MAX Solutions T/A MAX Solutions Pty Ltd
[2022] FWC 1815
•12 JULY 2022
| [2022] FWC 1815 |
| FAIR WORK COMMISSION |
| DECISION |
Fair Work Act 2009
s.120—Redundancy pay
MAX Solutions T/A MAX Solutions Pty Ltd
(C2022/3137; C2022/3161)
| COMMISSIONER SIMPSON | BRISBANE, 12 JULY 2022 |
Application to vary redundancy pay – Whether Applicants have standing – Finding that the Applicants do have standing under section 120 – Agreement redundancy entitlements equal or superior to NES – no capacity under Agreement to reduce redundancy entitlement – Agreement provides NES entitlements apply when more beneficial – No utility in conducting a substantive hearing – Applications dismissed
On 26 May 2022 Max Solutions Pty Ltd (Max Solutions) made an application under section 120 of the Fair Work Act 2009 (the Act) to reduce the redundancy pay of Ms Karla Alvarado (Ms Alvarado) to nil. The application stated that the redundancy entitlement arose under the Max Solution Enterprise Agreement 2020 (AG2020/3433) (the Agreement) and that Ms Alvarado had completed 5 years and 7 months service which would otherwise provide an entitlement to 10 weeks redundancy pay.
The application is pressed on the basis that Max Solutions had obtained other acceptable employment for Ms Alvarado and this was rejected.
The matter was listed for a directions hearing on 3 June 2022 where Max Solutions was represented by Ms Rachel Chapman-McCowan (Ms Chapman-McCowan) and Ms Alvarado represented herself. At the directions hearing I raised a preliminary issue that the Agreement did not appear to provide a capacity for Max Solutions to seek an order under section 120 to seek a reduction in redundancy pay.
I offered Max Solutions an opportunity to consider its position and make a submission on the issue. On 6 June 2022 Max Solutions sent correspondence to chambers advising it had sought legal advice that it did have standing to bring an application under section 120 of the Act notwithstanding clause 9.4 of the Agreement. Max Solutions provided a further additional submission on 8 June 2022.
A separate matter, C2022/3161 also filed on 26 May 2022, is an application by Max Solutions made under section 120 of the Act to reduce the redundancy pay of Ms Thi-Quyet Nguyen (Ms Nguyen) to nil. This application also stated that the redundancy entitlement arose under the Max Solutions Enterprise Agreement 2020 (AG2020/3433) (the Agreement) and in Ms Nguyen’s case, she had completed 12 years’ service which would otherwise have an entitlement to 13 weeks redundancy pay. This application is also pressed on the basis that the Max Solutions has obtained other acceptable employment for Ms Nguyen and this was rejected.
Matter C2022/3161 was initially allocated to Deputy President Boyce, however it was subsequently reallocated to my chambers on 6 July 2022 as the issues to be addressed in both C2022/3137 and C2022/3161 were closely related. I note from the file in matter C2022/3161 that Deputy President Boyce had provided Max Solutions an opportunity to make submissions as to its standing to bring that application.
Correspondence was sent to the parties in matter C2022/3161 requesting whether the parties would consent to the jurisdictional issue in respect of the Applicant’s standing to bring the Application in relation to Ms Nguyen being decided on the papers, as this approach had already been adopted in matter C2022/3137 before the other matter was reallocated to my chambers. The Applicant in C2022/3161 agreed to this approach on the basis that the Commission also considered the submissions made on the jurisdictional issue in its correspondence of 8 June 2022 to Deputy President Boyce. I have taken into account correspondence sent to the Commission in both matters.
Clause 9.4 of the Agreement reads as follows:
“9.4 Redeployment, Retirement and Redundancy
9.4.1 This Section only applies to permanent employees and temporary employees whose employment does not terminate on completion of the employee’s temporary employment contract.
9.4.2 The Company may terminate an employee’s employment where it determines that the job or position in which the employee is engaged does not need to be performed by anyone.
9.4.3 The Company will make reasonable efforts to redeploy employees who would otherwise be retrenched where there is a redundancy.
9.4.4 An employee who is terminated under the provisions of this Section is entitled to a redundancy payment based on the employee’s length of continuous service in accordance with the following table:
Employee’s period of continuous service with the Company on termination
Redundancy payment
LESS THAN 1 YEAR Nil At least 1 year but less than 2 years 4 weeks At least 2 years but less than 3 years 6 weeks At least 3 years but less than 4 years 7 weeks At least 4 years but less than 5 years 8 weeks At least 5 years but less than 6 years 10 weeks At least 6 years but less than 7 years 11 weeks At least 7 years but less than 8 years 13 weeks At least 8 years but less than 9 years 14 weeks At least 9 years but less than 10 years 16 weeks At least 10 years 13 weeks
9.4.5 The weeks’ pay specified in clause 9.4.4 is the employee’s base rate of pay for the employee’s ordinary hours of work.
9.4.6 An employee who is terminated on account of redundancy will also be provided with the notice of termination of employment that is required under clause 9.2.1 and may be paid in lieu of all or part of that notice.
9.4.7 Where an employee is redeployed to a lower level position as a result of a redundancy, the employee will continue to be paid at the higher level for a period of time that is based on the employee’s length of service. For these purposes the number of weeks specified in the redundancy payment column in clause 9.4.4 will be the number of weeks the employee will continue to be paid at the higher level.
9.4.8 An employee is entitled to finish his or her employment with the Company during the notice period. Where this occurs, the employee will not be paid for the part of the notice period that was not worked, but his or her redundancy payments and other termination payments will be calculated as though the employee worked for the entire notice period.
9.4.9 Where the Company provides an employee with notice of termination on the grounds of redundancy, he or she is entitled to up to one day off with pay each week in order to look for another job. The Company may require the employee to provide evidence of his or her job search activities on any paid time off work under this clause. Where the employee does not provide such evidence, the Company may withhold payment for that time.”
Max Solutions referred in correspondence on 6 June 2022 to the Full Bench of the Fair Work Commission decision in Maritime Union of Australia v FBIS International Protective Services (Aust) Pty Ltd [2014] FWCFB 6737 (FBIS) where the MUA argued that the employer in that matter lacked standing to bring an application under section 120 of the Act because the redundancy entitlements of the relevant employees in that matter did not arise under section 119 of the Act, but from a clause in the employers enterprise agreement.
Max Solutions submits that the Full Bench in FBIS dismissed this ground of appeal, finding that:
The entitlement to redundancy pay in the employer’s enterprise agreement was the same as the redundancy pay established under section 119 of the Act;
Where an enterprise agreement contains an entitlement that is the same as an entitlement in the National Employment Standards (NES), by virtue of the operation of section 55 of the Act, the agreements terms operate in parallel with the employee’s NES entitlement and the provisions of the NES relating to the NES entitlement apply, as a minimum standard, to the enterprise agreement entitlement; and
As the NES entitlement operates in parallel with the enterprise agreement entitlement, the employee’s entitlement to redundancy still arises “because of section 119” meaning the employer has standing to bring an application under section 120 of the Act.
Max Solutions added to this in correspondence of 8 June a fourth point that whilst section 55 of the Act permits an enterprise agreement to contain a clause that excludes the operation of section 120 of the Act, the agreement must either do so expressly, or by necessary implication.
Max Solutions submits that much like the enterprise agreement in the FBIS decision, the Agreement in this matter does not carve out the employer’s right to bring an application under section 120 of the Act. Max Solutions submitted that this is another basis upon which it submits that it can bring the section 120 application, and the Commission can hear and determine the application.
Max Solutions submits that nothing in section 55 of the Act precludes it from making an application under section 120 because the Agreement redundancy entitlements and the NES entitlements are the same or substantially the same because the redundancy entitlements operate in parallel, the only distinction being the entitlement to 13 weeks rather than 12 weeks after at least 10 years continuous service.
Max Solutions provided in its 8 June submission in relation to section 55 of the Act, that section 55(4) provides that enterprise agreements may include terms that “supplement” the NES. The note to section 55(4) provides examples of terms that “supplement” the NES, including terms that increase an employee’s annual leave above the minimum in section 87.
Max Solutions submits section 55(5) then provides that an enterprise agreement may include terms that have the same (or substantially the same) effect as the provisions of the NES, whether or not the agreement also contains supplementary terms. Further, section 55(6) provides that where an enterprise agreement includes terms that are permitted by section 55(4) and 55(5), to the extent that those terms give an employee an entitlement that is the same as the NES entitlement, then the agreement entitlement and the NES entitlement operate in parallel to one another (although not so as to give a double benefit) and the provisions of the NES relating to the NES entitlement apply, as a minimum standard, to the agreement entitlement.
Max Solutions submits that crucially, the note to section 55(6) of the Act, provides that where a term of an enterprise agreement provides for an employee to accrue six weeks of annual leave per annum, the provisions of the NES that regulate how such leave is accrued and taken apply to the minimum four week NES entitlement component of the six week leave entitlement under the agreement.
Max Solutions therefore contends that pursuant to section 55(6), section 120 of the Act (which regulates the circumstances in which the redundancy pay entitlement under the NES may be reduced by order of the Commission) applies to the redundancy pay entitlement.
Max Solutions submits that the Full Bench of the Commission decision in DL Employment Pty Ltd v AMWU [2014] FWCFB 7946 involved a redundancy clause in the relevant enterprise agreement that did not bear any resemblance whatsoever to section 119 of the Act redundancy entitlement, and as such Max Solutions entitlement to bring this application rests in part on section 55 of the Act and in particular subsections 55(5) and (6) because Max Solutions redundancy scale is virtually identical to the NES redundancy entitlement.
Max Solutions did not dispute that clause 9.4.4 provides a redundancy entitlement to Ms Alvarado or Ms Nguyen, and in Ms Nguyen’s case her entitlement exceeded the entitlement of 12 weeks under the NES, however it was submitted this minimal additional payment is not inconsistent with the entitlements at clause 9.4.4, or the Agreement and NES entitlements operating in parallel. Max Solutions submitted in Ms Alvarado’s case the redundancy entitlement is identical to the entitlement at section 119 of the Act. Max Solutions submits that applying the reasoning in FBIS it follows that Max Solutions has standing to bring the application, and it can be distinguished from the decision in DL Employment Pty Ltd.
Max Solutions also referred to a decision of Deputy President Lake in Application by Max Solutions Pty Ltd [2021] FWC 4063 where Deputy President Lake made an order reducing redundancy pay entitlement of another former Max Solutions employee whose entitlement arose under clause 9.4 of the Agreement.
Max Solutions submitted that the Full Bench decisions in FBIS and DL Employment Pty Ltd were clearly distinguishable. Max Solutions referred to paragraphs [26] to [33] of the Full Bench decision in FBIS which reads as follows:
“[26]However the entitlement to redundancy pay under the FBIS Agreement does not operate writ large. Whilst it is possible for an enterprise agreement to provide for a term which requires a redundancy entitlement to be paid unencumbered by s.120 of the Act, the FBIS Agreement does not so provide. Clause 2.5.5 of the FBIS Agreement contains exclusions, clause 2.5.5.1(c) of which provides that the redundancy clause shall not apply:
“. . . in a particular redundancy case if the Company arranges suitable alternative employment for the Employee; or the Employee unreasonably refuses to accept such employment”
[27] It is immediately apparent that the effect of this exclusion is that redundancy entitlements under the FBIS Agreement are not payable at all in the circumstances contemplated by the exclusion. For present purposes it is not necessary to decide whether there is any material difference between the phrase “obtains other acceptable employment” in s.120 of the Act and “arranges suitable alternative employment” in clause 2.5.5.1(c). Under clause 2.5.5, unlike s.120, there is no requirement for an application to be made to the Commission before the exclusions may be invoked and there is no possibility in the circumstances contemplated by the exclusions for a reduction of the entitlement rather than a complete loss of the entitlement. It cannot therefore be said that the clause is ancillary or incidental to, or supplements the NES within the meaning of s.55(4) of the Act because to the extent identified above, it is detrimental to an employee. Nor can it be said that the exclusions term in clause 2.5.5 has the same or substantially the same effect as any provision of the NES. Even if it were such a term it cannot displace s.120 by reason of s.61(1) of the Act.
[28] Moreover, to the extent that it was submitted that s.120 was excluded by operation of clause 2.5 of the FBIS Agreement,the submissions, in the circumstances of the exclusions in clause 2.5.5, flies in the face of s.55(1) and if it so operated it has no effect by reason of s.56 of the Act.
[29] To the extent that the redundancy pay entitlement in clause 2.5.2 provides an entitlement that is the same as the NES entitlement in s.119 within the meaning of s.55(5) then as s.55(6)(b) makes clear the provisions of the NES relating to the NES entitlement apply as a minimum standard to the enterprise agreement entitlement that is the same as the NES entitlement.
[30] It seems clear to us that s.120 of the Act is a provision of the NES relating to the NES redundancy pay entitlement in s.119. For reasons already given, it is not as suggested by the Appellant, excluded by the express terms of the FBIS Agreement. Rather it continues to apply as a minimum standard to the redundancy pay entitlement under the FBIS Agreement that is the same as the NES entitlement. In our view, this construction is consistent with the statutory note found at the end of s.55(6) of the Act which provides:
“Note: For example, if the award or agreement entitlement is to 6 weeks of paid annual leave per year, the provisions of the National Employment Standards relating to the accrual and taking of paid annual leave will apply, as a minimum standard, to 4 weeks of that leave.”
[31]It is also consistent with the explanation of this provision in the Supplementary Explanatory Memorandum to the Fair Work Bill 2008,which provides:
“28. The amendments made by this item also make clear that where:
· an enterprise agreement contains terms that are the same or substantially the same as a NES entitlement, or terms that are ancillary or incidental to, or which supplement, a NES entitlement; or
· a modern award contains terms that are ancillary or incidental to, or which supplement, a NES entitlement,
the provisions in the NES that relate to that entitlement (e.g., in relation to rate of accrual of leave, or what notice must be given to access an entitlement) apply to the entitlement in the award or agreement (as a minimum standard) to the extent that the award or agreement entitlement is the same as the NES guaranteed entitlement. [Original emphasis kept]
[32] The construction we prefer also gives full effect to s.61 of the Act. The construction argued for by the Appellant would displace the NES redundancy entitlement in s.119 and the NES standard relating to that entitlement found in s.120. The NES entitlement would not operate in parallel with the enterprise agreement entitlement, while the NES standard related to the NES entitlement it would not apply as a minimum standard to the enterprise agreement entitlement, and the exclusion of the entitlement would be subject to a less stringent test. As we have indicated above, an enterprise agreement may expressly or by necessary implication allow the NES redundancy entitlement to operate without the strictures in s.120 of the Act. That is, it might allow an employee an entitlement even if an employer obtained acceptable alternative employment for the employee. This would be a term that fell within s.55(4) of the Act. Clause 2.5.5.1(c) is not a term that has that effect, to the contrary it is detrimental to the employee.
[33] It follows that the Commissioner had power to reduce the amount of redundancy pay under s.120 of the Act that would otherwise have been payable to the employees under s.119 of the Act as the employees were entitled to be paid an amount of redundancy pay because of that section. No appellable error has therefore been disclosed.”
Max Solutions submitted that the Full Bench concluded that as the clause in the FBIS matter was less favourable to an employee than the process established under section 120 of the Act, its operation was prohibited by section 61 of the Act. The Full Bench went on to conclude that:
as there was no other clause in the agreement capable of excluding the application of section 120 of the Act;
the redundancy pay entitlement provided for in the agreement was the same as the entitlement at section 119 of the Act.
Both the enterprise agreement entitlement and the NES entitlement operated in parallel and as such, the employer had standing to apply to the Commission under section 120 of the Act seeking an order reducing its ability to pay redundancy pay to the employees in question.
Max Solutions submits that by contrast, the enterprise agreement under consideration in DLEmployment Pty Ltd contained a clause that appeared to expressly preserve the entitlement to a redundancy payment for employees who were successfully redeployed into an alternative position on site following the redundancy of their previous position for a period of up to three months from the redeployment date. The clause reads as follows:
“Transfers and Reclassifications:- Where an alternative position exists within the site which is within the same field of work and at the same or higher rate of pay and similar conditions of employment, the positions shall be offered to relevant employees who have not indicated a preference in separating from the Company.
Where an alternative position exists within the site for which no employees of similar skills applies, the Company shall offer employment to employees within the same field of work and provide the necessary training to enable the work to be undertaken in a safe manner.
Where an employee elects to transfer into an alternative position on site, any option of retrenchment which has been provided in writing to an employee will remain open for a period of three (3) months, provided that the company will be deemed to have met all commitments in respect to notification and consultation under this Agreement.”
Max Solutions submits that this clause, when considered in conjunction with the vastly more generous redundancy pay entitlement provided for in the agreement, evinces a clear intention on the part of the parties to the agreement in DLE to preclude the application of section 120 of the Act to the parties. Max Solutions submits that as there is no clause in the Agreement that purports to, or is capable of, excluding the application of section 120 of the Act, and the redundancy payment of Ms Alvarado under clause 9.4.4 of the Agreement mirrors the entitlement under section 119 of the Act, it follows that Max Solutions has standing to bring an application under section 120.
CONCLUSION
I accept that the two cases currently before the Commission are distinguishable from the facts in DLE as in DLE it was concluded that section 120 of the Act only applies if the employee is “is entitled to be paid an amount of redundancy pay by the employer because of section 119”, and in DLE the relevant entitlement did not arise because of s.119 but because of terms of the DLE Agreement.
The matter of Cameron Fraser; CFMMEU v JFM Civil Contracting Pty Ltd[2020] FWCFB 4866 is another matter where a Full Bench of this Commission has found circumstances existed where there was no power to reduce redundancy entitlements under section 120. In that case it was found that section 120 only applies if the employee is entitled to be paid redundancy pay under section 119, and where the source of an employees redundancy entitlement is not section 119 there is no power under section 120 to reduce that entitlement.
In the two cases currently before the Commission the entitlement arises from both the Agreement and the NES. I accept the submission of Max Solutions that they do have standing to bring the application under section 120 of the Act on the basis that I accept that where the terms of the Agreement and the NES are the same or similar as is the case here, they operate in parallel and by force of section 55(6) the NES applies as a minimum standard.
I am satisfied that clause 9.4 of the Agreement is ancillary or incidental to and supplementary to the NES. It is not detrimental to an employee in any respect when compared to the NES.
However, there are features of the current cases that are distinguishable from the FBIS case. Firstly, in these cases the Agreement does not provide for an exclusion, or variation of the redundancy entitlement on the same basis as was the case in FBIS. The enterprise agreement in the FBIS matter provided that an entitlement to redundancy pay does not apply in circumstances described at clause 2.5.5.1(c) “in a particular redundancy case if the Company arranges suitable alternative employment for the Employee; or the Employee unreasonably refuses to accept such employment.”
Except for the provision at clause 9.4.7 of the Agreement, (which contemplates circumstances where an employee accepts an offer of redeployment to a lower paying position in a case of a position becoming redundant), there are no other provisions in the Agreement which contemplate a capacity to modify an employee’s redundancy entitlement.
The arrangement at 9.4.7 has an effect, sometimes referred to as a ‘partial redundancy’, where the employment relationship remains on foot despite the former position being made redundant, and additional payments are made at the higher level of the former position for a period that is based on the employee’s length of service.
Clause 9.4 does not provide for any circumstances where the entitlement to redundancy pay under clause 9.4 can be reduced, where the employment relationship does not survive the redundancy. Therefore clause 9.4 could not be viewed as detrimental compared to section 120 of the Act, in the same way as clause 2.5.5.1(c) was viewed as detrimental in the FBIS matter.
The Full Bench decision in FBIS expressly contemplated at paragraph [26] circumstances where an enterprise agreement can provide for a term which requires a redundancy entitlement to be paid unencumbered by section 120 of the Act, however noted that the FBIS agreement was not such an agreement.
The facts in the two cases in this matter are distinguishable from FBIS, because in FBIS the Full Bench found the exclusion to be detrimental as compared to the NES, particularly given there was not even a requirement to make an application to the Commission before the entitlement could be completely lost. The existence of this detrimental effect led to a conclusion that it could not be said that the FBIS agreement clause was ancillary, or incidental to, or supplements the NES within the meaning of section 55(4), because of the detrimental effect. Nor could it be said that the exclusions term at 2.5.5 had the same or substantially the same effect as the provision of the NES. The Full Bench found in FBIS that clause 2.5.5 offended section 55.1 on the basis that it excluded the NES or any provision of the NES.
Also in these two cases, contrary to the submissions of Max Solutions, there is another clause in the Agreement which supports an interpretation that does not favour the Agreement operating in a way that intended that the redundancy amounts in clause 9.4 are able to be reduced by application under section 120 in the circumstances of the two Respondents to the applications. Clause 1.5 of the Agreement provides as follows:
“National Employment Standards
Where the National Employment Standards are more beneficial to an employee than the provisions of the Agreement, the more beneficial provisions will apply to the employee.”
The intent of clause 1.5 of the Agreement is clear enough on its own terms. Max Solutions presses for an interpretation of the interaction between the NES and the Agreement such that the redundancy amount at clause 9.4 can be reduced relying on section 120 despite the Agreement saying nothing about an ability to reduce the redundancy amount, the only exception being the specific circumstances in section 9.4.7 pertaining to acceptance of an offer of redeployment.
This interpretation favoured by Max Solutions flies in the face of clause 1.5 of the Agreement because it would not be more beneficial to an employee than the provisions of the Agreement, to allow a redundancy amount arising from clause 9.4 to be reduced in reliance on the NES when the Agreement itself does not provide (other than the specific circumstances in clause 9.4.7) for this ability.
Unlike in FBIS where section 120 had work to do to apply as a minimum standard, in the specific circumstances of the two individual Respondents who did not accept offers of redeployment, section 120 has no work to do to apply as a minimum standard. That is because the Agreement standard of itself is either the equal of, or superior to the NES regarding section 119 and, unlike section 120, the Agreement does not provide for a reduction of redundancy entitlement when the employment relationship ends.
For reasons already set out above, I have concluded that Max Solutions does have standing to bring the two section 120 applications, however on the particular facts of the two cases, if the substantive merits of the two section 120 applications were to be heard and determined, the only potential outcomes would be either findings in favour of Max Solutions which seek reduction in the entitlements, or alternatively the applications would fail. Because they are the potential outcomes from a substantive hearing, it is already apparent section 120 does not have work to do as a minimum standard because no potential outcome of a substantive hearing could improve upon the existing Agreement entitlement, and the interaction between the Agreement and the NES prevents a reduction in the entitlement relying on section 120.
This is in keeping with the finding at paragraph [32] of the Full Bench decision in FBIS where it said as follows:
“……….As we have indicated above, an enterprise agreement may expressly or by necessary implication allow the NES redundancy entitlement to operate without the strictures in s.120 of the Act. That is, it might allow an employee an entitlement even if an employer obtained acceptable alternative employment for the employee. This would be a term that fell within s.55(4) of the Act. Clause 2.5.5.1(c) is not a term that has that effect, to the contrary it is detrimental to the employee.”
For the reasons set out above, I have concluded that while Max Solutions does have standing to bring both applications under section 120, I am satisfied based on the material before me that it would be of no utility to put the parties to the time and cost of filing evidence and submissions regarding the two section 120 applications because of the way the Agreement and NES entitlements interact, and no basis for the Commission to order a reduction to the redundancy entitlements of the two Respondents that exists by force of clause 9.4 of the Agreement.
On that basis, in the exercise of my discretion I do not intend to issue directions for the filing of material to hear and determine the two section 120 applications and instead intend to dismiss them. Accordingly, applications C2022/3137 and C2022/3161 are dismissed.
COMMISSIONER
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