Liquidators lashed after staff lose redundancy

Joe Hayes of Wexted Advisers.
Wexted Advisors Andrew McCabe.

Liquidators Joe Hayes and Andrew McCabe have copped a bollicking from Administrative Appeals Tribunal (AAT) senior member Chris Puplick for what might qualify as the sin of disinterest.

As is revealed in the recent decision of Tjoputra and Secretary, Attorney-General’s Department [2021] AATA 1596 the Wexted Advisors pair didn’t inform two employees of Object Consulting Pty Ltd about their rights under the Fair Entitlements Guarantee Act (FEGA).

As a result of the circumstances of continued employment applying to these two individuals they lost entitlements to redundancy payments of approximately $32,000 and $37,000 respectively.

When the pair sought to challenge the determination in the AAT, Puplick ruefully ruled against them.

“This is a decision according to law producing a result which is both unfair and unjust,” Puplick said.

” Two dedicated, loyal, hardworking, long-term employees of a company which was placed into liquidation prior to having some of its assets sold were asked by the Liquidator to stay on to help wind-up the affairs of their company.

“One stayed on for one business day because he was the IT expert and was asked to tidy up the company’s records as well as copy and transfer files. The other stayed on for almost two weeks because he was the Finance Manager and he was asked to help finalise payrolls and entitlements for others,” Puplick said.

Because of the timing of their eventual termination and the fact that as at that time the company had morphed into a small business, the pair lost their entitlement to taxpayer-funded redundancies.

It should however be pointed out that there does not appear to be any reference to any efforts the two employees made on their own behalf to determine the status of any of their potential entitlements once Hayes and McCabe were appointed in mid-2019.

How far does the obligation on liquidators extend in respect of explaining to employees the consequences of their appointments and subsequent actions? If a competent individual doesn’t bother looking after their own interests why should that burden fall on anyone else?

Because of the operation of the FEG and Fair Work (FWA) Acts Puplick was rendered powerless to intercede and it was perhaps the frustration at being so neutered that prompted him to give McCabe and Hayes such a serve.

“The Tribunal cannot but be critical of the role of the Liquidator (Wexted Advisors) in this sorry saga,” he said.

“Wexted asked the two gentlemen to stay on as employees of the Company after it had been sold and ceased to operate. It had an option to take over their employment itself, but it chose instead to keep them on the Company’s books,” he said.

It gave them verbal notice of termination on 4 October 2019 but did not provide written notification until later dates and it asked them specifically to stay on to assist it in the finalisation of the Company’s affairs.

Wexted he said benefited from this, these employees did not, because it knew that as from 4 October 2019 the Company would morph into a small business.

“It was involved in and aware of this process,” Puplick railed.

“It knew, or at least ought to have known, that small business employer status enlivens the provisions of subsection 121(1) of the FWA and hence negated the rights which the two gentlemen might otherwise have enjoyed under section 119 of the FWA had their employment with the Company ceased on 4 October 2019 and not on later dates as a result of their agreeing to assist Wexted in the finalisation of company affairs.”

Whilst the criticisms might seem reasonable on the surface they tend to imply that liquidators should be obliged to consider the individual financial and legal circumstances of each and every employee they encounter during an appointment.

That would appear to be an onerous obligation that could open up liquidators to a degree of risk that might disincentivise IPs to take appointments. Support INO’s continued chronicling of the insolvency sector.

10 Comments on "Liquidators lashed after staff lose redundancy"

  1. Princess Leila, the Bankruptcy Queen | 9 June 2021 at 11:03 am | Reply

    What a sad state of affairs. The employees should have been terminated and retained by the Liquidation as ad-hoc contractors. Like everyone else does in these situations.

  2. Concerned liquidator | 9 June 2021 at 11:12 am | Reply

    Typical Kangaroo court commentary to be expected from the AAT noting that the liquidator has absolute discretion when to make an employee redundant. Not reasonable to suggest the Liquidator asked the employees to stay on where the employees consent is not required, their only other option is to resign (and forfeit redundancy in any event). It is not a liquidator’s obligation to provide for the most optimal personal outcome of each employee.

  3. Hound of the Baskervilles | 9 June 2021 at 11:21 am | Reply

    The way I see it the staff members who stayed on have been seriously dudded. Could there be grounds for them to remove the liquidators and appoint replacements who would be more inclined to approve their FEG claims?

  4. I’d be furious if I was one of those employees. The finance manager probably should have known better, but the IT guy was particularly hard done by, especially given he only worked 1 extra day! I wonder if there is any way the employees can sue the liquidators? I’m guessing not, which is a shame.

  5. Synical Sam | 9 June 2021 at 11:26 am | Reply

    Of course, this along with the every-day variety of s121(1) victims who are simply unlucky enough to be not made redundant until the final tranche of their employer’s terminations and collapse, could all be fixed by simply adding “… and has been for a continuous period exceeding 6 months…” into the middle of s121(1)(b).

    But of course that won’t happen any time soon – the federal government has a nifty little legislative oversight here that saves them millions in FEG advances every year…

  6. I've done this before | 9 June 2021 at 11:31 am | Reply

    This is nothing new, and it has happened before numerous times in front of the AAT. That is the legislation – if the employee is required to work then the only alternative is to resign and receive no redundancy. We sometimes use this process to to teach either disobedient or expensive employees (from a redundancy perspective) a lesson and keep them working so we don’t have to pay redundancy.

  7. This is a really unfortunate outcome for the employees and should not be the position where an external administrator is winding down a business. Yet another example of the poor interaction of insolvency with other laws!

  8. 35 years as IP | 10 June 2021 at 4:18 pm | Reply

    As Sinical Sam says, why not amend the laws rather than blaming the person (liquidator) who doesn’t make the laws but is supposed to somehow work around them (when the AAT can’t / won’t). The liquidators presumably needed the two key staff to stay on – perfectly reasonable. Why should the IP have to manage the situation by terminating them and then re=employing them ad hoc. What if then the two key employees (post termination) simply go away. The IP’s job is to deal with the affairs (mess) left by the management / directors. Perhaps the critics should try to do a role as IP and see how they fare with the initial days on a new job; there’s more to think about. Fix the laws.

    • John Thorne | 10 June 2021 at 7:37 pm | Reply

      Hardly a drama to engage the former staff as contractors. Fairly basic in fact. It’s standard procedure in receiverships or VA’s when you need a couple of key guys to stick around for a bit. Walk a day in my shoes and THEN you can call me names!!!!!

  9. Jim Johnson | 13 June 2021 at 4:24 pm | Reply

    A further example of the rights of employees are rarely fully attended to. I suspect the liquidators may nit gave been aware of the consequences of their actions as if they did they would clearly have had a duty to advise the employees of the consequences.

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