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Fair Work Commission rejects employer’s request for 80% reduction in redundancy payable

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Fair Work Commission rejects employer’s request for 80% reduction in redundancy payable

22 June 2020 by Kim McLagan & Nes Demir

In Print Logistics Unit Trust [2020] FWC 3128, Print Logistics (Aust) Pty Ltd (Print Logistics) was unable to secure a reduction in the redundancy payable to one of its employees, (Ms Karwa).

Print Logistics’ financial position declined rapidly in recent months as a result of the significant impact of COVID-19 and the associated lockdown and deterioration in economic activity. Its financial reports clearly show it is in a poor financial position. Its accounts payable are approximately double that of accounts receivable and it has been renegotiating payments to suppliers to account for the financial difficulties it is currently facing.

However, this was not enough to satisfy the Commission that Print Logistics’ is not financially competent or possessed of the necessary funds to make the payment. Despite its poor financial position, Print Logistics it has approximately $120,000 cash at bank. This is in contrast to last week’s case in which Acme Preston was successful in its applications – read more, here. The Commission found the reduction sought ($5,593.60) would provide only some small assistance to Print Logistics’ financial position.

Lessons

  1. An employer must prove it is not financially competent or possessed of the necessary funds to make the redundancy payment and has no reasonable source of funds. This includes establishing the reduction will significantly assist its financial position – for example, by having a beneficial effect on other employees thereby enhancing their prospects of continued employment. It is not enough that it will be beneficial or convenient to not pay the amount.
  2. If a business is likely to become insolvent, the Commission will consider the effect the sought reduction will have on the status of the employee as a potential creditor (i.e. diminishing their rights under GEERS).

Have a question or need advice?

Our team is available to clarify any questions you have and provide the right advice for your business and workforce. Contact Andrew Douglas at andrew.douglas@fcwlawyers.com.au or on 0488 151 503.

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