s.120 - Redundancy pay

Freeway Family Doctors Pty Ltd Trading AS Medsana and My Rehab Team

Variation of redundancy pay on the basis of incapacity to pay - jurisdictional pre-requisites not made out - application dismissed

[1] On 5 November 2025, Freeway Family Doctors Pty Ltd Trading AS Medsana and My Rehab Team (the Applicant) applied to the Fair Work Commission (the Commission) under s.120(2) of the Fair Work Act 2009 (the Act) to vary the redundancy entitlements of Ms Suzanne Oram (the Respondent) from four weeks to one week.

[2] Ms Oram advised my Chambers that she opposed the variation of redundancy. The matter was listed for hearing on 19 January 2026.

[3] Section 120 of the Act states as follows:

"120 Variation of redundancy pay for other employment or incapacity to pay

(a) an employee is entitled to be paid an amount of redundancy pay by the employer because of section 119; and

(i) obtains other acceptable employment for the employee; or

(ii) cannot pay the amount.

(2) On application by the employer, the FWC may determine that the amount of redundancy pay is reduced to a specified amount (which may be nil) that the FWC considers appropriate.

(3) The amount of redundancy pay to which the employee is entitled under section 119 is the reduced amount specified in the determination."

[4] The Applicant relies on incapacity to pay under s.120(1)(b)(ii). Before my discretion to vary the redundancy is enlivened, I must be satisfied that the Applicant "cannot pay the amount".

[5] The Applicant is still currently trading and continues to pay its other employees. Ms Oram observed during the hearing that she had been unable to locate a decision where an application to vary the redundancy on the basis of incapacity to pay was made while the applicant is still trading. I agree that it is an unusual situation.

[6] The Applicant argues that the business is currently operating at a financial loss. The Applicant pointed to a number of outstanding debts which affected the business' cash flow including an AMEX balance of over $17,000.00 and a BAS bill of almost $50,000.00.

[7] I start by observing that the test is whether the Applicant "cannot pay the amount" not whether the Applicant would rather not pay. An employer may be required to liquidate assets in order to make the payment. For example, Deputy President Colman concluded in Application by RTS Pauaco Pty Limited [2024] FWC 3265:

[4] I am not satisfied that RTS 'cannot pay the amount'. I accept that RTS has no money. But it is also the case that a related entity in New Zealand proposes to sell assets that might be used to satisfy debts owed by RTS to its creditors. These creditors include Mr Punsara and Mr Cilliers. In my view, the question of whether an employer 'cannot pay' redundancy amounts to employees is to be answered with regard to the foreseeable future, and therefore I cannot be satisfied that RTS cannot pay the amounts, because it may yet be able to. But alternatively, if the correct approach is to assess capacity to pay at the present time, and therefore cannot pay the amounts owed, I nevertheless decline to exercise my discretion to reduce the redundancy pay. It would not be fair and reasonable to do so in circumstances where RTS might yet find itself in a position to pay the amounts. For these reasons, the applications are dismissed.

[8] I accept that the Applicant's latest profit and loss statement shows it is trading at a financial loss. However, in my view, the Applicant's cash flow issues are self-imposed. The Applicant continues to trade and continues to employ new staff. The Applicant argued in the hearing that some of the suggestions proposed by Ms Oram did not make "business sense". For example, the Applicant argued that increasing its debt base by hiring a car rather than owning one would not make "business sense". With respect, the Applicant's current position of being allegedly unable to pay a debt to its employee following a BAS bill (which should not be an unexpected bill) means they should be focussed on freeing up capital in the short term. The Applicant is past the point of making decisions based on "business sense". They should instead be concerned with avoiding insolvency.

[9] The Applicant's trading income for the quarter ending September 2025 was $914,785.77. For the two months ending November 2025, the trading income was $697,572.62. The business traded at a loss of $30,015.28 and $71,399.54 for those periods, respectively. Ms Oram's redundancy amount is worth $10,384.64.

• [10] The Applicant gave evidence in the hearing that it had made some attempts to free up cash since making the application, through, for example, entering into lower-cost subscriptions. However, the subscriptions make up a very small percentage of the expenditure on the evidence before me.[1] There is no evidence that the Applicant made serious attempts to renegotiate current agreements with more cost to the business. For example, the Applicant uses virtual assistants for administrative assistance. This is a large cost to the business. Ms Oram argued, cogently in my view, that the Applicant could attempt to reduce administrative costs.

[11] The Applicant also owns a fleet of motor vehicles used by its staff valued at $173,349.01. The Applicant argued that it is required to either maintain the cars or pay mileage. In my view, there is nothing preventing the Applicant from selling one of the vehicles and paying an employee mileage to use their own vehicle instead. This would mean the Applicant had money free to pay Ms Oram's redundancy entitlement.

[12] Further, Ms Oram questioned the Applicant regarding their expenditure on "staff wellbeing" costs in the latest profit and loss statement. This was explained as being money spent on birthday cards, cakes and catering. The cost was over $2,500.00 for two months. If this money was truly used for catering and birthdays, then that is an extraordinary amount of frivolous expenditure when the business was facing financial difficulty.

[13] I agree with Deputy President Colman that the question of incapacity to pay is to be assessed with reference to the reasonably foreseeable future. I am not satisfied that the Applicant cannot pay the amount in the reasonably foreseeable future. The Applicant continues to generate trading income, the Applicant has assets it can liquidate, and the Applicant can take further steps to decrease its expenditure.

[14] Even if the question of capacity to pay were to be assessed at the present, and I were satisfied that the Applicant did not have the cash available to pay the amount, I would still deny the application. The decision whether to vary the redundancy entitlement is a matter of discretion. I observe that the financial difficulty appears to have been, to a large degree, caused by decisions of the Applicant's director rather than being caused by external forces. Further, the Applicant continued to employ staff following Ms Oram's redundancy. In my view, there is a recklessness in the Applicant in taking on new staff while knowing they have not been able to pay Ms Oram's entitlements. It also means that the Applicant and other employees effectively benefit from the Ms Oram's redundancy. For these reasons, in my view, it would cause unfairness if I were to reduce Ms Oram's redundancy entitlement to one week.

[15] I decline to vary Ms Oram's redundancy pay. The Applicant is required under s.119 of the Act to pay Ms Oram her full redundancy entitlement.

[1] See Profit and Loss statement at Page 77 of the Digital Hearing Book.

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