s.120 - Redundancy pay

• [1] Independent Kitchens & Joinery Pty Ltd (IKJ) has employed Mr Bryan Smith (for 14 years), Mr Graham Barron (for 15 years) and Mr Ned Kingwill (for 2 years excluding his apprenticeship). In 2023, the owner of the business, Mr James Philpott, was diagnosed with multiple sclerosis. This led him to cease work entirely by August 2024. Attempts were made to continue running the business over the following 12 months, but eventually a decision was made to close the business. As of 8 December 2025, the business was in debt to the tune of approximately $150,000. Efforts are being made to sell assets to fund payment of the debts and IKJ has separately done what it could to assist the employees with finding alternative work. These efforts were unsuccessful in relation to Mr Smith and Mr Barron. An opportunity was found for Mr Kingwill but not taken up, as he had found another job himself.

• [2] The circumstances have led to a position where the roles of Mr Smith, Mr Kingwill and Mr Barron in the business of IKJ are now redundant. Formal notice of redundancy was given and took effect on 17 November 2025 (for Mr Smith and Mr Barron) and 26 November 2025 (for Mr Kingwill). It is not in dispute that each was employed under the Timber Industry Award 2020 and was entitled to redundancy pay under the Award, although Mr Smith considers his entitlement to redundancy pay to be set by the National Employment Standards at 12 weeks, rather than the 8 weeks provided by the Award.

• [3] As IKJ was a small business employer at the time of dismissal and none of the relevant exceptions applied, the applicable redundancy pay amount for Mr Smith is found in the Award (8 weeks). IKJ has applied to the Commission under s.120 of the Fair Work Act 2009 (Cth) (the Act) to reduce the redundancy pay amounts owing to the employees to nil because its financial position means it cannot pay. I accept that IKJ has no capacity to pay the redundancy pay amounts and that it is entitled to apply to reduce those amounts under section 120 of the Act because of the effect of clause 39.4(f) of the Award.

• [4] The purpose of redundancy pay is to compensate for the inconvenience of hardship associated with having to find another job, as well as the loss of non-transferable employment credits.[1] In ordinary circumstances, this purpose might be achieved by payment of redundancy pay to Mr Barron, and to a lesser extent, to Mr Smith, who for reasons of his own may not seek another job, and to Mr Kingwill, who experienced only a short period out of work. However, these are not ordinary circumstances. The business has been struck by a personal medical condition affecting its owner from which he is unlikely to recover. Attempts to carry on the business without him have failed. The business does not have the means to pay its debts. Before the business closure, Mr Kingwill and Mr Barron were both considering moving on for their own reasons, and Mr Kingwill has since found another job.

• [5] The Act recognises that circumstances such as these might appropriately lend themselves to an exemption from the obligation to pay redundancy pay. In my view, that is the appropriate outcome in this case.

• [6] For these reasons, I have decided to reduce the redundancy pay amounts that are otherwise payable by IKJ, in relation to Mr Smith, Mr Kingwill and Mr Barron, to nil.

[1] Termination, Change and Redundancy decision, 2 August 1984, Print F6230[1984] CthArbRp 284; , (1984) 8 IR 34; Redundancy Case Decision, 26 March 2004, PR032004

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