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Perspective

Successful application for 70% reduction in redundancy payable

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The Fair Work Commission reduced the redundancy payable to four HyperLife Pty Ltd T/A Acme Preston’s (Acme Preston) employees by nearly 70 per cent due to Acme Preston’s lack of financial capacity to pay.

In light of COVID-19 and associated financial pressures, Acme Preston made a decision to close its Ingleburn site. Acme Preston’s Ingleburn site had received a $200,000 loan from a family company before COVID-19 struck and was still operating at a loss. COVID-19 made it financially untenable and the site had to be shut down. Acme Preston was not eligible for the JobKeeper subsidy because it acquired another business in late 2019 and did not meet the required reduction in turnover.

Acme Preston held discussions with four employees about proposed redundancies of their roles and subsequently confirmed the redundancy decisions in writing.  Acme Preston then made an application to the Fair Work Commission to reduce the redundancy amounts payable by nearly 85 per cent. Importantly, the employees were employed under the Graphics Award and there was no EA or common law contract that increased their entitlement to NES  severance payments (otherwise no access to s.120 FWA)

Lessons

  1. An employer can apply to the Fair Work Commission to reduce the redundancy payable if it obtains other acceptable employment for the employee or 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
  2. The employer must satisfy the Fair Work 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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