Company told supervisor it was bankrupt during the holiday, but consultation never occurred
The Fair Work Commission (FWC) recently dealt with an unfair dismissal application from a construction supervisor who argued he was dismissed without proper consultation when his employer announced plans to enter liquidation.
The worker had been employed for eight years and seven months when he was informed over the phone in May 2025 that the company had gone bankrupt and would be entering liquidation.
The employer contended the worker's position was genuinely redundant due to financial difficulties and the loss of expected new contracts.
The worker argued that the dismissal was unfair, primarily due to the manner in which he was informed and the lack of consultation prior to his redundancy. The employer raised a jurisdictional objection that the worker was genuinely made redundant.
The employer explained that it had been expecting to commence a new contract working on a childcare centre, but in the week when the worker was dismissed, the employer found out the new contract had fallen through.
Eight years of service ended abruptly
The worker worked for the employer as a supervisor for eight years and seven months. The employer's enterprise was a construction business, dependent on gaining new contracts.
The worker went on leave to Fiji at the end of April 2025. The worker stated that prior to commencing his leave, he had been working on a major contract that had been running for two years. He knew that the project was coming to an end.
The worker asked one of the directors on 29 April 2025 whether there would be a job for him to return to. The director reportedly advised that there would be.
On 2 May 2025, the worker was informed over the phone, after returning from annual leave, by the director that the company had gone bankrupt and would be entering into liquidation.
He was advised to contact the Fair Entitlements Guarantee scheme for payment in lieu of notice. The following week, the worker contacted the scheme and was informed that he would need a formal notice of his redundancy.
On 14 May 2025, the worker received an email from the employer advising that the company would enter liquidation in the coming weeks, that the company would permanently cease trading, and all employment positions would be made redundant.
The email stated the worker's employment was being terminated on the grounds of redundancy and that an external liquidator would be appointed. The email also provided information about the Fair Entitlements Guarantee scheme and what entitlements may be covered.
Company delayed liquidation process
Despite the employer's advice that the company would be going into liquidation imminently, at the time of the FWC decision, the employer was not in liquidation according to corporate records.
The employer's director explained in the hearing that the liquidation process had been delayed by negotiations with a client of the business.
That client held a security interest over property owned personally by the company directors. The director advised during the hearing that the employer was insolvent.
The worker was not paid his notice in lieu of termination. The FWC was satisfied that the employer was a small business with fewer than 15 employees at the time of termination.
The worker alleged that two other employees who had also been made redundant were now working for a related entity of the employer.
The FWC directed the director to advise of the name of this entity. The director informed of the existence of a company of which his wife was a director.
The FWC informed itself of the relevant corporate records showing that the director was the sole shareholder of that company. That company was a plastering business, which the director argued was materially different from the employer's enterprise.
The FWC examined whether the employer no longer required the worker's job to be performed by anyone because of operational requirements of the employer's enterprise.
The FWC accepted the director's evidence that the employer was insolvent and was no longer performing any construction work. The worker's position was no longer required.
The company was still registered, as there was an ongoing defects liability period and security interests over the directors' property.
Operational requirements found to exist
The Commissioner stated: "I appreciate that the decision to make employees redundant, in this case, appears to be out of financial necessity. However, regardless of whether the decision was one made out of financial imperative, it is still a decision that the Respondent made."
The Commissioner found: "I consider that the decision to make [the worker's] position redundant was one based on operational requirements. It was made on [the employer's] directors' assessment of the current financial state of the business, noting there were no new major projects on the horizon."
The FWC referred to a High Court decision which stated that section 389(1)(a) is not subject to a reasonableness inquiry.
The Commissioner said: "It is not the role of the Commission to determine whether the choice to make the roles redundant was reasonable. Instead, I must be satisfied that operational requirements existed. I am satisfied the redundancy of [the worker's] position was based on operational requirements."
The FWC examined whether the employer complied with any obligations in a modern award to consult about redundancy.
The worker was covered by an award which required that if an employer makes a definite decision to make major changes in production, program, organisation, structure or technology that are likely to have significant effects on employees, the employer must give notice of the changes to all employees who may be affected and discuss with affected employees the introduction of the changes, their likely effect, and measures to avoid or reduce adverse effects.
Consultation requirements not met
The director advised in his response that the worker did not answer the phone prior to 2 May 2025, and so the employer was not able to inform him of the redundancy prior to his dismissal.
The Commissioner noted the worker was on annual leave and in Fiji in the period before 2 May 2025 and stated: "I do not consider that he should have answered the phone."
The Commissioner stated: "I am not satisfied that [the worker] was consulted about the changes to the business. He was not advised, prior to his position being made redundant, that redundancy was a likely possibility. Further, even if [the worker] was generally aware of the business's financial difficulties, this does not meet the requirements of consultation."
The FWC referred to a Full Bench decision which defined consultation as meaning more than the mere exchange of information and involving, at the very least, the giving of information by one party, the response to that information by the other party, and the consideration by the first party of that response.
The FWC stated that consultation was defined to include: "Inherent in the obligation to consult is the requirement to provide a genuine opportunity for the affected party to express a view about a proposed change in order to seek to persuade the decision maker to adopt a different course of action."
The Commissioner concluded: "As [the worker] was not informed that it was likely that the business would stop trading prior to being made redundant, I consider that the obligations under the Award have not been discharged. Therefore, in accordance with s.389, [the worker's] redundancy was not a genuine redundancy."
Redeployment within associated entity examined
The FWC examined whether it would have been reasonable in all the circumstances for the worker to be redeployed within the employer's enterprise or the enterprise of an associated entity.
The FWC examined whether the director's wife's company was an associated entity of the employer. The FWC noted that the director was the sole shareholder of his wife's company and owned 50% of the shares in the employer, with the other 50% being owned by another director.
The Commissioner stated: "On the evidence before me, it appears that [the director] does not have a controlling shareholding in [the employer]. In relation to whether he exerts practical control over the company, there is limited evidence before me. It appears that the decisions are made by both directors, including the decision to make employees redundant. On the evidence before me, I am unable to conclude [the director's] wife's company is an associated entity of [the employer]."
The Commissioner also noted: "I note that even if I were satisfied that [the director's] wife's company is an associated entity, it may not have been reasonable to redeploy [the worker] into a role in that company given the roles available in that business as it would involve essentially a demotion for [the worker], who had been in the role of Supervisor for many years."
Dismissal found harsh and unfair
Having found that the worker's dismissal was not a case of genuine redundancy, the FWC turned to whether the dismissal was harsh, unjust or unreasonable.
The FWC found the reason for the worker's dismissal was that the employer no longer required the worker's role to be performed by anyone. The Commissioner found this to be a neutral factor, as the reason for dismissal did not relate to any issue of conduct or capacity.
The Commissioner stated: "Further, while a failure to consult in accordance with the relevant Award does not automatically lead to a finding that the dismissal was unfair, it is a factor which may weigh in favour of a finding of unfairness. The sudden nature of the dismissal, with [the worker] having no notice that his job may have been at risk, weighs in favour of a finding of unfairness."
"I note [the worker] had been employed with [the employer] for many years. The decision not to at least inform [the worker] that his job may no longer be required prior to dismissing him, weighs in favour of a finding of harshness," it added.
The Commissioner noted the worker was also not paid his statutory notice entitlement and was advised to make a claim with the Fair Entitlements Guarantee scheme for those amounts.
The Commissioner stated: "In these circumstances, had the consultation requirements been complied with, including a notice of the change and consultation, I find that [the worker] would have remained employed with [the employer] for no more than two weeks. Given the lack of new projects, it is unlikely that consultation would have changed the outcome."
Two weeks' compensation awarded
The Commissioner concluded: "I find that the dismissal was harsh and unfair. Although I am satisfied that the business was experiencing financial difficulty, which led to the decision to make [the worker's] position redundant, the manner in which dismissal was effected was very flawed. [The worker] was provided with no notice of the impending change, despite his many years of service with the company, his dismissal was sudden, and he was not paid his statutory entitlement to notice."
The worker requested that compensation be granted. Given that the employer was no longer trading, the FWC was satisfied that reinstatement would not be appropriate.
The Commissioner found that had the consultation requirements been complied with, the worker would have remained employed with the employer for no more than two further weeks.
The Commissioner stated: "I find that [the worker] would have earned two further weeks' pay at $2,859.61 per week had he remained employed with [the employer] for another week."
The FWC made no deductions for any failure by the worker to mitigate his losses in the two weeks following his termination.
The worker was not dismissed as a result of any conduct he engaged in, and the Commissioner made no deduction for contingencies.
The FWC ordered the employer to pay the sum of two weeks' pay at $2,859.61 per week plus superannuation within 21 days.
The Commissioner also stated: "In addition to payment of the compensation awarded in this decision, [the employer] should immediately attend to payment of the notice owing to [the worker]. If that amount is not paid, [the worker] may have a claim for civil penalties."
