Review of industry-specific small business redundancy provisions in certain modern awards

[2025] FWC 2569

[2025] FWC 2569

FAIR WORK COMMISSION

STATEMENT

Fair Work Act 2009

s.160—Application to vary a modern award to remove ambiguity or uncertainty or correct error

Review of industry-specific small business redundancy provisions in certain modern awards

(AM2025/20)

JUSTICE HATCHER, PRESIDENT SYDNEY, 1 SEPTEMBER 2025

Review of industry-specific small business redundancy provisions in certain modern awards – Commission’s own initiative – Joinery and Building Trades Award 2020 – Mannequins and Models Award 2020 – Manufacturing and Associated Industries and Occupations Award 2020 – Sugar Industry Award 2020 – Textile, Clothing, Footwear and Associated Industries Award 2020 – Timber Industry Award 2020 – draft determinations issued.

1. This matter has been commenced on the Commission’s own initiative under s 160 of the Fair Work Act 2009 (Cth) (FW Act) to deal with a potential inconsistency or ambiguity in award specific redundancy provisions in six identified modern awards. This arises due to s 121(4) of the FW Act, which was introduced by the Fair Work Legislation Amendment (Closing Loopholes) Act 2023 (CL Act) and came into effect on 15 December 2023.

1. Section 121(4) of the FW Act requires small business to pay redundancy under certain circumstances:

Certain small businesses to pay redundancy pay

(4)Despite subsection (1), an employee whose employment is terminated is entitled to be paid redundancy pay in accordance with this Division if:

(a)at the time of the termination, section 119 did not apply to the termination because the employer was a small business employer; and

(b)the employer is bankrupt or in liquidation (other than only because of a members’ voluntary winding up); and

(c)the employer is a small business employer because the employment of one or more employees was terminated; and

(d)       those terminations occurred:

(i)on or after the day that is 6 months before the employer became bankrupt or went into liquidation; or

(ii)if there was an insolvency practitioner (the last insolvency practitioner) for the employer on the business day before the employer became bankrupt or went into liquidation—on or after the day that is 6 months before the insolvency practitioner was appointed; or

(iii)if, before the last insolvency practitioner was appointed, other insolvency practitioners for the employer were appointed without any intervening business days between any of those appointments—on or after the day that is 6 months before the first of those insolvency practitioners was appointed; or

(iv)       due to the insolvency of the employer.

1. Before the introduction of s 121(4), small businesses, as defined by s 23 of the FW Act, were exempt from paying redundancy pay under the National Employment Standards (NES) (contained in the FW Act). The amendment was introduced to provide an exception to this exemption when the employer becomes a small business when downsizing occurs in the context of a bankruptcy or insolvency.[1]

1. Despite the previous exemption for small businesses to not pay redundancy pay under the NES, several modern awards provide an additional entitlement for employees of small businesses to receive redundancy payments in specified circumstances. I note that the Explanatory Memorandum made no reference to the interaction between the NES and award provisions.

1. It appears that the introduction of s 121(4) of the FW Act has no impact on modern awards which contain the standard redundancy clause. However, a potential inconsistency or ambiguity has arisen in six modern awards that contain non-standard redundancy clauses which provide a supplemental entitlement to the payment of redundancy for employees. Five of these modern awards provide an entitlement for employees working in a small business in specified circumstances:

·   Joinery and Building Trades Award 2020

·   Mannequins and Models Award 2020

·   Manufacturing and Associated Industries and Occupations Award 2020

·   Textile, Clothing, Footwear and Associated Industries Award 2020

·   Timber Industry Award 2020

1. For each of the identified modern awards above, a potential ambiguity arises in the clause setting out when the award-specific small business employee provisions apply to an employee and when they may be excluded.[2] For example, the relevant clause in the Manufacturing and Associated Industries and Occupations Award 2020 reads: ‘Clause 46.4 applies to a furnishing employee of a small business employer except for an employee who is excluded from redundancy pay under the NES by sections 121(1)(a), 123(1), 123(4)(a) or 123(4)(d) of the Act.’[3] Similar clauses are contained in the other identified modern awards.

1. It is my provisional view that the relevant clause in each of the 5 identified modern awards is the subject of ambiguity within the meaning of s 160(1) and should be varied to clarify that employees are entitled to redundancy pay in the circumstances provided for by s 121(4) of the NES.

1. An ambiguity or uncertainty may also arise in the Sugar Industry Award 2020.[4] This award does not contain an additional entitlement for employees of small businesses. However, clause 42.4 applies ‘to an employee engaged at a bulk terminal, unless the employee is excluded from redundancy pay under the NES by sections 121(1), 123(1), 123(4)(a) and 123(4)(d) of the Act.’ The effect of this clause may be to inadvertently exclude an employee from the new entitlement to redundancy in the circumstances set out in s 121(4). My provisional view is that this clause is also subject to ambiguity within the meaning of s 160(1) and should be varied to clarify that employees are entitled to redundancy pay in the circumstances set out in s 121(4).

1. Draft determinations have been prepared consistent with this provisional view to resolve the inconsistency or ambiguity for each of the identified modern awards. They are published with this Statement.

1. Interested parties are invited to file submissions regarding the provisional views expressed in paragraphs [7] – [8] of this Statement and the accompanying draft determinations. Submissions must be sent to [email protected] by 12.00 pm (AEST) on Friday, 26 September 2025. In the absence of any responsive views, the variations will be made in the same terms as proposed in the draft determinations.

PRESIDENT

[1] The Parliament of the Commonwealth of Australia, Senate, Fair Work Legislation Amendment (Closing Loopholes) Bill 2023 Revised Explanatory Memorandum, PNs 61-64 and 440-442.

[2] Joinery and Building Trades Award 2020 clause 37.4; Mannequins and Models Award 2020 clause 33.4; Manufacturing and Associated Industries and Occupations Award 2020 clause 46.4; Textile, Clothing, Footwear and Associated Industries Award 2020 clause 43.4; Timber Industry Award 2020 clause 39.4.

[3] Clause 46.4(a).

[4] Sugar Industry Award 2020 clause 42.4.

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