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CASE ALERT - Obtaining a Reduction in Redundancy PaymentsKaela Krushka Posted 29 June 2020
On 12 June 2020, HyperLife Proprietary Limited trading as Acme Preston (HyperLife) was successful in the Fair Work Commission in obtaining a reduction of four employees’ redundancy payments by almost 70%.
HyperLife made an application under s.120 of the Fair Work Act 2009 to reduce the payments owed to employees made redundant in April 2020 following a decision to close a business acquired just a year earlier.
The basis of the application was that HyperLife lacked the financial capacity to pay. HyperLife gave evidence that the purchase of the business in March 2019 was funded by vendor finance and a loan from a family company. HyperLife said that the site continued to operate at a loss and a considerable amount of funds had been injected. Initially, HyperLife was looking to move the production to a smaller site to reduce costs, however the business was then affected by the COVID-19 pandemic and the decision was then taken to close the site. HyperLife argued that the business had insufficient cash flow to fund redundancy payments. In support of the application, they provided a letter from their accountants setting out current assets and liabilities. Since the outbreak of the coronavirus, HyperLife had drawn a further $200,000 from the family business to maintain financial viability. HyperLife management gave evidence that the company held $38,000 cash in the bank and had wages for its remaining staff due the following week.
Deputy President Dean held that the onus was on HyperLife to satisfy the Fair Work Commission it was not financially competent or possessed the necessary funds to make the payment and had no reasonable source of funds. Deputy President Dean held that HyperLife had made a case at justifying the exercise of discretion pursuant to s.120.
This meant that two employees owed between 12-13 weeks’ redundancy pay were only to receive four weeks’ redundancy pay. The other two workers were owed six weeks and were to receive two weeks’ redundancy pay.
If your business has been affected by COVID-19 and/or you are considering whether a redundancy situation arises, please contact one of our team for advice.