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FWC rejects plea to slash redundancy payout

Noting there was insufficient evidence to suggest the business couldn't pay.
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FWC rejects plea to slash redundancy payout

FWC rejects plea to slash redundancy payout

15 July 2020

By Marise Donnolley

An employer's plea to slash redundancy payments to nil has fallen on deaf ears, with a tribunal noting there was insufficient evidence to suggest the business couldn't pay.


Facts of case

Coal River Farm Investments (trading as Coal River Farm) operates several sites across Australia that manufacture, supply and sell food and drink.

It applied under s120 of the Fair Work Act to reduce redundancy payouts owed to two workers to nil on the grounds of incapacity to pay.

One employee was entitled to $4769 and the other $19,230.

Coal River said the government's response to COVID-19 had led to the closure of a restaurant where one of the employees worked, while travel restrictions limited business whether the other was employed.


Arguments

Coal River told the Fair Work Commission its food and beverage operation had lost 100% of its revenue with no prospect of returning to pre-COVID levels for two years. It said the overall business had suffered an 80% reduction in revenue and had limited cash flow.

The company also claimed it had a 'sizeable' tax debt, relied solely on JobKeeper to pay its 22 workers, had limited funds in its bank account, and was presently trying to secure a loan to cover the shortfall in revenue.

Prior to the pandemic, the business committed to long-term leases on new stores in Perth and Fremantle. Coal River said it faced becoming insolvent if these stores were unable to open.

The two employees opposed the application and described Coal River's financial evidence as "unverifiable", "misleading" and capable of being "false and inaccurate".

The employees also provided screenshots from recruitment website SEEK showing job advertisements posted by the company.


Decision

Commissioner Cirkovic didn't accept the financial evidence was likely to "mislead" but acknowledged the "overall paucity of evidence" regarding Coal River's financial position.

She noted the company "chose to rely on an unverified P&L, a screenshot of a bank account with no name and a document purporting to evidence the applicant’s creditors containing no information or detail."

The commissioner said the evidence about the company's financial position was "in my view, insufficient to establish an incapacity to pay and enliven section 120(2) of the Act".

She agreed that Coal River faced significant challenges and that its future financial prospects were uncertain and that it was "a time of great stress and concern for the applicant and many other business owners. However, it is insufficient to demonstrate that it is merely beneficial or of assistance to reduce the amount to be paid by way of redundancy."

While sympathetic to the company's uncertain and difficult operating environment, primarily due to the impact of COVID-19, "I am not satisfied that in these particular circumstances the evidence is such that I am able to make a finding that the Applicant “cannot pay”. Consequently, the discretion under section 120(2) is not enlivened and there can be no order to reduce the redundancy pay entitlements of the employees."

The application was dismissed.


Read the judgment

Coal River Farm Investments Pty Ltd T/A Coal River Farm [2020] FWC 3558

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