Draftsman hired for a project
A draftsman started employment with an aircraft manufacturer. His employment by the Australian company was in connection with a project commissioned by a Hong Kong company to design and build a single-engine aircraft in Australia. The draftsman and his family relocated to live near the company’s worksite. The draftsman’s wife also worked for the company.
Late payment of wages
He began working in January 2020. All went well until February 2021 when the aircraft company paid the draftsman’s wages 24 days late. In April 2021, the draftsman’s wages were paid 7 days late. In May 2021, the wages were paid 10 days late. In June 2021, the draftsman’s wages were paid 53 days late. In July, the wages were paid 31 days late and in August, the wages were paid late by 2 days.
Company blamed Covid for funding difficulties
The company explained to the employees that company shutdowns and layoffs in other companies due to Covid was to blame for the delay in transfer of funding from the aircraft company’s headquarters in Hong Kong. Consistently, the company excused the delays as caused by foreign exchange approval processing. Despite the many emails from the draftsman asking for a timeframe or even an estimated timeframe for the payment of their wages, the company just could never say exactly when the draftsman’s wages would be paid.
Late payment caused indebtedness and anxiety
The draftsman repeatedly enquired and he was repeatedly told that the company was having funding difficulties because the sponsor in Hong Kong was late in sending them the funds. The draftsman emailed his bosses to tell them that the delay in the payment of wages was affecting his morale and productivity and it was causing anxiety because they had not been assured by the company when the pay issues would be resolved. The draftsman also informed their manager that they were incurring debts just to cover their living expenses and were unable to pay their bills and mortgages on time. The situation was hard for the draftsman seeing as both he and his wife worked for the aircraft company and both their wages were paid late.
Company’s response to the employees
The company cautioned the employees saying that the sponsoring company in Hong Kong may withdraw the commission and abandon the project altogether if the employees raised too vigorously the issue of late wages.
The company gave all employees a “goodwill payment” of $1000. At one point, the employees were given the opportunity to stay at home on full pay until such time that the aircraft company was able to pay their wages at the right time. The company allowed employees to stay home without deducting the missed days of work from their allowable leaves.
No choice but to resign
The draftsman, in his letter of resignation said that the repeated delay in the payment of his wages was a breach of his employment contract. He also said that he was forced to resign not only because of the repeated delay in the payment of his wages but also because of the lack of adequate and timely communication from the management, and the lack of transparency as to how the company was solving the problem of delayed wages.
Company claims it has done all it could to make up for the delays
The aircraft company replied to the draftsman’s letter of resignation saying that they had done all within their power to manage the impact of the late wages on its employees. It reminded the draftsman that he had received the company’s goodwill payment that was intended to make up for the delays. The company even offered to make additional support payments upon request. The aircraft company demanded that the draftsman give them notice of his resignation as required under his employment contract.
Application for constructive dismissal
In his application for constructive dismissal, the draftsman said that he was forced to resign because his wages were paid late on at least six occasions. He had also lost all trust that the company would pay his wages in a timely manner in the future as they had promised in his employment contract. More importantly, he resigned because the company never told the employees what it was doing to stop wages being paid late in the future.
The aircraft company denies that there was any constructive dismissal but that the draftsman voluntarily resigned. The company also claimed that at the time the draftsman resigned, his wages were all paid in full and there were no outstanding wages.
The manager testified that the company in Australia usually made a request for funds by providing a budget forecast and the Hong Kong headquarters sent money in advance to Australia based on the budget forecast. Beginning February 2021, the payment of wages was delayed because the company headquarters in Hong Kong stopped sending funds in advance.
The Hong Kong headquarters informed the Australia company that the business of selling aircraft was negatively impacted by Covid-19. Because of the pandemic and the sharp decrease in air travel, the Hong Kong company could not sell the aircraft designed and manufactured in Australia. One customer, an airline in Asia that leased aircraft from the Hong Kong company had gone bankrupt.
But by September 2021, at the time the draftsman resigned, the funding situation had already improved. They had even begun recruiting new employees and leasing new premises.
Test to determine that there was constructive dismissal
The Fair Work Commission held that the test to be applied to the draftsman’s situation is whether the aircraft company engaged in conduct with the intention of ending the draftsman’s employment. It is not enough to only find evidence that the draftsman resigned because the aircraft company’s behaviour left them no choice. There must be a finding that the employer’s conduct directly and consequentially caused the employee’s resignation. The question to ask was if the aircraft company did not delay in paying the draftsman’s wages, would the draftsman remain in his employment.
Payment of wages is a basic requirement
When the aircraft company hired the draftsman, it signed a contract where it promised to pay him a wage and it promised to pay it to him at regular intervals of a fortnight. By frequently failing to comply with the terms of the agreement in the employment contract, the aircraft company indicated that it was not going to live up to the contract it had entered.
Late payments became a regular occurrence
If the aircraft company paid the draftsman’s wages late only once or twice, or if the aircraft company paid only one or two days late, it might not have been unacceptable. If the company had apologised sincerely and acted to quickly rectify the delay, then the employees would not have felt too aggrieved. They were working for a start-up company, after all. But the evidence shows that the non-compliance with the obligation to pay wages in full and on time was egregious. The delay in payment was significant.
Procuring funds from the sponsor was the aircraft company’s responsibility
While the aircraft company in Australia may not have had control over their sponsor’s transfer of funding, it was not the Hong Kong company that had hired the draftsman. It was the Australian aircraft company that had the responsibility to pay their employees on time.
The Australian company ought not to use the pandemic as a shield. And the tone of the aircraft company’s communications with its employees shows that it expected the employees to continue working despite the consistent late wage payments on the understanding that they will all be eventually paid in the future.
Draftsman exhausted all remedies available
The draftsman sent emails to his supervisors and to the company manager enquiring as to the reasons for the delay. He also told the aircraft company how the delays impacted him and his family. He reminded the company of their obligations under his employment contract. The draftsman even raised his concerns with the Fair Work Ombudsman.
The company would be late in paying wages, then it made a promise to pay on a specified date but continuously fail to pay the wages, extending the date of payment again and again. The draftsman could not be expected to live with the uncertainty of when he would be paid. He could not continue working under that uncertainty or continue contacting the Fair Work Ombudsman every time his wages were paid late.
Constructive dismissal was proved
Even if the aircraft company never intended to cause the draftsman to resign, its failure to pay the draftsman’s wages on time for six months was of such magnitude and of such frequency that it had caused the draftsman to resign. The draftsman was constructively dismissed.
James McKay v Astro Aero Pty Ltd  FWC 170
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