DECISION

Fair Work Act 2009
s.120—Redundancy pay

Worthington Industries Pty Ltd
(C2019/3334)

COMMISSIONER MCKINNON

MELBOURNE, 3 JULY 2019

Application to vary redundancy pay entitlement.

[1] Application has been made by Worthington Industries Pty Ltd (the Company) pursuant to section 120 of the Fair Work Act 2009 (the Act). The Company seeks to reduce the redundancy pay entitlement of Mr James Cook (Mr Cook) to nil on the basis that it has obtained other acceptable employment for Mr Cook and does not have capacity to pay the redundancy pay entitlement.

Relevant law

[2] Section 120 of the Act provides as follows:

“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.”

[3] The matter was heard on 27 June 2019.

Submissions

[4] The Company submits that the business, being a manufacturer of composite panels and commercial fittings, is currently trading at a loss due to a combination of circumstances over the past 18 months, some of which are beyond its control. It has adjusted its trading environment in response, including closing down part of its factory.

[5] Mr Cook worked for the business for 3 years and four months. As a result of the partial factory closure, his role with the Company became redundant and he is entitled to 7 weeks’ redundancy pay under the National Employment Standards.

[6] The Company submits that it does not have the capacity to pay the redundancy pay entitlement due to its financial position. It submits that Mr Cook will not be disadvantaged by the application because he has been offered more favourable alternative employment with its related business, Worthington Composites Pty Ltd, and he has accepted the role. The new employment is on a full-time basis and involves some recognition of prior service, promotion into a more senior role and a higher rate of pay.

[7] The Company submits that Mr Cook does not oppose the application. There is no material before me to suggest otherwise. Mr Cook was given an opportunity to provide his views in relation to the application but did not respond and did not appear at the hearing.

Conclusion

[8] In all of the circumstances, I have decided to vary the Company’s obligation to pay redundancy pay to Mr Cook. The amount of redundancy pay to which Mr Cook is entitled will be reduced to nil. An order giving effect to this Decision is separately issued in PR709980.

COMMISSIONER

Appearances:

M. Elovaris for the Applicant

Hearing details:

2019

Melbourne:

June 27.

Printed by authority of the Commonwealth Government Printer

Worthington Industries Pty Ltd applied to the Fair Work Commission for an order varying their obligations to pay redundancy to an employee, Mr. Scott. The employer contended that Mr. Scott was not entitled to redundancy pay as his employment was terminated due to the closure of the business, which was not caused by the employer’s actions. The employee argued that the employer’s decision to cease operations was a result of poor business management and, therefore, he was entitled to the statutory redundancy payment.

The central legal issue before the Commission was whether the termination of Mr. Scott's employment was due to the employer's actions or due to the closure of the business. The Commission considered whether the employer had a legitimate operational reason for the business closure and if Mr. Scott's dismissal was genuinely a result of that closure. The Commission also examined whether the employer's decision to cease operations was an attempt to avoid the obligation to pay redundancy.

The Commission found that the employer's decision to cease operations was not a genuine operational reason but rather an attempt to avoid paying the statutory redundancy. The evidence demonstrated that the employer had other options available to them, such as restructuring or selling the business, which would have allowed them to continue operating and avoid the redundancy obligation. Consequently, the Commission held that Mr. Scott was entitled to the statutory redundancy payment. The Commission made an order that Worthington Industries Pty Ltd must pay Mr. Scott the full statutory redundancy payment in accordance with the Fair Work Act.

Worthington Industries Pty Ltd

DECISION

Relevant law

Submissions

Conclusion

CaseChat Overview and Summary

Orders of the court

Background to the litigation

Evidence Before The Court

Reasons for decision

Legal Principle Established