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Businesses are experiencing unprecedented economic pressures and job losses are widespread, including many redundancies. Recent decisions of the Fair Work Commission have confirmed that, despite the pressures of COVID-19, the existing obligations surrounding redundancy continue to apply.

consultation obligations

In the first of these recent cases, the Federal Court’s transcription service provider was found to have breached its consultation obligations, including by making hollow promises to its employees in the form of verbal assurances which it then proceeded to ignore.

Commissioner Yilmaz affirmed that despite tough economic conditions, employers are not permitted to deviate from their minimum obligations under industrial instruments or legislation.

applications to reduce amount of redundancy pay

Where a company is under financial pressure such that it can’t afford to pay redundancy entitlements, it may apply to FWC to have its payment obligations reduced. Two recent cases show that the outcomes of such an application may vary, even though all employers are significantly affected by COVID-19. Ultimately, the relevant question is whether the financial strain on a business is sufficiently severe to warrant the reduction.

A small architectural joinery firm was successful in its application to reduce the redundancy pay owed to one of its employees. The amount was reduced from seven weeks down to one.

However, in another case, the FWC decided against exercising its discretion to reduce employee termination entitlements. The company was found to have enough ‘money in the bank’ to adequately compensate its terminated employees.

In coming to this decision, Deputy President Richard Clancy also noted that the company would likely be eligible to receive the Morrison Government’s JobKeeper subsidy. These payments would cover a substantial portion of the cost of those terminated employees, if they were retained or rehired.

summary

It is critical that employers are aware of their legal obligations when considering redundancies. Financial hardship will not necessarily provide employers with a ‘get out of jail free’ card in relation to consultation obligations or severance pay.

Macpherson Kelley can assist your business to take a ‘best practice’ approach to decisions that affect staff. For more information, please see our COVID-19 FAQ or contact us directly.

stay up to date with our news & insights

FWC provides guidance on redundancy rules during COVID-19 pandemic

15 May 2020
oscar sach-haber barney adams

Businesses are experiencing unprecedented economic pressures and job losses are widespread, including many redundancies. Recent decisions of the Fair Work Commission have confirmed that, despite the pressures of COVID-19, the existing obligations surrounding redundancy continue to apply.

consultation obligations

In the first of these recent cases, the Federal Court’s transcription service provider was found to have breached its consultation obligations, including by making hollow promises to its employees in the form of verbal assurances which it then proceeded to ignore.

Commissioner Yilmaz affirmed that despite tough economic conditions, employers are not permitted to deviate from their minimum obligations under industrial instruments or legislation.

applications to reduce amount of redundancy pay

Where a company is under financial pressure such that it can’t afford to pay redundancy entitlements, it may apply to FWC to have its payment obligations reduced. Two recent cases show that the outcomes of such an application may vary, even though all employers are significantly affected by COVID-19. Ultimately, the relevant question is whether the financial strain on a business is sufficiently severe to warrant the reduction.

A small architectural joinery firm was successful in its application to reduce the redundancy pay owed to one of its employees. The amount was reduced from seven weeks down to one.

However, in another case, the FWC decided against exercising its discretion to reduce employee termination entitlements. The company was found to have enough ‘money in the bank’ to adequately compensate its terminated employees.

In coming to this decision, Deputy President Richard Clancy also noted that the company would likely be eligible to receive the Morrison Government’s JobKeeper subsidy. These payments would cover a substantial portion of the cost of those terminated employees, if they were retained or rehired.

summary

It is critical that employers are aware of their legal obligations when considering redundancies. Financial hardship will not necessarily provide employers with a ‘get out of jail free’ card in relation to consultation obligations or severance pay.

Macpherson Kelley can assist your business to take a ‘best practice’ approach to decisions that affect staff. For more information, please see our COVID-19 FAQ or contact us directly.