Villa Crerarii Pty Ltd v Daniel Kahl

[2013] FWC 903

[2013] FWC 903

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.120—Application to vary redundancy pay

Villa Crerarii Pty Ltd
v
Daniel Kahl
(C2012/5843)

COMMISSIONER DEEGAN CANBERRA, 7 FEBRUARY 2013

Application to vary redundancy pay - incapacity to pay.

[1] On 1 November 2012 Villa Crerarii Pty Ltd (the employer) made an application to Fair Work Australia pursuant to s.120 of the Fair Work Act 2009 (the Act) seeking a reduction or removal of the responsibility to pay redundancy pay to a former employee, Mr Daniel Kahl. The application was made on the ground set out in s.120(1)(ii) of the Act, that the employer cannot pay the amount.

[2] The matter was listed for hearing on 14 November 2012. At the hearing the employer was represented by an administration clerk, Ms Marilyn Jordan and the respondent appeared in person. The respondent objected to the making of the order.

[3] Ms Jordan, on behalf of the employer lodged a number of documents in support of the application, including

• The Profit and Loss Statement for the 2011/2012 financial year



• The Profit and Loss Statement for the first quarter of the 2012/2013 F/Y



• The Statement of the employer’s debt to the Australian Taxation Office



• Bank Statements for September and October 2012



• Current cash flow statement prepared by the company accountant.

[4] A letter lodged by the owner /director of the employer, Mr Bruce Crerar noted that Mr Kahl had worked for the company for just over three years and was entitled to a redundancy payment of 7 weeks wages which amounted to $5,883.50. He noted that due to a significant downturn in work the company was unable to pay this amount. According to the letter two apprentices that had been employed by the company had also had their employment terminated, one before and one after the applicant. Additionally two other employees were made redundant earlier in 2012 and both had been paid all their entitlements, including their redundancy pay. According to Mr Crerar the company, as at November 2012, employed 13 employees (including the applicant and his wife) and “we have been doing everything in our power to keep these workers employed”.

[5] On the basis of the evidence supplied in November 2012 I was not prepared, at that time, to make an order relieving the employer of all or some of the obligation to make the redundancy payment to Mr Kahl. There was some anticipation that the company fortunes might improve in the coming months. On 15 November 2012 I made an interim order relieving the employer of the obligation to make the payment to Mr Kahl “until further order,” indicating that the matter would be relisted early in 2013 for a final determination.

[6] A further hearing took place on 1 February 2013 by telephone. On this occasion Mr Bruce Crerar appeared for the employer. Mr Crerar advised that since November he had been forced to make two additional employees redundant but was striving to keep the company going and to continue to employ the remaining employees so as not to lose their specialised skills for the future. He also advised that the company’s financial position had not improved and provided a Profit and Loss Statement for January 2013, a recent ATO Statement of Debt and Bank Statement for November and December. Detailed evidence was given of the outstanding debts but this was provided on a Commercial-In-Confidence basis and it is not necessary to reveal the detail.

[7] In response Mr Kahl noted that he had been unable to find work, other than some intermittent casual work, since his termination. He was intending to take up full-time study in the near future and had been forced to live on his savings as, having only Permanent Resident status, he was not entitled to social security benefits.

Consideration

[8] 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. Sections 119-121 of the Act provide:

119 Redundancy pay

(1) An employee is entitled to be paid redundancy pay by the employer if the employee’s employment is terminated:

(a) at the employer’s initiative because the employer no longer requires the job done by the employee to be done by anyone, except where this is due to the ordinary and customary turnover of labour; or

(b) because of the insolvency or bankruptcy of the employer.

Amount of redundancy pay

(2) The amount of the redundancy pay equals the total amount payable to the employee for the redundancy pay period worked out using the following table at the employee’s base rate of pay for his or her ordinary hours of work:

Redundancy pay period
Employee’s period of continuous service with the employer on termination	Redundancy pay period
1	At least 1 year but less than 2 years	4 weeks
2	At least 2 years but less than 3 years	6 weeks
3	At least 3 years but less than 4 years	7 weeks
4	At least 4 years but less than 5 years	8 weeks
5	At least 5 years but less than 6 years	10 weeks
6	At least 6 years but less than 7 years	11 weeks
7	At least 7 years but less than 8 years	13 weeks
8	At least 8 years but less than 9 years	14 weeks
9	At least 9 years but less than 10 years	16 weeks
10	At least 10 years	12 weeks

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.

121 Exclusions from obligation to pay redundancy pay

(1) Section 119 does not apply to the termination of an employee’s employment if, immediately before the time of the termination, or at the time when the person was given notice of the termination as described in subsection 117(1) (whichever happened first):

(a) the employee’s period of continuous service with the employer is less than 12 months; or

(b) the employer is a small business employer.

(2) A modern award may include a term specifying other situations in which section 119 does not apply to the termination of an employee’s employment.

(3) If a modern award that is in operation includes such a term (the award term), an enterprise agreement may:

(a) incorporate the award term by reference (and as in force from time to time) into the enterprise agreement; and

(b) provide that the incorporated term covers some or all of the employees who are also covered by the award term.

[9] At the time of Mr Kahl’s termination he had been employed for over 3 years by the applicant company which was not a small business for the purposes of s.121(1)(b) of the Act. Mr Kahl was employed under the Joinery and Building Trades Award 2010 [MA000029] which contains a provision (clause 17.4) under which s.119 does not apply but this provision concerns only small businesses. It is not disputed that Mr Kahl had a redundancy entitlement because of s.119.

[10] While the discretion to grant an application of this nature is very broad I must exercise it in the knowledge that any order I might make not only relieves the employer of the obligation to pay but also disentitles the applicant from recovering the entitlement through other means should the company be liquidated. These were matters taken into consideration by Raffaelli C in PYL Nominees Pty Ltd as Trustee of the Lesina Family Trust t/as Mundi Clothing Co 1. In rejecting an application by PYL Nominees to reduce the amount of redundancy pay to nil based on incapacity of the employer to pay Raffaelli C, noted:

[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.

[11] This is a case where there is a prospect that reducing the entitlement of Mr Kahl may well have a beneficial effect on other employees, enhancing their prospects of being able to remain in employment. I accept Mr Crerar’s evidence that he is making every effort to keep the company operating and his remaining employees in employment despite the very difficult financial position of the company.

[12] Clearly there is no cash available to the company at this point in time with which the redundancy payment might be made to Mr Kahl. While I sympathise with Mr Kahl’s situation I must have regard to the evidence that the current employees have not been paid their wages on time and that any payment to Mr Kahl might reduce their prospects of receiving these payments.

[13] The legislation envisages that there will be cases in which it is appropriate to remove an employer’s obligation to make a redundancy payment on the ground that the employer is unable to pay. In very few cases would it be appropriate to do so, particularly given the effect such an order would have on the employee’s right should the company be wound up. The decisions acknowledge that an appropriate case for such an order is one where the order would have a beneficial effect on the prospects of other employees. It is my decision that this is such a case. If the company is required to make the payment to Mr Kahl it may well have the effect of putting in jeopardy the employment of the remaining employees. As Mr Kahl has found finding other employment in the area so difficult I am reluctant to take any course which may bring about such a result.

[14] I am satisfied that in this case the employer cannot pay the redundancy pay entitlement of Mr Kahl. I will grant the application and reduce the obligation upon the employer to nil. An order to that effect will issue separately.

COMMISSIONER

Appearances:

Ms M. Jordan and

Mr B. Crerar, for the Applicant.

Mr D. Kahl in Person.

Hearing details:

2012.

Launceston:

November 14.

2013.

Canberra/Launceston (by telephone):

February 1.

 1   [2011] FWA 1581

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