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Unfair Dismissal Actions Against Companies in Receivership

Unfair Dismissal Actions

Fair Work Australia has given two former employees the right to pursue unfair dismissal claims against a company employer despite it being in receivership, with the tribunal confirming it is not a "court" under the Corporations Act.

The employer was placed into administration on August 23, the employees filed their applications on July 24 and August 1 respectively.

Administrators from Ferrier Hodgson argued the applications should be stayed under s440D of the Corporations Act, which says a proceeding in a "court" against a company in administration can't continue without the consent of the administrator or the leave of the court.

Commissioner Suzanne Jones said the issue before her was whether FWA was a "court" under s440D. The administrators said while the legal authorities diverged on the issue, state supreme court and Federal Court decisions were in favour of the tribunal falling within the definition. Commissioner Jones said the AIRC full bench Smith & Others v Trollope Silverwood & Beck Pty Ltd had considered those authorities, and had found it was not a court under the Corporations Act.

FWA's jurisdiction includes the making of workplace determinations (Part 2-5), determining applications for unfair dismissal remedy (Part 3-2), facilitating the making and approval of enterprise agreements (Part 2-4). Fair Work Australia continues to exercise predominantly arbitral powers and may be required to take into account the public interest," the commissioner said. Commissioner Jones also refused the administrators' alternative request for the applications to be adjourned until after a scheduled meeting of creditors on January 18 next year.

The employees argued they would be potentially eligible for entitlements under the federal government's General Employee Entitlements and Redundancy Scheme if their applications were successful.

Commissioner Jones said GEERS entitlements included "unpaid annual leave and long service leave, unpaid wages in the 3 months prior to the Appointment of an Insolvency Practitioner, unpaid pay in lieu of notice up to a maximum period of 5 weeks and unpaid redundancy pay up to a maximum of 4 weeks per completed year of service."

The commissioner said the employees might be entitled to GEERS payments before the company became insolvent if they had obtained a reinstatement order.

She said a reinstatement order might have utility for two reasons. "First, FWA may order an amount for lost remuneration under s.391(3) of the Act. It is arguable that such an Order constitutes unpaid wages. Secondly, an Applicant who is reinstated and subsequently made redundant because of the financial circumstances of a Respondent becomes entitled to redundancy pay." The commissioner said there was also a potential prejudice to the employees if their applications were held over until after the creditors meeting, "namely that if the creditors meeting resolves to voluntarily wind up [AGM], s.500 of the Corporations Act would prohibit the applications being further dealt with by FWA except by leave of the Court."