Meneghello Galvanizing Pty Ltd
[2020] FWC 3398
•30 JUNE 2020
| [2020] FWC 3398 |
| FAIR WORK COMMISSION |
DECISION |
Fair Work Act 2009
s.120—Redundancy pay
Meneghello Galvanizing Pty Ltd
(C2020/3206)
COMMISSIONER WILLIAMS | PERTH, 30 JUNE 2020 |
Variation of redundancy pay.
[1] This is an application made pursuant to s.120 of the Fair Work Act 2009 (the Act) by Meneghello Galvanizing Pty Ltd (the Applicant). The respondent is Mr Corey Hill (Mr Hill).
[2] The Applicant is applying for the Commission to reduce the redundancy pay of Mr Hill on the basis that the Applicant employer is not able to pay the employee their redundancy pay entitlements.
[3] On the application in answer to 1.3 the Applicant included in the calculation of Mr Hill’s redundancy entitlements payments owing to him for 5 weeks’ pay in lieu of notice plus accrued long service leave and accrued holiday pay. None of these amounts however can be reduced by the Commission through this application, nor through any other application.
[4] It is only the amount of 12 weeks’ redundancy pay which the Commission has jurisdiction to reduce by virtue of this application.
[5] All the other amounts for pay in lieu of notice, long service leave and holiday pay, regardless of the outcome of this decision, are due and owing to be paid to Mr Hill.
The legislation
[6] Sections 119 and 120 of the Act are relevant and are set out below.
Subdivision B—Redundancy pay
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.
Note: Sections 121, 122 and 123 describe situations in which the employee does not have this entitlement.
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 |
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.”
Factual findings
[7] Both parties have provided written materials in support of the respective positions.
[8] Mr Hill had been employed for 27 years.
[9] The Applicant’s explanation for why it cannot afford to pay Mr Hill’s redundancy pay is as follows.
[10] The Applicant currently employs 110 people. The Applicant was experiencing a general slowdown in business activity prior to early March before Covid-19, but then during March and April 2020 the increased operating costs associated with Covid-19 distancing and compliance rules created production inefficiencies in its’ plant.
[11] These inefficiencies have meant that cost of production increases, coupled with turnover decreases have caused a significant fall in profitability and forced the Applicant to look towards streamlining its business by implementing a cost reduction plan including a reduction in staff numbers.
[12] The Applicant say its’ turnover has dropped, but not by 30%, therefore it does not qualify for the JobKeeper subsidy, however its’ profit has dropped significantly due to the current financial climate.
[13] Furthermore, the current heightened level of uncertainty and disruption in the economy means the Applicant is expecting revenues to be significantly challenged over the next 6 to 9 months due to the deferral of potential new contracts which it expected to be awarded.
[14] Additionally, in the last two months quoting and tendering for new projects has reduced by approximately 60% therefore the Applicant anticipates a severe drop in demand for its’ services for the remainder of this calendar year.
[15] In support of its application the Applicant has provided a letter from their accountants and tax agents which reads as follows.
“Based on our understanding of the company’s current financial position, we confirm as follows:
• The company was faced with a challenging business market prior to the onset of Covid-19.
• These challenges materially impacted the company’s operating results and cashflow.
• The company, within the last few months, had to significantly reduce costs wherever possible as a result of the above. A comprehensive restructuring plan was implemented in response.
• Set against this already challenging background, the company has had to contend with a sudden, unexpected and significant decline in sales turnover as a result of the onset of Covid-19.
• The decline, through substantial, has not satisfied the eligibility criteria to allow the company to access the Job Keeper subsidy scheme and the embedded cash support which is being received by many other businesses.
• As a result, the company is faced with having to somehow absorb the above significant decline – which is likely to be prolonged and deep – without any assistance.
• The combination of these factors is putting significant strain on the business at all levels and underlines the circumstances and background behind the application.”
[16] Mr Hill in his submission in reply disputes that the Applicant’s business has been impacted as severely as the Applicant says.
Incapacity to pay principles
[17] In the case of Mildren Automotive Pty Ltd 1 Commissioner Hampton summarised the principles from past decisions that considered similar provisions regarding an employer’s incapacity to pay redundancy entitlements as follows,
“[44] Drawing upon various decisions of the Commission when applying provisions akin to those in the VIRS&R Award, the following principles appear:
• The provision means that the Commission “may” determine to reduce the amount of redundancy pay up to an amount of nil, indicating that the granting of full or partial relief from the obligation is an exercise of discretion in the circumstances of the case. The employer bears the onus of establishing that there are grounds justifying the exercise of the discretion.
• The employer must satisfy the FWC that it is not financially competent or possessed of the necessary funds to make the payment, and has no reasonable source of funds.
• The assessment of financial competence will include consideration of the financial standing of the business including its cash position and the assets of the business.
• The effect upon the employees immediately concerned will be considered including whether making an order prevents the employee from recovering the entitlement through other means should the company be liquidated; the effect that any order may have on the status of employees as potential creditors should the company become insolvent; and the impact of any order on the employee’s rights under the General Employee Entitlements and Redundancy Scheme (GEERS) or similar schemes.
• The effect upon the continuation of the business, including whether reducing the entitlement of dismissed employees may have a beneficial effect on other employees, thereby enhancing their prospects of being able to remain in employment, are also relevant considerations.” (References omitted)
[18] I accept these principles are applicable to this matter.
Can the Applicant pay the redundancy pay?
[19] The question to be determined by the Commission is whether the Applicant employer has demonstrated that it cannot pay the amount of Mr Hill’s redundancy pay which it has calculated as $16,156.08.
[20] Much of the Applicant’s submissions and the supporting information provided by its’ accountants may support the decision to reduce costs and make some positions redundant but it does not demonstrate that the financial position of the Applicant’s business is so precarious that it cannot pay Mr Hill’s redundancy pay.
[21] The fact there has been a significant downturn in business and future business is, unsurprisingly, predicted to be poor does not without more demonstrate that the Applicant’s finances are so bad that it cannot pay the amount of $16,156.08 that it owes Mr Hill and so the Commission should reduce that amount.
[22] The onus is on the Applicant to prove its’ case and in my view it has not done so.
Conclusion
[23] The Applicant has not proved that it cannot pay the amount of Mr Hill’s redundancy pay. This application is consequently dismissed.
[24] Mr Hill remains entitled to the full benefits of redundancy pay as provided for in s.119 of the Act.
[25] As explained at paragraph [5] above Mr Hill is also entitled to the payment of his 5 weeks’ pay in lieu of notice, accrued long service leave and accrued annual leave.
Final written submissions:
Applicant, 19 and 27 May 2020.
Respondent, 27 May 2020.
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1 [2013] FWC 2113.
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