Fair Work Act 2009

s.120 - Redundancy pay

[1] The following is an edited version of a decision given on transcript earlier today. RTS Pauaco Pty Limited (RTS) has made applications under s 120(2) of the Fair Work Act 2009 (Cth) (Act) to have the Commission reduce to nil the redundancy entitlements of two of its employees, Pahan Punsara and Charl Cilliers. RTS ceased trading in April 2024. Since August 2024, it has had no work for the employees to perform and has not paid them. It says that it cannot pay them because it has no money. It submitted a bank statement showing a large debt to a retail bank and said that this was its only account. RTS also contended that it had not yet effectuated the redundancy of the two employees and that they remain employed by the company. It said that its related entity in New Zealand intends to sell assets that could be used to pay some of its debts in Australia. Mr Punsara and Mr Cilliers oppose RTS's applications. They say that they have been made redundant and want to be paid their redundancy entitlements.

[2] Section 120 of the Act provides that if an employee is entitled to be paid an amount of redundancy pay under s 119, and the employer 'obtains other acceptable employment for the employee', or 'cannot pay the amount', the employer may apply to the Commission to reduce the amount of redundancy pay to a specified amount, which can be nil.

[3] If RTS were correct in its submission that the employees have not been dismissed (perhaps on the basis that the obligations to work and to pay wages had been put into abeyance by agreement), s 120 would not be applicable, because the employees would not yet be entitled to redundancy pay. In my view however, the employees have been dismissed, because they have not been paid wages for several months and have objected to this, thereby signalling their acceptance of a repudiation of their contracts. The employees have entitlements to redundancy pay under s 119. I can therefore proceed to consider RTS's applications under s 120 to reduce those entitlements.

[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 RTS 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.

Printed by authority of the Commonwealth Government Printer