Earlier this year, the Fair Work Commission (FWC) issued a decision reducing the redundancy payable to an employee from eight weeks to nil.
JFM Civil Contracting Pty Ltd experienced a significant downturn in business and was operating under negative profit conditions for over a year, after it failed to renew $7.2 million worth of work with the Gold Coast City Council. Employees received a five-week potential notice of redundancy.
The employee in question stopped work at the end of the notice period and remained without work for a further six weeks, at which point he told his employer he could take some casual work elsewhere. JFM Civil Contracting advised him he could return if business improved but he declined, and requested to receive his redundancy entitlement in accordance with the award.
JFM Civil Contracting were, in the first instance, granted a reduction in the redundancy payable from $12,000 to $0. In seeking the reduction, JFM Civil Contracting cited its incapacity to make the payment.
A FWC Full Bench has since quashed this decision, finding that the employee’s entitlement to redundancy stemmed from an industry-specific redundancy scheme in a modern award, which is excluded from the right of reduction under s.123 of the Fair Work Act 2009 (Cth) (FW Act). It did not stem, like most Awards who defer to the National Employment Standards, under the FW Act. It was held that the FWC had no jurisdiction to order the reduction.
Lesson for employers: Check your Award
If the Award has an industry-specific redundancy scheme, an employer cannot seek a reduction in redundancy payable.
If the Award refers to the National Employment Standards, an employer can apply to the Commission to reduce the redundancy payable, in the following circumstances:
- Other acceptable employment is obtained for the employee, or the employer cannot pay the amount (only if the employee’s entitlement to redundancy pay stems from section 119 of the Fair Work Act – not if it arises under an enterprise agreement); and
- The employer must satisfy the Commission it is not financially competent or possessed of the necessary funds to make the payment, and has no reasonable source of funds. The assessment of financial competence will include consideration of the financial standing of the business including its cash position and assets.
Written by Nes Demir
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