Tunnelcorp Pty Ltd v Mr David Pollock
[2018] FWC 482
•24 JANUARY 2018
| [2018] FWC 482 |
| FAIR WORK COMMISSION |
| DECISION |
Fair Work Act 2009
s.120 - Application to vary redundancy pay for other employment or incapacity to pay
Tunnelcorp Pty Ltd
v
Mr David Pollock
(C2017/6526)
| COMMISSIONER HUNT | BRISBANE, 24 JANUARY 2018 |
Variation of redundancy pay.
Mr David Pollock was employed by Tunnelcorp Pty Ltd (Tunnelcorp) as Manager – Major Projects from 1 June 2015 until his dismissal on 24 November 2017 due to redundancy. Mr Pollock had served more than two years, and on becoming redundant, was entitled to a payment of six weeks’ redundancy pay in accordance with s.119(2) of the Fair Work Act 2009 (the Act).
The amount owed to Mr Pollock by Tunnelcorp is $21,679.38 gross.
On the last date of Mr Pollock’s employment, Tunnelcorp made an application under s.120 of the Act to vary the amount of redundancy pay payable to Mr Pollock on the basis that it cannot pay the redundancy amount. Mr Pollock refuted that Tunnelcorp cannot pay the amount owed to him.
Following a telephone conference before me on 7 December 2017, directions were issued for the filing of written materials by the parties prior to a hearing of the application. Tunnelcorp did not file any material in accordance with the first compliance date as directed. Mr Pollock filed a witness statement and submissions in support of his position. Tunnelcorp subsequently filed a statement of Mr Allan David Johnson, Director in support of the application.
The application was heard in Brisbane on 23 January 2018. Mr Johnson attended by telephone and gave evidence on behalf of Tunnelcorp. Mr Pollock appeared in person and gave evidence on his own behalf.
Evidence and submissions
Mr Johnson’s evidence is that in the lead up to Mr Pollock’s dismissal, Tunnelcorp’s financial position was ‘bad and getting worse’,[1] such that it had no other option but to terminate his employment. Mr Johnson’s evidence is that since Mr Pollock’s termination in late November 2017, Tunnelcorp has remained in financial distress. He stated that without some form of relief in the amount to be paid to Mr Pollock, Tunnelcorp will find itself in “greater hardship and a greater chance of failure and of further terminations.”[2]
Tunnelcorp did not present any financial records to the Commission for consideration. On questioning from me, Mr Johnson’s evidence was to the following effect:
(a) The company continues to trade;
(b) The company has not appointed an administrator or liquidator;
(c) Attempts have been made to sell the business, together with a related entity, Johnson Contracting and Hire Pty Ltd;
(d) The weekend prior to the hearing, the company completed a significant piece of work for a major client, Lendlease;
(e) The Lendlease work was completed at considerable expense to Tunnelcorp. A decision was made to continue to employ employees to perform this work to prevent Lendlease making a claim of penalties or damages against Tunnelcorp for failure to meet its contractual obligations;
(f) Approximately 10 employees remain employed, and the payroll for the week of 9 January 2018 was $18,021 (excluding the salary of Mr Jim Perry, General Manager who is paid a monthly salary);
(g) The payroll for the week of 16 January 2018 was $17,656 (excluding the salary of Mr Perry);
(h) The company owns a number of highly specialised equipment, together with utility vehicles and excavators. Mr Johnson’s broad estimation of the value of the equipment is approximately $200,000;
(i) Mr Johnson’s broad estimation of known liabilities to the Australian Taxation Office (ATO) and to creditors is approximately $2 million;
(j) Tunnelcorp has appointed a consulting company to assist with the pressing financial predicament and to assist with communication to the ATO.
Mr Johnson informed the Commission that Tunnelcorp hires additional equipment, when required, from a related body corporate, Johnson Contracting and Hire Pty Ltd. Mr Johnson has an interest in both companies.
Mr Johnson requested further time be granted to obtain financial information which would demonstrate Tunnelcorp is in a difficult financial position. I questioned Mr Johnson if the financial information would demonstrate that the payment to Mr Pollock of $21,679.38 would result in Tunnelcorp being unable to meet its debts and liabilities, to which Mr Johnson answered that it would not, in the short term. His evidence was to the effect that the requirement to make the payment would increase the chances or likelihood of the company failing at some point in the future, but not immediately.
Mr Pollock was afforded the opportunity to cross-examine Mr Johnson, and Mr Pollock also gave evidence in support of his objection to the Commission granting the application in part or in full. Mr Pollock informed the Commission that he had not yet secured employment, and Tunnelcorp’s resistance in paying to him the redundancy pay owed to him was causing a financial strain on his family’s resources.
Mr Pollock submitted that the application has been made by Tunnelcorp to delay the payment of the monies owed to him.[3]
I decided against allowing further time for Tunnelcorp to provide further financial information for the Commission’s consideration. Tunnelcorp was afforded ample opportunity to provide documentary evidence in accordance with the directions; it failed to avail itself of that opportunity. In addition, on Mr Johnson’s evidence, further material would not assist in the Commission’s determination that Tunnelcorp cannot pay to Mr Pollock the amount owed to him. Having heard from Mr Johnson, any further financial information would reveal that the payment due to Mr Pollock would put strain on the company, but would have no greater effect.
Mr Johnson was asked by me why Tunnelcorp had nominated the amount owed to Mr Pollock to be reduced by the Commission to nil, to which he answered that Tunnelcorp would be in a position to pay to Mr Pollock 50% of the amount owed, but could not pay 100% of the amount owed.
Mr Pollock responded that he would be agreeable to receiving 50% of the amount owed to him in the short-term, with the balance to be paid by instalments. I discussed with the parties that if this type of arrangement was made, it would be a private arrangement agreed to by the parties, and not one which the Commission could order relevant to this application.
Mr Johnson considered Mr Pollock’s offer and rejected it, stating that Tunnelcorp could only pay to Mr Pollock 50% of the amount owed, but would not be in a position to pay the balance to Mr Pollock. No financial documents were provided to support this submission.
Consideration
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. (my emphasis)
(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.’
If the application was granted in part or in full, in the event Tunnelcorp later become liquidated, Mr Pollock 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).
In PYL Nominees Pty Ltd as Trustee of the Lesina Family Trust t/as Mundi Clothing Co[4] 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.’
At the time the application was made to the Commission, Tunnelcorp was trading, and on Mr Johnson’s evidence, employing a reasonable number of employees to ensure important jobs were completed. In just two weeks the payroll to employees was in excess of $35,000, not including the monthly salary paid to the General Manager.
On learning that an important job has now been completed, and Tunnelcorp now has less than 15 employees, in the event other employees are made redundant, there would be no obligation under the Act to make redundancy pay payable to those redundant employees. On the material before the Commission, with the important jobs completed, it would appear some of those employees may no longer be required.
As in the case referred to above, this does not appear to be a case where reducing the payment owed to Mr Pollock may enhance the prospects of other employees being able to remain in employment.
The discretion to grant an application to vary redundancy pay is a broad discretion.[5]
Tunnelcorp has failed to demonstrate that the application has been made because it cannot pay the amount, or part of the amount owed to Mr Pollock. 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).
The applicant has not provided any financial information for the Commission’s consideration to satisfy the Commission that the payment of $21,679.38 or part of that amount would result in Tunnelcorp limping towards administration or liquidation. I do not consider that Tunnelcorp has an incapacity to pay to Mr Pollock $21,679.38.
While it is true the stated liabilities of Tunnelcorp outweigh its assets, Tunnelcorp has a substantial amount of assets, together with that of its related body corporate, Johnson Contracting and Hire Pty Ltd. No assets have been sold to assist in the payment to Mr Pollock of the amount owed to him. There is no evidence before the Commission of the timeframe in which Tunnelcorp is required or obliged to attend to its liabilities, and on Mr Johnson’s evidence it does not appear to be an immediate or short-term obligation.
In all of the circumstances I have determined not to grant the application as sought by Tunnelcorp. I will not reduce the amount of redundancy pay owed by Tunnelcorp to Mr Pollock as I am not satisfied that Tunnelcorp cannot pay the amount owed.
The application is dismissed.
COMMISSIONER
[1] Witness statement of Allan David Johnson at [5].
[2] Ibid at [10].
[3] Witness statement of David Pollock at [24].
[4] [2011] FWA 1581.
[5] Moltoni Waste Management v P Fairs, R Ellen and K Birkett[2012] FWC 5590 at [25] (Bisset C).
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