Rockhampton Auto Group Pty Ltd T/A Rockhampton Volkswagen v Mr Mark Hay

[2018] FWC 3580

[2018] FWC 3580

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.120 - Application to vary redundancy pay for other employment or incapacity to pay

Rockhampton Auto Group Pty Ltd T/A Rockhampton Volkswagen
v
Mr Mark Hay
(C2018/2805)

COMMISSIONER HUNT BRISBANE, 20 JUNE 2018

Variation of redundancy pay.

[1] Mr Mark Hay was employed by Rockhampton Auto Group Pty Ltd T/A Rockhampton Volkswagen (Rockhampton Volkswagen) as the General Sales Manager from 19 April 2017 until his dismissal on 23 May 2018 due to redundancy. Mr Hay served for just over one year and on becoming redundant was entitled to a payment of four weeks’ redundancy pay in accordance with s.119(2) of the Fair Work Act 2009 (the Act).

[2] There is no dispute that Rockhampton Volkswagen has already paid to Mr Hay two weeks’ severance of the four weeks owed to him. The balance of the amount owed to Mr Hay is approximately $2,084.62.

[3] Rockhampton Volkswagen has made an application to reduce the amount of severance pay payable to Mr Hay to nil on the basis that it obtained other acceptable employment for Mr Hay, to which Mr Hay refused. Alternatively the Applicant stated that it cannot pay the amount.

[4] Section 119 of the Act sets out the minimum entitlements owed to certain employees on their employment ending due to redundancy. 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.”

[5] Directions were issued for the filing of written material and supporting documentation from the Applicant. On 13 June 2018 Rockhampton Volkswagen filed material with the Fair Work Commission (Commission) demonstrating a financial year-to-date loss of approximately $300,000.

[6] Mr Hay filed material relevant to the two roles he had been offered and why, in his view, the roles were not acceptable offers of employment.

[7] The application was heard on 19 June 2018 by telephone. Mr Michael Prendergast, Director attended by telephone and gave evidence on behalf of the Applicant. Mr Hay attended by telephone and gave evidence on his own behalf.

Evidence and submissions

[8] Mr Prendergast’s evidence is that in the lead up to Mr Hay’s dismissal, the Applicant’s financial position was becoming urgent and action needed to be taken. Mr Prendergast was concerned with ongoing solvency requirements. Mr Prendergast stated, “….we as directors have a legal responsibility to ensure the company is viable going forward. We have a further 3-4 employees leaving within the next 4-5 weeks.”

[9] Mr Hay’s role entitled him to $54,200 per annum plus commission.

[10] In finding an alternative role for Mr Hay, the Applicant offered to him a position as a New Vehicle Sales Consultant. The retainer was to be $809.10 per week ($42,073.20 per annum) plus commission. The Applicant desired Mr Hay to obtain his Dealers Licence, and when or if this occurred, he would be offered a Manager role of $52,000 plus commission.

[11] Mr Prendergast stated that on Mr Hay’s last day of employment, Mr Hay informed the Applicant that he did not consider either of the roles offered to him to be acceptable offers of employment. During the hearing Mr Prendergast stated that Rockhampton Volkswagen had paid for training for Mr Hay to obtain his Dealers Licence, but he had not taken the necessary steps to obtain it. Mr Hay’s evidence is that it would take a minimum of six weeks to obtain the Dealers Licence, four weeks greater than the two week notice period he was given.

[12] Relevant to the trading loss the Applicant was experiencing, questions were put by the Commission to Mr Prendergast as to the assets and liabilities of the Applicant, as only the profit and loss statement had been provided to the Commission. Mr Predndergast stated that it could be provided, if necessary. He stated that a large part of the stock of vehicles was on loan, and not necessarily owned by Rockhampton Volkswagen.

[13] Mr Hay stated that there had been a purchase in the past 12 months of two properties by Rockhampton Volkswagen. Mr Prendergast stated that the purchase of the properties was not by Rockhampton Volkswagen, but was by an associated entity of Rockhampton Volkswagen.

[14] When questioned as to whether the payment to Mr Hay of the monies owed to him would likely enhance the prospects of other employees being able to remain in employment with the Applicant, Mr Prendergast stated that up to around four employees have already resigned their employment. There was no evidence put that being relieved of an obligation to make a payment to Mr Hay of $2,084.62 would result in the continuation of ongoing employment for existing employees.

[15] On being asked what steps the Applicant would take if the application was not granted by the Commission, Mr Prendergast answered to the effect that the Applicant would honour the decision and would need to find a way to come up with the cash flow to make the payment to Mr Hay.

Consideration

[16] Relevant to the two alternative jobs the Applicant offered to Mr Hay, I have had regard for a decision of SDP Richards in Von Bibra Robina Autovillage Pty Ltd [2007] AIRC 397 at [15]:

“The matter in dispute is that the employee does not agree that the Applicant obtained for the employee alternative employment that was objectively acceptable in the sense contemplated by the relevant authorities. The Full Bench in Re:Derole Nominees stated as follows:

“What constitutes ‘acceptable alternative employment’ is a matter to be determined, as we have said, on an objective basis. Alternative employment accepted by the employee (and its corollary, alternative employment acceptable to the employee) cannot be an appropriate application of the words because that meaning would give an employee an unreasonable and uncontrollable opportunity to reject the new employment in order to receive redundancy pay; the exemption provision would be without practical effect.

Yet, the use of the qualification ‘acceptable’ is a clear indication that it is not any employment which complies but that which meets the relevant standard. In our opinion there are obvious elements of such a standard including the work being of like nature; the location being not unreasonably distant; the pay arrangements complying with award requirements. There will probably be others.” [footnotes omitted]

[17] I have no hesitation in finding that the Applicant ‘obtained’ other employment for Mr Hay, as the role of New Vehicle Sales Consultant offered to him was within its own business and the role was genuinely offered to Mr Hay for his acceptance. Mr Hay declined to accept the role offered to him.

[18] The role of New Vehicle Sales Consultant offered to Mr Hay was at an annual base rate of approximately $12,000 less than his role of General Sales Manager, or only approximately 77%. I concur with Mr Hay that the role offered to him was not an offer of acceptable employment due to the significant reduction in the annual salary. (emphasis added)

[19] Regarding the Manager role paying $52,000 plus commission, I am satisfied the difference between $52,000 and $54,200 per annum is not substantial. If the matter turned on that issue alone, I would find that the Applicant obtained other acceptable employment for Mr Hay.

[20] However the role of Manager would only become available if or when Mr Hay obtained a Dealer’s Licence. Despite criticism by the Applicant of Mr Hay for not obtaining his Dealer’s Licence with the support of the Applicant over his year of employment, at the time of the redundancy he did not have it. Nothing changes that fact. The communication to Mr Hay made it clear that he could not be a Manager until such time as he had a Dealer’s Licence. No arrangement was offered by the Applicant to pay to Mr Hay the salary of a Manager until such time as he obtained the Dealer Licence. The arrangement offered by the Applicant was to pay to Mr Hay the New Vehicle Sales Consultant salary of $42,073.20 until Mr Hay became licenced.

[21] At the time of the dismissal the Applicant did not offer to Mr Hay the Manager role without qualification. The qualification was that he needed to have a Dealer’s Licence, and it was known that this would take some time. In the meantime he would be employed as a New Vehicle Sales Consultant. For the reasons given above, I do not find that the Applicant obtained acceptable employment for Mr Hay.

[22] As to whether the Applicant ‘cannot pay the amount’ to Mr Hay, there is no evidence before the Commission that Rockhampton Volkswagen is in a precarious financial position. I am satisfied that the payment to Mr Hay would put strain on the company, but would have no greater effect.

[23] The profit and loss statement for the month of April 2018 demonstrates a monthly payroll of approximately $85,000 in salaries, $19,000 in commission paid to managers and salespersons, $18,000 in advertising and $5,000 in professional fees.

[24] If the application was granted in part or in full, in the event Rockhampton Volkswagen would later become liquidated, Mr Hay would not have capacity to bring a claim under the Commonwealth Fair Entitlements Guarantee (FEG). The FEG replaced the former General Employee Entitlements and Redundancy Scheme (GEERS).

[25] In PYL Nominees Pty Ltd as Trustee of the Lesina Family Trust t/as Mundi Clothing Co¹ 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. The Commissioner 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.”

[26] As in the case referred to above, this does not appear to be a case where reducing the payment owed to Mr Hay may enhance the prospects of other employees being able to remain in employment. The evidence is to the contrary; it appears that employees are voluntarily leaving the business and not being replaced.

[27] The discretion to grant an application to vary redundancy pay is a broad discretion.²

[28] The Applicant has failed to demonstrate that the application has been made because it cannot pay the amount, or part of the amount owed to Mr Hay. I consider the test to be a significantly high bar for an applicant to meet given the use of the word ‘cannot’ in s.120(1)(b)(ii). (emphasis added)

[29] The applicant has not provided any financial information for the Commission’s consideration to satisfy the Commission that the payment of $2, 084.62 or part of that amount would result in Rockhampton Volkswagen limping towards administration or liquidation. I do not consider that the Applicant has an incapacity to pay to Mr Hay $2,084.62.

Conclusion

[30] In all of the circumstances I have determined not to grant the application as sought by Rockhampton Volkswagen I will not reduce the amount of redundancy pay owed by Rockhampton Volkswagen to Mr Hay as I am not satisfied that the Applicant obtained other acceptable employment for Mr Hay, nor that it cannot pay the amount owed.

[31] The application is dismissed.

COMMISSIONER

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1  [2011] FWA 1581.

2 Moltoni Waste Management v P Fairs, R Ellen and K Birkett[2012] FWC 5590 at [25] (Bissett C).