Webbers Retravision Gladstone

[2013] FWC 5417

[2013] FWC 5417 Note: An appeal pursuant to s.604 (C2013/6155) was lodged against this decision - refer to Full Bench decision dated 9 January 2014 for result of appeal.

FAIR WORK COMMISSION

DECISION

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

Webbers Retravision Gladstone
(C2013/4929)

COMMISSIONER SPENCER BRISBANE, 6 SEPTEMBER 2013

Variation of redundancy pay.

[1] This decision relates to an application filed on 27 June 2013 pursuant to s.120 of the Fair Work Act 2009 (Cth) (the Act). The Application has been made by Webbers Retravision Gladstone. A review of the documentation filed however reveals that Webbers Retravision Gladstone is not a corporate entity. The actual identity of the employer, from the material is Neonlyn Pty Ltd T/A Webbers Retravision Gladstone ABN 62 713 408 499 1 (the Applicant).

[2] The Applicant has applied to the Fair Work Commission (the Commission) seeking that the redundancy entitlement of a group of employees (the Respondents) be reduced to nil. The employees to which the application relates are:

● Trudy Leschniok;

● Michael Penrose;

● Paul Dowley;

● Anne-Maree Boston;

● Crystal Smith; and

● Natalie Anderson.

[3] The Applicant has made the claim on that basis that the Applicant submits that it is unable to pay for the redundancy entitlements.

[4] Directions were issued for the filing of material in the application. On the basis of the nature of the application, the material filed in the matter and the views of the party the Commission determined that the matter could efficiently be determined on the papers.

[5] While not all submissions and evidence filed in this matter have been referred to, all of such have been considered.

Background

[6] The Applicant operated three stores under the brand name “Webbers Retravision” at Gladstone, Rockhampton and Mackay. While it is not clear in the material it seems that the Applicant operated the stores through some sort of franchise arrangement with Retravision. It is the Gladstone store which is of relevance to the present application.

[7] The Respondent’s were employed in various positions at the Applicant’s Gladstone store.

[8] A letter was sent to the relevant employees on 24 June 2013 under the hand of Mr J Webber, Proprietor or Webbers Retravision. This correspondence disclosed that the Applicant would cease trading in Gladstone o Friday 28 June 2013 “due to circumstances beyond our control”.

[9] The letter further refers to “notice” given by Mr Doug Webber, Director, during a store visit on 31 May 2013 or through “subsequent advising” (sic) by the Store Manager, Ms Trudy Leschniok, who is a Respondent in these proceedings.

[10] The Applicant then ceased trading in Gladstone. This application was filed some weeks later.

Relevant legislation and award clauses

[11] The National Employment Standards (NES) prescribe the minimum entitlements to redundancy pay pursuant to s.119 of the Act:

119 Redundancy pay

Entitlement to 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.

Note: Sections 121, 122 and 123 describe situations in which the employee does not have this entitlement.

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

[12] The application has been made pursuant to s.120 of the Act which 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.

[13] The Applicant specifically relies upon s.120(1)(b)(ii).

[14] The Applicant submitted that the General Retail Industry Award 2010 [MA000004] (the Award) covered and applied to the employment of the Respondents. Clause 15.1 of the Award provides that redundancy pay is provided for in the NES.

Applicant submissions and evidence

[15] The originating application filed by the Applicant was incomplete in that it did not identify the individual Respondent’s to the application. The applicant filed supplementary material to provide the details of each Respondent for whom an Order was sought.

[16] The Applicant also filed some supporting material in relation to the application. The Commission issued Directions to the parties regarding the filing of submissions and evidence in the application. The Applicant contacted Chambers by phone to query the requirements of the Directions. The Applicant advised that they wished to rely solely on the material already filed. Correspondence was sent from Chambers to the Applicant on 24 July 2013 advising of the ability for the Applicant to file additional material to support the application. The Applicant did not file any additional material in support of the application.

[17] The Applicant submitted that the Gladstone store was purchased so that “Restravision in Gladstone would be still be (sic) operating and providing a service”. 2 The contract date of the purchase was January 2010. The Applicant has operated the store since that time

[18] The Applicant submitted that Retravision (the national corporation) went into liquidation in the eastern state of Australia in May 2012 and in Queensland in June 2012. It was submitted that this has had a “detrimental effect” on the Applicant as Retravision “centrally accounted our (the Applicant’s) stock”. Additionally the Applicant said that the effect of Restravision’s liquidation has also meant that suppliers to the Applicant have cut credit limits and supply.

[19] The Applicant submitted hat there has also been a general downturn in the economy, affecting the retail sector. The Applicant submitted that the Gladstone store, being the store at which the Respondents were employed, has shown a loss of approximately $500,000 in the last 11 months to May 2013.

[20] The Applicant submitted that the Owner (personally) has had to mortgage his home to cover some of the losses. The business in Rockhampton was also stated to be “severely mortgaged to the bank”. The Applicant submitted that if they were required to pay the outstanding redundancy entitlements they would be forced into bankruptcy.

[21] The Applicant submitted that the amount of redundancy owing, in total, for the six Respondent’s is $30,406.40. The Applicant has calculated this figure on the basis of continuous service only being counted for the period since the purchase of the store (January 2010). The Applicant submitted that as the previous business employed less than 15 staff the employees were not, as at the date of the transfer of business, entitled to redundancy, and that this prior period of service does not count towards the calculation of redundancy entitlements. The Applicant however accepted that they did recognise the employees’ service for the purposes of annual leave, personal and long service leave.

[22] The Applicant also submitted that two employees have taken periods of long service leave. As to the relevance this plays in the application, the Applicant did not clarify in the submissions.

[23] The Applicant also stated that “several” of the Respondent’s have obtained alternative employment. The Applicant has not however made any submissions or provided any evidence regarding s.120(1)(b)(i) of the Act and how such employment was “obtained” or was “acceptable” employment.

[24] Two additional staff were employed at the time of the closure of the business, however the Applicant submitted, they were employed for less than 1 year and therefore not entitled to redundancy pay.

Respondents submissions and evidence

[25] The Respondents collectively filed a statement in response to the application.

[26] The Respondents agreed that Mr Doug Webber attended the store on 31 May 2013 to advise those staff that were present, about the Applicant’s decision to cease trading at the Gladstone store. The Respondents stated that those employees not present at the store on that day had to subsequently be advised by Ms Leschniok or, in the case of Ms Smith, by another employee who attended at Ms Smith’s property to advise her of the advice. The Respondents submitted their belief, that all staff should have been advised personally by the owners of the business.

[27] The Respondents submitted that Ms Leschniok contacted Webbers Retravision at Rockhampton “numerous times” to request written confirmation of the impending redundancies.

[28] The Respondents referred to the letter of 24 June 2013 which they stated was provided on 25 June 2013. The Respondents submitted that this letter referred the employees to a payout of annual leave and long service leave entitlements (if any) but made no mention of redundancy entitlements.

[29] The Respondents stated that they were only advised of the Applicant’s intention to file an application in this Commission at 4pm on the final day of work, being 28 June 2013.

[30] The Respondents submitted that in any case the Applicant’s calculations, made on the basis of service since January 2010, is incorrect. The Respondents submitted that they have made contact with the Fair Work Ombudsman (FWO). The Respondents stated that the advice of FWO was that their entire period of service would be counted for the purposes of redundancy pay because the Applicant recognised their service the purposes of annual leave, personal leave and long service leave.

[31] The Respondents stated that while some of the Respondents have now gained further employment there was no attempt on the part of the Applicant to find that employment. In so far as the Applicant’s submissions in this regard was concerned the Respondents submitted that the Applicant has not obtained, suitable acceptable employment for the Respondents.

[32] The Respondents implicitly accept that the Gladstone store may have been running at a loss. They submitted however that any such loss was only on paper, or at the making of the Applicant. The Respondents stated that it was the practice of the Respondent to “stock adjust” between the Gladstone and Rockhampton store. The effect of which is that Gladstone would incur the expense of stock, the stock would be “stock adjusted” to the Rockhampton store, the Rockhampton store would then record the asset or sale of the item. This, in the submission of the Respondents lead to deficits in the Gladstone books.

[33] The Respondents submitted that the Applicant does have the ability to pay the redundancy obligations. This was said to be so either from the assets of the company itself or personally from the Directors.

[34] The fact that the Rockhampton store was so significantly mortgaged was evidence, so it was submitted, that there was, somewhere, a large amount of equity (which I take to mean security) against which that mortgage was secured.

Consideration

[35] An application pursuant to s.120 has multiple elements of which the Commission must be satisfied prior to issuing an Order.

[36] Firstly the wording of the section is that an entitlement to redundancy pay must exist in order for the Commission to vary that redundancy pay entitlement. Fair Work Australia (FWA) has previously held that in order for s.120 of the Act to have any application there must first be an entitlement to redundancy pay pursuant to s.119 of the Act. 3 Further it was held in that matter that where there is no entitlement under s.119 there can be no order to reduce the “entitlement” pursuant to s.120.4

[37] It is in dispute between the parties what the exact quantum of the entitlement to redundancy pay is. It is noted that the prior period of service has been recognised for the purposes of long service leave and annual leave. It is sufficient for the purposes of this decision that both parties accept, and the Commission is satisfied, that the named Respondents have an entitlement to redundancy pay, pursuant to s.119 of the Act, subject to any order that the Commission may make.

[38] So far as the Applicant has purported to make an application pursuant to s.120(1)(b)(i) of the Act, in reliance upon acceptable employment, the application is dismissed. No evidence of any efforts on the part of the Applicant to “obtain” acceptable alternate employment for the Respondents was submitted. That is, no evidence of any alternate employment was submitted or sought by the Applicant to enable the Commission to assess the “acceptable” nature of that employment.

[39] The primary application has been made alleging that the Applicant “cannot pay the amount” pursuant to s.120(1)(b)(ii) of the Act. In considering an application pursuant to this section Commissioner Raffaelli in PYL Nominees Pty Ltd ACN 120 344 649 as Trustee for the Lesina family Trust T/A Mundi Clothing Co 5 (PYL Nominees) said:

“[30] It is clear that Mr and Mrs Lesina have been unsuccessful in their business venture. So much is evident from the evidence, particularly of Ms Clarke. The problems existed from the start.

[31] The question of course is why should the six employees pay for unfortunate management decisions.

[32] I have balanced all the material before me and have decided in all the circumstances to give greater weight to the predicament of the employees.”

[40] Similar circumstances exist in the current matter in so far as the Applicant made a business decision electing to close one poorly performing store, leaving the employees redundant.

[41] The Applicant submitted a “Profit and Loss Statement” for the period 1 July 2013 to 31 March 2013 that provided income figures for the three stores being Gladstone, Mackay and Rockhampton. Without divulging confidential business information the Commission is satisfied that the total income was substantial. The income for the Gladstone store for the period was in the millions.

[42] The Applicant has not provided an audited Profit and Loss Statement for any of the stores. The Applicant has provided submissions of the Applicant’s financial status where reference has been made to another property and reasons why it would be currently unattractive to liquidate such.

[43] Further the Applicant (Mr Jim Webber) made reference to the business property owned in trust by the family company as well as a family beach unit at Yeppoon. The Applicant referred to mortgages in place over these properties.

[44] The Applicant’s submitted that they were not able to form an accurate picture of the business losses until new Accountants were introduced this year. The Applicant stated that the Accountant’s view was that they ‘were trading insolvent’. The Applicant stated that an investment property was sold in May this year, to pay some of the business debts.

[45] Mr Douglas Webber (son of Mr Jim Webber) provided a general statement regarding the sale of a unit in New Zealand. Further reference was made to the sale of vehicles and the sale proceeds being used to pay out the leases. He also made submissions regarding ongoing efforts to maintain the Rockhampton store.

[46] The starting point is that employees are entitled to redundancy pursuant to the provisions of the Act, read in conjunction with the relevant Modern Award. The critical issue is, on the material, why should the employees forgo an entitlement to their redundancy payment in circumstances where there is an absence of material, in terms of the Applicant’s business overall, justifying an incapacity to pay.The onus rests solely on the Applicant/Employer to prove their case under either of the alternatives put in s.120.

[47] All of the material filed has been considered and in all the circumstances it is appropriate to give greater weight to the predicament of the employees, given the submissions and evidence provided.

[48] The Applicant has not satisfied, on the basis of evidence and submissions, that the Applicant has an incapacity to pay the severance entitlements (pursuant to s.120(b)(ii) of the Act). Further the Applicant has not demonstrated that they, in the alternative, obtained other acceptable alternative employment for the employees (pursuant to s.120(b)(i) of the Act).

[49] Accordingly in all the circumstances, that are not dissimilar to those before Raffaelli C in PYL Nominees, I have assessed the Applicant’s material provided, and there is an absence of satisfactory incapacity to pay evidence and a lack of evidence that the Respondent obtained acceptable alternative employment for the Respondents. Greater weight has there been given to ‘the predicament of the employees’. Accordingly it is determined not to reduce the amount of redundancy pay due to each Respondent former employee.

[50] The application for a variation to the redundancy pay owed to each of the named Respondent’s is dismissed.

[51] I Order accordingly.

COMMISSIONER

 1   Refer appendix 1 to statement of Respondent’s being letter dated 24 June 2013.

 2   Applicant submission dated 27/6/2013 at

 3   Application by CAE Australia Pty Ltd [2012] FWA 7992 per Watson VP at [13].

 4   Ibid; also refer M & S Dickson [2011] FWA 5206 per Lewin C.

 5   [2011] FWA 1581.

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