Four manufacturing workers have had their redundancy payouts cut by more than two-thirds after their employer appealed to the Fair Work Commission (FWC) for a reduction in costs amid the COVID-19 pandemic.
Commission deputy president Lyndall Dean granted Sydney-based manufacturing firm ACME Preston a $29,606 reduction in redundancy payouts across four hearings in the past week, cutting 29 weeks’ worth of entitlements for workers at the company’s now-closed Ingleburn plant.
The business initially appealed to the FWC for a variation in redundancy payouts in May, claiming it was in severe financial stress and would be unable to pay $44,000 in entitlements originally owed to workers it had laid off in April.
Ordinarily workers are entitled to between four and 12 weeks’ pay when they’re made redundant, but there’s a provision in the Fair Work Act allowing the FWC to reduce this amount if an employer is unable to pay the bill.
ACME Preston director Craig Dowson, who bought the loss-making Ingleburn plant in 2019, made the four staff redundant after deciding to close down the operation amid the coronavirus crisis.
Dowson argued the business was unable to make full payouts to staff, submitting documents showing the company had just $38,000 in cash on hand, having already drawn on a $200,000 loan from his family business. Third party lenders, he claimed, had not been forthcoming with additional capital.
Asked whether ACME Preston had applied for the Morrison government’s JobKeeper program, Dowson said he believed the company was ineligible under the headline turnover test because he made several other acquisitions in 2019.
However, speaking to SmartCompany on Tuesday, Dowson confirmed the business had subsequently applied for wage subsidies under the Australian Tax Office (ATO)’s alternative test and had been accepted.
Commission filings fail to indicate whether Dowson was asked about the alternative test, which was published on April 22 and operational at the time of the May hearings.
The workers were officially made redundant on April 17, three days before JobKeeper enrolments opened and six days before the details of the alternative test were published. However, the alternative test was previously flagged in public comments by Treasurer Josh Frydenberg and the ATO, including that businesses that had made acquisitions would be catered for in the scheme.
Deputy president Dean said the FWC typically considers the capacity of businesses to pay, their ability to continue operating, and the financial situation of redundant workers when deciding whether to vary redundancy payouts.
“I am satisfied that the company is under significant financial strain and that it cannot afford to pay [the worker’s] full entitlement to redundancy pay,” Dean said in comments that were similar across all four cases.
“This is evident given the financial position of the company, and in particular the evidence that the company currently held only $38,000 cash in the bank, and had wages for its remaining staff due the following week.
“I am satisfied it does not have a reasonable source of other funds, having already borrowed from Mr Dowson’s family business to the amount of $200,000,” Dean continued.
The workers were originally entitled to a combined 43 weeks of redundancy wages, worth about $44,000. This was cut to 14 weeks at a cost of $14,400 — a 67% reduction.