HyperLife Pty Ltd t/a Acme Preston v Brennan [2020] FWC 3080: Redundancy Payments Reduced

In HyperLife Pty Ltd t/a Acme Preston v Brennan [2020] FWC 3080 (12 June 2020), Deputy President Dean has granted a Sydney-based manufacturing firm (“ACME Preston”) a $29,606 reduction in redundancy payouts across a total of four hearings, essentially cutting 29 weeks’ worth of entitlements for workers at the company’s manufacturing plant.

Background

SmartCompany reports that in May 2020, ACME Preston initially appealed to the Fair Work Commission (“FWC”) for a "variation in redundancy payouts", claiming the company was in severe financial stress due to the COVID-19 pandemic and would be unable to pay $44,000 in entitlements originally owed to workers it had laid off in April 2020.

Workplace Assured reports one of the employees was aged 61 while two of the employees had more than 10 years’ service. Their owed redundancy pay ranged from six to 13 weeks. The employer applied to reduce the payments to either one or two weeks’ pay.

Currently, workers are entitled to between four and 12 weeks’ pay when they are made redundant, but there is a provision in the Fair Work Act 2009 (Cth) allowing the FWC to reduce this amount if an employer is unable to pay the entitlements.

Business Shutdown

Company Director, Craig Dowson, who bought the company in 2019, made the four staff redundant after deciding to close down the operation amid the coronavirus crisis. He argued the business was unable to make full payouts to staff, submitting documents showing the company had just $38,000 in cash on hand, having already drawn on a $200,000 loan from his family business. He claimed that third party lenders had not been forthcoming with additional capital.

It was noted at [para 13] of the ruling:

The Redundancies

The four workers were officially made redundant on 17 April 2020, which was three days before JobKeeper enrolments opened and six days before the details of the alternative test were published. However, the alternative test was previously flagged in public comments by Federal Treasurer Josh Frydenberg and the ATO, including that businesses that had made acquisitions would be catered for in the scheme.

Dean DP noted at [para 21]:

JobKeeper Eligibility

Mr Dowson explained that the Company did not meet the reduction in turnover requirements due to having acquired another business in November 2019 and was not eligible for the Federal Government’s JobKeeper payment.

Speaking to SmartCompany Mr Dowson said the business had "subsequently applied for wage subsidies under the Australian Tax Office’s alternative test and had been accepted".

Implications of the Appeal

Workplace Assured reports that the current COVID-19 pandemic has created some exceptional circumstances, with the FWC and other tribunals having had to adapt very quickly to them. The current case shows how an employer can argue that being in a very difficult financial position justifies reducing the entitlements it has to pay to employees. However, each case will be decided on its individual circumstances and the onus is on the employer to provide clear evidence that it is unable to pay out full entitlements.

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HyperLife Pty Ltd T/A Acme Preston v Kelly Brennan [2020] FWC 3080 (12 June 2020)

Manufacturer saves 29 weeks pay after Fair Work Commission slashes workers’ redundancy payouts (Matthew Elmas, SmartCompany, 16 June 2020)

FWC allows Sydney company to drastically slash redundancy payouts – (Maja Garaca Djurdjevic, MyBusiness, 16 June 2020)

COVID pain justifies redundancy pay cuts (Mike Toten, Workplace Assured, 17 June 2020)