Tjoputra and Secretary, Attorney-General's Department
[2021] AATA 1596
•4 June 2021
Tjoputra and Secretary, Attorney-General's Department [2021] AATA 1596 (4 June 2021)
Division:GENERAL DIVISION
File Number(s): 2020/6062
Re:Erwin Tjoputra
APPLICANT
AndSecretary, Attorney-General's Department
RESPONDENT
File Number(s): 2020/6382
Re:Damodhar Chetty Budhi
APPLICANT
AndSecretary, Attorney General's Department
RESPONDENT
DECISION
Tribunal:Chris Puplick AM, Senior Member
Date:4 June 2021
Place:Sydney
The decision under review in relation to:
(a)Mr Erwin Tjoputra (2020/6062) is affirmed; and
(b)Mr Damodhar Chetty Budhi (2020/6382) is affirmed.
.....................................[sgd]...................................
Chris Puplick AM, Senior Member
CATCHWORDS
FAIR ENTITLEMENTS GUARANTEE – whether the applicants are entitled to redundancy payment – where governing instrument is Fair Work Act 2009 (Cth) – employer is small business employer at date of written termination notice – role and responsibility of liquidator – decisions under review are affirmed
LEGISLATION
Fair Entitlements Guarantee Act 2012 (Cth) ss 5 and 37
Fair Work Act 2009 (Cth) ss 23, 117, 119 and 121
CASES
Bower and Secretary, Attorney-General’s Department [2020] AATA 4353
Bullivant and Secretary, Attorney-General’s Department [2020] AATA 2047
Fink and Secretary, Attorney-General’s Department [2021] AATA 734
Gayed and Secretary, Department of Jobs and Small Business [2019] AATA 1132
Kable and Secretary, Attorney-General’s Department [2019] AATA 3963
Mi and Secretary, Department of Employment [2016] AATA 419
SECONDARY MATERIALS
House of Representatives, Hansard, 11 October 2012
REASONS FOR DECISION
Chris Puplick AM, Senior Member
4 June 2021
NO GOOD DEED GOES UNPUNISHED
This is a decision according to law producing a result which is both unfair and unjust.
Two dedicated, loyal, hardworking, long-term employees of a company which was placed into liquidation prior to having some of its assets sold were asked by the Liquidator to stay on to help wind-up the affairs of their company. One stayed on for one business day because he was the IT expert and was asked to tidy up the company’s records as well as copy and transfer files. The other stayed on for almost two weeks because he was the Finance Manager and he was asked to help finalise payrolls and entitlements for others.
Their acts of decency and loyalty, must, under the provisions of the Fair Entitlements Guarantee Act 2012 (Cth) (FEGA) result in them losing their entitlements to redundancy payments, to which they might otherwise have been entitled, in the sums of approximately $32,000 and $37,000 respectively.
BACKGROUND
The facts in this matter may be stated briefly as follows:
(a)Mr Damodhar Chetty Budhi and Mr Erwin Tjoputra were employed by Object Consulting Pty Ltd (the Company), for 11 years and 19 years respectively. They were both key employees, the former the Finance Manager and the latter one of the key IT personnel.
(b)On 21 August 2019 representatives of Wexted Advisors (Wexted) were appointed as the Joint and Several Administrators of the Company.
(c)On 23 August 2019 Wexted advised the Attorney-General’s Department (the Respondent[1]) that the Company had some 89 employees. This figure was revised down to 53 staff on 27 August 2019.
[1] The Attorney-Generals’ Department is the Respondent by virtue of being the department administering the FEGA.
(d)On 25 September 2019 Wexted (the Liquidator) was appointed as the liquidators of the Company.
(e)On that same day the Company entered into an Assets Sale Agreement with DWS Limited (DWS).
(f)The following day (26 September 2019) DWS sent letters of offer to those employees of the Company whose services it wished to retain. Approximately 40 such letters were issued and, in the event, some 31 employees accepted that offer.
(g)On 4 October 2019 the Company was sold and ceased trading.
(h)On Friday 4 October 2019 both Mr Chetty Budhi and Mr Tjoputra were informed verbally by the Liquidator that their services were no longer required by the new owners. Neither of them was provided with any written notice of the termination of their employment.
(i)As of that day the remaining employees of the Company ceased to be employed.
(j)Mr Tjoputra was asked by the Liquidator to remain at work until Monday 7 October (one business day later) to tidy-up various IT matters and on that day was provided with a written letter terminating his employment. His employment ceased that day.
(k)Mr Chetty Budhi was asked by the Liquidator to remain at work to help finalise payroll and other financial matters and he was provided with a letter of termination on 16 October 2019. His employment ceased that day.
(l)As of 4 October 2019, the Company retained only two employees – Messrs Chetty Budhi and Tjoputra. Both were still employed by the Company via the agency of the Liquidator.
(m)As of 16 October 2019, the Company retained only one employee – Mr Chetty Budhi.
(n)On 18 October 2019 both gentlemen applied for an advance under the FEGA in respect of unpaid wages, annual leave, payment in lieu of notice, long-service leave and redundancy.
(o)On 2 December 2019 a delegate of the Respondent made a decision under subsection 15(1) of the FEGA that Mr Chetty Budhi was entitled to payment for unpaid wages, annual leave, payment in lieu of notice and long-service leave. Mr Chetty Budhi was paid his entitlements accordingly. In his decision the delegate decided that Mr Chetty Budhi was not entitled to redundancy payment.
(p)Mr Chetty Budhi appealed this decision to the Department but on 15 September 2020 a delegate of the Respondent affirmed the original decision.
(q)On 2 December 2019 a delegate of the Respondent made a decision under subsection 15(1) of the FEGA that Mr Tjoputra was entitled to payment for unpaid wages, annual leave, payment in lieu of notice and long-service leave. In his decision the delegate decided that Mr Tjoputra was not entitled to redundancy payment.
(r)Mr Tjoputra applied for an internal review of this decision but on 15 September 2020, a delegate of the Respondent affirmed the original decision. On 3 November 2020 the decision was varied upon review by a delegate of the Respondent such that an adjustment was made to the level of his entitlement for payment in lieu of notice[2] but the decision on his other entitlements (including redundancy) remained unchanged from the previous decision.
(s)Both Mr Chetty Budhi and Mr Tjoputra appealed to this Tribunal for a review of the delegate’s decisions, made in respect of each of them, that neither was entitled to redundancy payments under the FEGA. Because of the similarities of the issues in question all parties agreed that the matters should be heard together in the Tribunal as they were on 10 May 2021.
[2] This decision was made on 3 November 2020 under section 37 of the FEGA.
THE DELEGATE’S REASONS
The basis of the delegate’s decisions denying redundancy payments is simple:
(a)The FEGA provides, pursuant to section 5 that entitlements are calculated in accordance with the provisions of whatever “governing instrument” applies to the employment of any claimant.
(b)In relation to both gentlemen the “governing instrument” is the Fair Work Act 2009 (Cth) (FWA).
(c)Section 119 of the FWA deals with redundancy payments and establishes that an employee is entitled to redundancy payments “because of the insolvency or bankruptcy of the employer” (s 119(1)(b)).
(d)However, paragraph 121(1)(b) of the FWA excludes the operation of section 119 where the employer was
“immediately before the time of the termination, or at the time when the person was given notice of the termination as described in section 117(1)… a small business employer.”
(e)Subsection 23(1) of the FWA defines a “small business” as one having “fewer than 15 employees”.
(f)Subsection 117(1) of the FWA requires that an employee must be given notice of the termination of their employment in writing before being terminated.
(g)Although there is no dispute that both gentlemen were notified verbally of the intention to terminate their employment on 4 October 2019, Mr Tjoputra only received his written notice on 7 October 2019 and Mr Chetty Budhi received his on 16 October 2019.
The Respondent noted that Mr Chetty Budhi actually had a contract with the company but that was not to be taken as the governing instrument in his case as its provisions were insufficiently precise as to establish a clear entitlement to redundancy payments in the event of the termination of his employment.
To summarise the position:
·On 4 October 2019 both Mr Chetty Budhi and Mr Tjoputra were employees of a company that had more than 15 employees. Both were verbally advised that their services were to be terminated but they were asked by the Liquidator to stay on to help finalise the arrangements payroll matters and for the sale of the company they had served for many years. None of this was put in writing.
·Both agreed. Mr Tjoputra remained until 7 October 2019 and Mr Chetty Budhi until 16 October 2019 when their respective services were terminated in writing.
·By 7 October 2019 (and it follows, by 16 October 2019) the Company had ceased to have more than 15 employees and hence had, after their oral notice of termination but before their written notice, become a small business.
·As a result of their staying on to help, the interplay of section 5 of the FEGA and subsection 117(1), section 119, paragraph 121(1)(b) and subsection 23(1) of the FWA mean that the claimants are rendered ineligible for redundancy payments.[3]
[3] Summum ius summa iniuria (The more laws, the less justice), Cicero: De Officiis, Book 1 section 33.
REMEDY SOUGHT
In order to amend this manifest injustice, both gentlemen seek that the Tribunal establish that their termination was effective from the verbal notification of 4 October 2019 at which stage the Company was not a small business and hence their redundancy claims could be considered.
Regrettably, although this would be the fair thing to do, the Tribunal must apply the law as it stands and cannot, even in circumstances such as this, fail to apply it properly and in full.
In Mi and Secretary, Department of Employment, the Tribunal said:[4]
With some regret, I conclude that it is not open to me sitting as the decision-maker in this case to insert a different test in s 121(1) for determining the time at which an employer was a small business employer.
…
This is an unfortunate result which I doubt was an intended outcome but the law in respect of administration is clear and gives rise to the result that in this case the Applicant does not have a redundancy pay entitlement.
[4] [2016] AATA 419 at [23] and [64].
These passages were cited by the Tribunal in Gayed and Secretary, Department of Jobs and Small Business.[5]
[5] [2019] AATA 1132 at [42].
In Bower and Secretary, Attorney-General’s Department[6] the Tribunal said:
It would be convenient to stretch the word “immediately” in section 121(1) back to when the other employees were given notice of termination but that is a step too far. It is unfortunate that by agreeing to finish up work to assist her employer she, and a couple of fellow employees, inadvertently suffered for their generosity, by missing out on a right they would otherwise have had to an advance of redundancy payment under the provisions of the FEG Act.
[6] [2020] AATA 4353 at [18].
In Kable and Secretary, Attorney-General’s Department,[7] the Tribunal likewise said:
The applicant feels that this outcome is unfair and that she is being penalised for her loyalty and empathy which led her to stay on longer than other employees. The applicant contends that the date should be taken into account, for the purposes of determining her FEG entitlements is 7 July 2017. Unfortunately, the Tribunal has no discretion in this situation. The applicant continued to perform her duties until her employment ended on 10 August 2017. Her other FEG entitlements have been calculated to reflect this reality. There is no scope for the Tribunal to determine that a date should be used to calculate benefits which is different from the actual date of the applicant’s termination.
[7] [2019] AATA 3963 at [37].
This passage was quoted by the Tribunal in Fink and Secretary, Attorney-General’s Department [8] to the effect that there was no discretion in the Tribunal to vary a date of termination to accommodate the circumstances of the applicant and that this was, once again, an unfair outcome, but one mandated by the legislation.
[8] [2021] AATA 734 at [121].
Although Mr Tjoputra in his oral submissions sought to distinguish the factual situations in the various cases quoted, which are indeed not exactly consonant with the facts in this case, nevertheless the legislative framework covering that variety of situations remains one and the same.
CONSIDERATION OF BULLIVANT
Among the list of authorities supplied by the Respondent, a case particularly apposite in this matter was not included.
The facts in Bullivant and Secretary, Attorney-General’s Department[9] were as follows:
(a)A company was in the hands of a Liquidator which, at the time of their appointment had some 60 employees;
(b)One of those employees (Ms Bullivant) was asked by the Liquidators to stay on and she was reassured by them, clearly in a written letter, that in doing so her entitlements would be preserved;
(c)Following the downsizing of the company it eventually came within the definition of a “small business”;
(d)Hence when Ms Bullivant was subsequently terminated from employment it was initially determined that she had no entitlement to redundancy pay pursuant to paragraph 121(1)(b) of the FWA.
[9] [2020] AATA 2047.
Before the Tribunal Ms Bullivant argued that, although there were some qualifications in the letter from the Liquidator,[10] she had an enforceable undertaking with the Liquidator (to preserve her entitlements) such that that undertaking constituted the governing instrument (under section 5 of FEGA) for the purposes of establishing her entitlements.
[10] Ibid at [14].
The Tribunal accepted that such an undertaking had been given, and because that undertaking was given before the company became a small business, the Tribunal found in her favour and hence that she was entitled to make a claim for redundancy payments.
Of course, the critical issue here was that a specific undertaking to protect entitlements was given by the Liquidator, accepted by Ms Bullivant and given at the relevant time.
THE ROLE OF WEXTED ADVISORS
The Tribunal cannot but be critical of the role of the Liquidator (Wexted Advisors) in this sorry saga.
·Wexted asked the two gentlemen to stay on as employees of the Company after it had been sold and ceased to operate. It had an option to take over their employment itself, but it chose instead to keep them on the Company’s books.
·It gave them verbal notice of termination on 4 October 2019 but did not provide written notification (subsection 117(1)) until later dates.
·It asked them specifically to stay on to assist it in the finalisation of the Company’s affairs. Wexted benefited from this, these employees did not.
·It knew that as from 4 October 2019 the Company would morph into a small business. It was involved in and aware of this process.
·It knew, or at least ought to have known, that small business employer status enlivens the provisions of subsection 121(1) of the FWA and hence negated the rights which the two gentlemen might otherwise have enjoyed under section 119 of the FWA had their employment with the Company ceased on 4 October 2019 and not on later dates as a result of their agreeing to assist Wexted in the finalisation of company affairs.
There is a file note created by Fair Entitlements Guarantee officials on 24 July 2020, which reads:
“Telephone call to [name redacted} of the liquidator’s office on mobile number [redacted] to discuss employment conditions of the claimant.
[Redacted] advised that the claimant was terminated verbally on 4 October 2019, however stayed on to assist the IP with post appointment duties.
[Redacted] confirmed there was no change to the terms of the claimant’s employment contract – status quo kept.
Not deemed as a ‘casual’ worker.
[Redacted] advised that no undertaking provided by the IP to the claimant with respect to the payment of redundancy.
[Redacted] advised that what the IP should have done is terminate the claimant in writing on 4 October 2019, to allow them to be entitled to redundancy.”[11]
[11] Tribunal documents (Mr Chetty Budhi) at 431. Emphasis added. IP = insolvency practitioner.
That indeed is what should have been done by Wexted. It was not done. Failure to do it has resulted in the two claimants being trapped in a situation, essentially not of their making but of Wexted’s, that has cost them potential access to significant amounts of money.
In Bullivant the Tribunal made it clear that it expected professional insolvency practitioners to be fully aware of the provisions of the FWA and of the small business exclusion provisions in any dealings with employees.[12] It said:
But the insolvency practitioners would have known, as an elementary matter, that if an employer is a SBE immediately before an employee receives a notice of termination, then section 121(1)(b) of the FWA will generally defeat a FEG redundancy claim. It does not matter if the employer was once a large employer and became an SBE during the course of administration.[13]
[12] Bullivant and Secretary, Attorney-General’s Department [2020] AATA 2047 at [53].
[13] Ibid at [50].
Clearly Wexted’s position is different in that no specific undertaking was provided to either employee in respect of their redundancy entitlements, however as noted in Bullivant, they must have been professionally aware that by asking these employees to stay on until after the Company had been rendered into a small business they were likely to find themselves caught by the provisions of paragraph 121(1)(b).
The Tribunal cannot imagine a situation in which either Mr Chetty Budhi nor Mr Tjoputra would have consented, loyal as they might have been, to run the obvious risk of loss of significant entitlements, had they been appraised fully by Wexted of the relevant provisions of the law in question when they were asked to stay on.
NATURE OF THE OUTCOME
Such an outcome is, of course, entirely at odds with the beneficial intention of the FEGA itself which, in its Objectives clause states:
3 Objects of this Act
The main objects of this Act are:
(a) to provide for the Commonwealth to pay advances on account of unpaid employment entitlements of former employees of employers in cases where:
(i) the employers are insolvent or bankrupt; and
(ii) the end of the employment of the former employees was connected with that insolvency or bankruptcy; and
(iii) the former employees cannot get payment of the entitlements from other sources; and
(b) to allow the Commonwealth to recover the advances through the winding up or bankruptcy of the employers and from other payments the former employees receive for the entitlements.
In his Second Reading speech, the Minister said:
The bill will provide certainty for Australian employees who find themselves without a job and left out of pocket when their employer becomes insolvent or bankrupt and cannot pay them the employment entitlements they are owed.
On this side of the House we know that employees who lose their job through insolvency or bankruptcy of their employer have enough to worry about. They have to worry about where their next mortgage repayment will come from. They have to worry about how to buy the children new clothes or pay school fees. They have to worry about what money will cover unexpected bills or an unexpected emergency. Those of us on this side of the House believe that these individuals should not have to worry about being paid what they have already earned.
It will be a good day for working Australians when this bill passes and they have certainty that their entitlements are protected even if the company they work for enters liquidation and cannot pay them what they are owed.
This bill will protect Australian employees under circumstances which are brought about through no fault or choice of their own.
This bill will ensure that Australian employees who are victims of employer insolvency or bankruptcy, where employment entitlements are owed, are supported by a government that supports Australian workers.
In doing so, this bill also enshrines Labor’s commitment to the Australian sense of a fair go by providing a legislative framework employees can rely on and an entitlement which, unlike the employment entitlements those opposite advocate for, cannot be scrapped with the flick of a pen.[14]
[14] House of Representatives, Hansard, 11 October 2012 page [12032].
It is not so much “the flick of a pen” that has now resulted in these entitlements being rendered nugatory for so many applicants who have come before the Tribunal in recent years, but rather the failure of governments to address this unintended inequity, despite the fact that the Tribunal has pleaded:
“I respectfully suggest that the attention of the Attorney-General be drawn to the injustice that appears to be created in this kind of matter when the intention of the legislature was to enact beneficial legislation.”[15]
[15] Bower and Secretary, Attorney-General’s Department, [2020] AATA 4353 at [20].
In the hope that repetition of this message might lead to some reconsideration of the issues exposed in these cases, this Tribunal can but strongly endorse that sentiment.
Nevertheless, the law must take its inexorable course.
DECISION
The decision under review in relation to:
(a)Mr Erwin Tjoputra (2020/6062) is affirmed; and
(b)Mr Damodhar Chetty Budhi (2020/6382) is affirmed.
I certify that the preceding 32 (thirty -two) paragraphs are a true copy of the reasons for the decision herein of Chris Puplick AM, Senior Member
..................................[sgd]......................................
Associate
Dated: 4 June 2021
Date(s) of hearing: 10 May 2021 Applicant(s): In person Solicitors for the Respondent: Ms K Cooke, HWL Ebsworth Lawyers
0
6
0