As a result of the ongoing coronavirus pandemic, the industrial landscape is changing at a rate not seen before. Businesses are trying to stay afloat, look out for its employees as best as possible and aim for future prosperity beyond the current crisis. Understanding how these objectives can be achieved whilst continuing to maintain compliance with rapidly changing workplace laws is posing a real challenge to many.
Unfortunately, for many employers, decisions on redundancy have had to be made. Prior to the introduction of the "JobKeeper Enabling Stand Down" many employers faced no option but to make employees redundant. Recently the Fair Work Commission (FWC) handed down two decisions dealing with redundancy pay to employees as a result of pandemic-induced redundancies.
The two decisions were delivered on the same day by the FWC and had contrasting outcomes. In Mason Architectural Joinery Pty Ltd, the FWC agreed to allow an employer to reduce the redundancy payment it is required to make to an employee, whereas in Worthington Industries it rejected the employer's request to reduce the redundancy payment for three former employees.
Mason Architectural Joinery made two employees redundant in early February as part of a decision to reduce costs in light of the coronavirus pandemic. The employer had received no income for the previous two months. In reducing the payment for Mason Architectural, Commissioner Sarah McKinnon considered the "significant financial strain" experienced by the employer and approved its application to reduce one of the former worker's redundancy entitlement from seven weeks' pay to one.
The Commissioner acknowledged that the former worker was paid three weeks' notice and subsequently found another job on better hourly rates, and accepted that the employer faced "significant financial strain" meaning it could not afford to pay the full seven week redundancy amount. Therefore, it was determined that it was appropriate to reduce the amount of redundancy pay to 1 week's pay.
Conversely, Deputy President Richard Clancy dismissed a similar application by Worthington Industries to reduce the redundancy amount payable to three former full-time workers from four weeks to one.
Similarly to Mason Architectural, Worthington Industries was dealing with slowing business resulting from the coronavirus pandemic.
However, in making his decision, Deputy President Clancy placed great emphasis on a statement from the company's HR manager that it "has both the means to pay the full amount of the redundancy entitlement ... and the money in the bank to do so".
Deputy President Clancy stated that "having regard to this statement, I am not satisfied Worthington Industries comes within the circumstances of s120(1)(b)(ii) of the [Fair Work] Act and I decline to exercise the discretionary power in s120(2) of the Act to reduce the amount of redundancy pay".
Although the Deputy President highlighted the likely eligibility of the employer for the JobKeeper payments, which would have equated to approximately 90% of the worker's salaries, and an offer to hold the matter over until such eligibility had been determined, the employer considered that the uncertainty of what might happen in six months' time if the business had not recovered led it to conclude that the better option for Worthington Industries was to resolve the redundancy issue instead, so as to provide certainty to all.
What these two decisions highlight is the need to obtain expert advice prior to acting. The workplace landscape is rapidly changing and now more than ever employers need to ensure they comply with these changes.
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