Extreme Team Pty Ltd v Romano [2005] QIRC 128 (2005) 180 QGIG 226

[Extract from Queensland Government Industrial Gazette, dated 23 September, 2005, Vol 180, No.4, pages 226-227] QUEENSLAND INDUSTRIAL RELATIONS COMMISSION Industrial Relations Act 1999 – s. 288 – statement of policy Extreme Team Pty Ltd AND Melissa Romano (B/2005/980) DEPUTY PRESIDENT SWAN 12 September 2005 DECISION This application has been made by Extreme Team Pty Ltd (Extreme) seeking an exemption to pay full redundancy entitlements to a former employee, Melissa Romano (pursuant to clause 20 Incapacity to Pay “Termination, Change and Redundancy Clause Statement of Policy” (TCR) (174 QGIG 911) which states as follows: “An employer in a particular redundancy case may make application to the Commission to have the general severance pay prescription amended on the basis of the employer’s incapacity to pay.”. The TCR provisions are contained within the Retail Industry Award – State 2004 (the Award) and clause 4.4.14 of that Award replicates the wording of clause 20 in the TCR provisions. The abovementioned Award was the Award under which Ms Romano was employed. Giving evidence for the employer was Mr Bruce Exton, a director of the company. Mr Exton advised the Commission that Extreme (1) was trading as Its Extreme and operated two stores in Cairns, and one in Airlie Beach. Extreme Team 2 Pty Ltd (Extreme 2) trades also as Its Extreme and operated a store in Surfers Paradise. Mr Romano had worked for the former employer for more than four years. Were redundancy pay to be paid, she would have qualified for eight weeks’ pay. As a matter of fact, Ms Romano received three weeks’ pay upon her position being declared redundant. Mr Exton explained the reasons for claiming an incapacity to pay this redundancy pay. • The businesses have been suffering significant trading losses during the past year. • A decision was made to sell two of the stores. • One of those stores was located at Surfers Paradise. • A deal had been negotiated whereby another retailer was to take over the Surfers Paradise lease. • It had been hoped that the new employer would engage the services of Ms Romano. • On 10 June 2005, Ms Romano was advised by the new retailer that it did not wish to employ her. • Mr Exton offered Ms Romano a position as a full-time sales person in Cairns and also offered to pay her relocation costs were she to accept the appointment. • Ms Romano rejected this offer. • Currently, these stores are under the guidance of Chartered Accountants KPMG and a recovery plan to trade out of the financial position is being undertaken. • As part of this process, two Directors (including Mr Exton) have injected considerable amounts of money borrowed against their personal homes into this fund. • The stores trade creditors are currently outside of their usual trading terms of 30 days and any available cash reserves have to be committed to them. • Supporting the claims of financial hardship, Mr Exton tendered correspondence from KPMG Chartered Accountants. • This correspondence (dated 29 July 2005) states inter alia that: “There is currently a workout arrangement in place with the group’s financier, the National Australia Bank (NAB). The workout was necessary because of the NAB’s concern with their exposure to the group, and the group’s trading performance. The workout arrangement is still on foot and will likely be for a considerable period… Without the support and indulgence of the NAB through the workout arrangement, the trustee company may be insolvent. Furthermore, the employer company is no longer trading and the directors advise it has no material realisable assets.”. -- 1 of 2 -- ¿ 2 • Mr Exton provided to the Commission detailed financial information highlighting the financial state of his businesses. Ms Romano states as follows: • In late May 2005, Mr Willets (a co-owner and director of Extreme) visited the Surfers Paradise store and advised staff that the new owner of the business would interview staff. He also advised Ms Romano that she would have a good chance of being retained. • Based upon this commentary, Ms Romano did not seek alternative employment. • On 7 June 2005, Ms Romano was advised that she would not be retained in this position. • The offer of a position in the Cairns store entailed working 2 days per week in Head Office and three days per week in the store. • Ms Romano queried the veracity of the financial statements which had been tendered by Mr Exton. For one company listed in the Reconciliation Summary (payable), Ms Romano states that a search of the Directors of this company shows that it is owned by both Mr Exton and Mr Willets. • Ms Romano also understands that Mr Willets had recently returned from a holiday in the United Kingom. • Ms Romano was not in a position to return to Cairns as she had moved to Surfers Paradise some 18 months prior and had a lease on a house until September 2005. • Ms Romano had advised the Directors of the business that she would have been prepared to have taken her redundancy payment in weekly instalments. • Ms Romano admits that she does not know the true financial situation of Extreme 2 but she states that the remainder of the Extreme stores continue to trade in Cairns and Airlie Beach. I have considered the submissions made by both parties and have also considered the documentary evidence put before me by Mr Exton as to the financial state of his business together with the correspondence from KPMG. I appreciate that Ms Romano is very disappointed in not receiving her redundancy entitlements. This is the first position she has held since leaving school. I accept that Ms Romano held a belief that she would firstly be retained in employment by the new purchaser of the business and, when that didn’t occur, that she would be paid her redundancy pay. I also appreciate Ms Romano’s honesty when she stated that she did not really know the true financial situation of the former employer. Notwithstanding that, the TCR Statement of Policy does take into account the fact that sometimes employers are legitimately unable to meet those financial requirements because of an “incapacity to pay”. I have determined that the former employer is entitled to rely upon this provision contained both with the TCR Statement of Policy and incorporated within the Award. I have accepted Mr Exton’s evidence that the business is unable to meet these payments. The statements made by KPMG reinforce the submissions made by Mr Exton. The application is granted. The applicant is not required to make any redundancy payments to Ms Romano. Order accordingly. D.A. SWAN, Deputy President. Appearances: Hearing Details: 2005 July 27 August 23 Mr B. Exton on behalf of Extreme Team Pty Ltd. Ms M. Romano, the respondent. Released: 12 September 2005 Government Printer, Queensland The State of Queensland 2005. -- 2 of 2 --