Coronavirus: Fair Work slashes redundancy pay

The Fair Work Commission has approved the application by a Melbourne small business to cut an employee’s redundancy payment from seven weeks to one. Picture: istock
The Fair Work Commission has approved the application by a Melbourne small business to cut an employee’s redundancy payment from seven weeks to one. Picture: istock

The Fair Work Commission has backed an employer bid to cut redundancy pay due to the financial impact of the coronavirus crisis.

Commissioner Sarah McKinnon approved the application by Melbourne small business, Mason Architectural Joinery, to cut an employee’s redundancy payment from seven weeks to one, the first time the entitlement has been slashed by the tribunal during the pandemic.

The decision contrasts with a ruling by commission deputy president Richard Clancy who rejected a Victorian employer’s bid to cut the redundancy pay of three sacked workers.

Mason Architectural Joinery made two employees redundant in February including the worker who had his redundancy payment cut by the commission.

The worker was paid his accrued annual leave and accrued rostered days off but the company said it could not afford to pay seven weeks’ redundancy.

After the termination of his employment, the worker took leave for a pre-booked holiday to Bali before returning to Australia where he was required to self-isolate for 14 days. He secured a new job, which pays $2 per hour more than his previous position at Mason Joinery.

After receiving no business income for two months, Mason Joinery received one payment for a completed job and was hopeful of securing two new contracts.

Commissioner McKinnon said the company was finishing pre-booked jobs “although two had been lost due to the pandemic”.

“The business is trying to work through the current crisis and much depends on how long the situation lasts,” she said.

“I am satisfied that Mason Joinery is under significant financial strain and that it cannot afford to pay (the worker’s) full entitlement to redundancy pay.”

In contrast, another business failed in a bid to slash the redundancy pay of three sacked workers after it refused to investigate rehiring them and using the JobKeeper wage subsidy to cover 90 per cent of their salary.

Worthington Industries, which manufactures products for the building, furniture, caravan and rail industries, applied to the commission on March 24 to reduce the amount of the workers’ redundancy pay from four weeks to one week.

Mr Clancy told the company that given its turnover was predicted to fall by 30 per cent, this would “appear to enliven ­eligibility” for JobKeeper wage subsidies.

He said the $1500 JobKeeper fortnightly payment ­appeared to equate to 90 per cent of the employees’ wages.

He also highlighted government advice that where a company rehired terminated em­ployees, it could immediately receive the JobKeeper payment, even if the workers were then stood down.

If rehired, the employer “will need to consult with the employee and consider prevailing workplace arrangements to settle redundancy terms”.

Mr Clancy suggested to Worthington Industries he would hold over proceedings while it established whether it was eligible for the JobKeeper payment and considered rehiring the workers.

The company decided to press its application, given the uncertainty of what might happen in six months if business did not recover.

Given the company had the means to pay the full redundancy and money in the bank to do so, Mr Clancy rejected the application and ordered the workers be paid four weeks’ redundancy each.