have the financial capacity to make the redundancy payments.
Each of the Respondents advised my Chambers that they opposed the variation in redundancy. Mr Kebby however, advised Chambers that he had in fact been paid his redundancy entitlements of $8,076.90 gross, following a direction from the Fair Work Ombudsman (FWO). Mr Whittaker and Mr Marsters have not received their entitlement and remain opposed to the application
I issued directions to the parties to file and serve submissions and materials on which they sort to rely. The Applicant, represented by Ms Kate Hemat-Siraky as Director of Zest People Solutions Pty Ltd consented to the application being determined on the papers. The Respondents raised no objections in this regard.
Legislation / Statutory Framework
Section 119 of the Act states as follows:
“119 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:
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
(3) 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 120 of the Act provides:
“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.”
The question for consideration in the present matter is whether the company cannot pay the redundancy entitlement that each of the Respondents are owed, and if this is the case, whether I will exercise my discretion to reduce those amounts.
Factual Background
Leonard’s was a restaurant and function venue operating in Brisbane’s Central Business District.
Mr Kebby commenced full-time employment with Leonards on 17 March 2021. Mr Marsters had been employed by Leonard’s since 15 March 2021 before going full-time on 20 December 2022 and Mr Whittaker had been employed as a casual since 27 June 2022. All three respondent’s were covered by, and paid in accordance with the Restaurant Industry Award 2020 [MA000119] (the Award).
On the 14 September 2023 a meeting was held to advise staff that, due to a downturn in business, Leonard’s would officially close in four (4) weeks, making their positions redundant. Staff were advised that as Leonard’s was a small business with less than 15 employees, they were exempt from making redundancy payments to employees.
Mr Kebby’s employment ceased on 14 October 2023 and Mr Marsters and Mr Whittaker’s employment ceased on 15 October 2023.
Whilst the business officially closed on 15 October 2023, they continued to complete prior booking and paid functions until late 2023, averaging two functions per week. Mr Marsters and Mr Whittaker continued working on a casual basis after their termination date until these functions ceased in 2024.
Following the redundancy notification meeting, The Respondents wrote to the Applicant querying their entitlement to redundancy pay.
The Applicant states that having received these inquiries, they sought further expert advice regarding the issue, which they say, confirmed their view that they were a small business, and as such the employees had no entitlement to redundancy pay.
Mr Kebby, disagreed with this outcome and sought the assistance of the FWO. The FWO investigated and determined that the Applicant’s business was not a small business. The Applicant was subsequently issued a compliance notice for a contravention of s.119 of the Act for failing to pay Mr Kebby the amount of redundancy entitlement payable to him.[1]
The Applicant notes they had been advised by the FWO that Mr Marsters and Mr Whittaker had also sought their assistance in relation to non-payment of their redundancy entitlements.
Viewed objectively, having received this determination from the FWO the Applicant would have been aware that they were in breach of the FWA and the Award with respect of any of their eligible former employees.
It seems arrangements were then made to pay Mr Kebby’s entitlements in instalments.[2] The Applicant notes that these payments have been made by Mr Andrew Lewis, Director of Mary Street Trading Pty Ltd, from his own personal funds.
It is not clear however, why such arrangements were not made for Mr Marsters and Mr Whitaker. Viewed objectively, it seems likely that rather than accepting the FWO’s determination, the Applicant instead, lodged this present application.
In accordance with s.119 of the Act, Mr Kebby and Mr Marsters are entitled to a redundancy payment equivalent to six weeks’ pay, whilst Mr Whittaker is entitled to a redundancy payment equivalent to four weeks’ pay.
Based on their respective weekly wages, Mr Marsters was entitled to a gross payment of $6,923.10 and Mr Whittaker was entitled to a gross payment of $5,384.60. Mr Kebby received his full gross entitlement of $8,076.90. It is therefore not clear why he has been included in the application as it seems curious to argue incapacity to pay Mr Kebby’s entitlements when these payments have already been made.
Submissions
The Applicant
The Applicant’s submission are, in large part, focussed on re-prosecuting the FWO’s determination that they were a small business. That question has been determined. The FWO have established that they were not a small business and as such are required to pay redundancy entitlements to eligible employees.
Therefore, as the entitlement has been established, this decision is solely concerned with determining whether I consider it appropriate to exercise my discretion on to vary the amount of redundancy entitlement that is owing.
Relevant to this application, it is submitted that at the time of filing submissions, the business had not traded or received income for over nine months and has now ceased all business activities. Further, it is asserted that requiring Mr Lewis, as a past Director to pay $20,000.00 gross in severance entitlements to the Respondents would place extreme financial strain on him and his family in the current economic climate where he is also personally contributing to trying to grow other businesses.[3]
The Applicant’s materials filed included the Tax Return for Mary Street Trading Pty Ltd filed in 2022 and 2023 respectively and a witness statement from their Director, Mr Andrew Lewis. Upon analysis of the Applicant’s Company Tax Return for 1 July 2021 – 20 June 2022, the document provides a total loss of $394,961.00 and taxable/net loss of $434,916.00 whilst the Company Tax Return for 1 July 2022 – 20 June 2023 document provides a total loss of $83,676.00 and a taxable/net loss of $100,330.00. The total taxable/net loss equates to $495,291.00. No information regarding Mr Lewis’ personal finances was filed.
In short summary, the Applicant submits that there are no funds left in the company and the Director, Mr Lewis does not have the capacity to pay out severance payments personally, without experiencing financial hardship.
The company, through their submissions and materials, provided it was appropriate in the circumstances for the Commission to exercise its discretion and to reduce the redundancy entitlements of the Respondents to nil.
The Respondents
Mr Kebby and Mr Marsters relied on their objections submitted by email on the 3 September 2024 and 2 September 2024 respectively and did not provide further submissions.
Mr Whittaker filed his submissions and materials on 12 September 2024. Mr Whittaker’s submissions also focus heavily on the question of establishing an entitlement. For the reason already discussed, the entitlement has already been established.
Relevant to the question of the Applicants capacity to pay, Mr Kebby notes that Mr Lewis is more than capable of paying out the entitled redundancies as he owns a global hospitality training company known as Allara. This was confirmed in Mr Lewis’ statement where he advises he is the Director and CEO of Allara Investments Pty Limited, which he wholly owns and is a registered training organisation operating primarily in New South Wales but also in Queensland, providing accredited and non-accredited training.[4] Mr Lewis is also the Director and CEO of Allara Global Pty Limited, which is an online training provider that provides non-accredited online courses nationally and internationally.[5]
Consideration
Whilst the Applicant has provided financial statements for the business and has claimed that, he has not provided any evidence to suggest the he does not have the capacity to make the payments, other than asserting financial strain making the payment would pose “in the current economic climate”.[6]
It goes without saying that making redundancy payments after a business has failed will be difficult, however I must also consider the purpose of the entitlement in the first place, which is to compensate employees for the financial hardship they will face upon being made redundant.
I further note the Applicant’s submissions that Mr Lewis is personally contributing to trying to grow other businesses. [7] This is an indication to me that he does have funds available that could be directed to ensuring employee entitlements are paid before being invested in new business ventures.
It is also of note that the as Mr Kebby has already been paid, the amount to be paid is a total of $12,307.70, as opposed to the $20,000 stated in the Applicant’s material.
Having considered all of the material before me, Mr Lewis has not established that he cannot pay the redundancy entitlements owed to the Respondents. Exemption can only be granted if the employer cannot pay, and I am not satisfied that this is the case.
As the Applicant has not made out its case in relation to s.120(1)(b)(ii) and for that reason the application is dismissed. An order to the effect will be issued separately and concurrently with this decision. It follows that the Redundancy amount must be paid in accordance with the requirement to do so in s.119 of the FWA.
COMMISSIONER
[1] The Applicant’s Submissions, Page 6 Paragraph 27.
[2] Ibid, Page 7 Paragraph 34.
[3] The Applicant’s Submissions, Page 7 Paragraph 33 & Witness Statement of Andrew Lewis, Page 2 Paragraph 16.
[4] Witness Statement of Andrew Lewis, Page 1 Paragraph 2.
[5] Ibid.
[6] The Applicant’s Submissions, Page 7 Paragraph 33.
[7] Ibid.
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