Moltoni Waste Management v P Fairs, R Ellen and K Birkett
[2012] FWA 5590
•3 JULY 2012
[2012] FWA 5590 |
|
DECISION |
Fair Work Act 2009
s.120—Redundancy pay
Moltoni Waste Management
v
P Fairs, R Ellen and K Birkett
(C2012/3612, C2012/3614 and C2012/3615)
COMMISSIONER BISSETT | MELBOURNE, 3 JULY 2012 |
Application to vary redundancy pay; incapacity to pay.
[1] Moltoni Waste Management (MWM) have made three applications under s.120 of the Fair Work Act 2009 (the Act) to vary the amount of redundancy pay otherwise due to three employees to nil on the basis that the employer cannot pay the redundancy amount. The employees are Mr Peter Fairs, Mr Brian Burkett and Ms Roslyn Ellen (collectively, the Respondents).
[2] The applications were heard in Morwell on 14 June 2012. MWM was represented with permission by Mr Greg Petrie, Mr Fairs was represented with permission by Mr Ellingham and Mr Burkett and Ms Ellen represented themselves at the hearing. Directions were issued in May for the filing of written materials by the parties prior to the hearing and further material was directed to be provided by MWM in writing by 28 June 2012.
Background
[3] In 2010 MWM was awarded a contract by Baw Baw Shire Council to operate the council’s land fill and waste transfer station. This contract was previously held by Gippsland Waste Services Pty Ltd (GWS).
[4] Mr Fairs, Mr Burkett and Ms Ellen had, from approximately 2004, been each employed by GWS. Each was offered, and accepted, employment with MWM.
[5] In 2007 Mr Charles Moltoni purchased GWS. Mr Moltoni is also a director of MWM. In 2011 Mr Moltoni negotiated the sale of GWS and another company of which he was also a director. MWM was not offered for sale as part of this arrangement.
[6] In October 2011 receivers were appointed to a number of trading entities of the Moltoni Group of companies. MWM was not included in the group to which the receivers were appointed. At this time however MWM was struggling to meet its financial commitments.
[7] On 2 April 2012 Baw Baw Shire Council terminated its contract with MWM as MWM could not meet its financial commitments or continue to trade. 1 Each of the Respondents had their employment terminated at or about this time.
Submissions
[8] Mr Petrie for MWM submits that MWM ceased to trade on 2 April 2012. 2 It is not under administration, in receivership or in liquidation, it has just ceased trading. MWM has no source of income now that the Baw Baw Shire Council contract has been terminated.
[9] MWM do not deny that they are liable to pay redundancy to the Respondents but claim they do not have the financial resources to do so. Whilst in its written submissions MWM suggested the total redundancy liability was approximately $9,000, during the hearing Mr Petrie agreed that it appeared the Respondents had a period of ongoing employment with GWS that should count towards service for redundancy purposes such that the liability for redundancy pay would be greater than the $9,000.
[10] Mr Petrie states that MWM is unable to trade and the company is currently being wound up. If the determination sought by MWM was not granted Mr Petrie says that MWM would not be able to pay the amount owed for redundancy. At the time of hearing MWM had no assets and no income although it did have liabilities, including the redundancy pay due to the Respondents.
[11] Mr Petrie agreed that no action has been taken by Baw Baw Shire Council to recover an alleged debt of approximately $1.5 million from MWM.
[12] Mr Ellingham for Mr Fairs submits that if I grant the applications of MWM that would prevent Mr Fairs and the other Respondents from making any application under the General Employees Entitlement and Redundancy Scheme (GEERS) should the company be wound up by the appointment of a liquidator or a receiver. This, he submits, would be a double disadvantage to the Respondents. Mr Ellingham submits that there is a general obligation in the Act to be fair to employees. If I granted the applications of MWM this object would not be met.
[13] Mr Burkett and Ms Ellen both provided written material relevant to their claim that they were on-going employees with GWS prior to moving to MWM. Ms Ellen also stated that she was owed outstanding leave and that some of her superannuation had not been paid by MWM.
[14] At the conclusion of the hearing I requested that Mr Petrie arrange to have provided to me a copy of MWM’s bank statement and advice from Mr Moltoni as to his intention with respect to the company.
[15] Whilst the bank statement provided to me has no account name I accept that it is MWM’s bank statement. It clearly shows a negative balance as at 25 May 2012. Mr Moltoni indicated that MWM has not traded since 2 April 2012. He indicated that he has voluntarily decided to close down MWM and that it will not trade at any time in the future.
[16] The bank statement for MWM however shows that there was activity in and out of the bank account beyond 3 April 2012 (the day following the day on which MWM was said to have ceased trading). No explanation for that activity was provided.
Consideration
[17] Division 11 of Part 2-2 of Ch 2 of the Act sets out the minimum entitlements with respect to notice of termination redundancy pay. 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, FWA may determine that the amount of redundancy pay is reduced to a specified amount (which may be nil) that FWA 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.
[18] The operation of s.120 is not just to reduce the obligation on the employer (if the application is granted) to otherwise pay to the employees what they would be entitled to under s.119, it also reduces the employee’s entitlement to the redundancy pay. This means that the employee cannot enforce the payment through any means.
[19] GEERS payments only cover the entitlements an employee is legally entitled to receive. Should these applications be granted the operation of s.120(3) will affect the legal entitlement of the employees and hence their capacity to access any payment under GEERS should an insolvency practitioner be appointed to MWM.
[20] In PYL Nominees Pty Ltd as Trustee of the Lesina Family Trust t/as Mundi Clothing Co 3 Rafaelli C rejected an application by PYL Nominees to reduce the amount of redundancy pay to nil based on incapacity of the employer to pay. Rafaelli C found:
[28] I accept that Mundi faces financial difficulties. However, I also note the following:
- the possibility that Mundi is or will be insolvent and the effect that any order may have on the status of employees as potential creditors;
- the impact of any order on the employees rights under GEERS;
- the fact that reducing the entitlements of these employees will have no beneficial effect on other employees. This is not a case where reducing the payments to some, may enhance the prospects of other employees being able to remain in employment;
- the service of the employees and their relatively low level of remuneration.
[21] After considering all of the material before him, Rafaelli C ‘decided in all of the circumstances to give greater weight to the predicament of the employees.’ 4
[22] The evidence indicates that at the time MWM ceased to trade they certainly had a positive bank balance. It was not until a month after they ceased to trade that the bank balance went negative. Whilst MWM said they ceased to trade on 2 April 2012 there is no explanation as to why they could not make the redundancy payments to the Respondents at the time their employment was terminated.
[23] I note in these matters that no material was put before me on the material effect of granting or not granting the orders sought by MWM.
[24] Mr Ellingham has made a range of submissions about MWM incurring debts and its related obligations under the Corporations Act 2001 but these submissions lack a factual grounding. In any event I am not sure where they take me.
[25] The discretion to grant an application to vary redundancy pay is a broad discretion.
[26] On the basis of the material presented to me it is apparent that the company had no or minimal cash in hand at the time the applications were made.
[27] I accept that at the time the applications were made MWM had ceased trading. Mr Moltoni does not indicate that he intends to place the company in voluntary administration. It is clear however that the company has substantial debts to Baw Baw Shire Council and, should the Council seek to act on those debts, the status of the company will inevitably change.
[28] What has not been made clear is why the employee entitlements were not paid at the time of the termination of their employment. Mr Moltoni had the option of making these payments. The company was not under administration such that these decisions were taken out of his hand. That the Respondents were not paid at the time of the termination of their employment seems to have been a deliberate decision of the company.
[29] It would indeed be wrong if an employer could voluntarily wind up their company, run down the accounts of the company over time and then apply to the tribunal for relief from the obligation to make redundancy payments. This is not to say an employer cannot cease to operate a business if they so chose. That is their right but the obligations of the business to employees cannot go unheeded in the process.
[30] I am mindful of the fact that the Respondents in this matter were not highly paid. There are questions as to whether MWM has met its obligations to pay superannuation or full termination payments to the Respondents including outstanding leave entitlements. To grant the applications will further penalise them by denying them any right to access GEERS payments should these become available.
[31] Further the granting of the applications will not absolve MWM of any obligation to the Respondents as they may still have claims for outstanding leave and other entitlements.
[32] The granting of the applications will not alter the position of the MWM in any material sense - it will not save MWM from creditors (if there are any) nor will it ensure the company remains in a viable situation (given that it is not trading).
[33] In all of these circumstances I have determined not to grant the applications as sought by MWM. I shall not reduce the amount of redundancy pay on the basis that the employer cannot pay.
[34] The applications are dismissed.
COMMISSIONER
Appearances:
G Petrie for the Applicant.
J Ellingham for the Respondent, P Fairs.
Hearing details:
2012.
Morwell;
June 14.
Final written submissions:
28 June 2012 (Applicant)
2 July 2012 (Respondents)
1 See generally exhibit MWM1.
2 Exhibition MWM1, paragraph 14.
3 [2011] FWA 1581
4 [2011] FWA 1581, [32].
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