Dismissal due to restaurant closure for Covid-19—not a case of genuine redundancy

Covid-19 pandemic and lockdown forced cessation of operations

A small restaurant and bar had employed a chef for 15 years. When the Covid-19 pandemic occurred and the state enforced a lockdown, the restaurant/bar ceased operations. The bulk of their customers were office workers around their area but when employees began working from home, they lost a lot of business.

From April to November 2020, the restaurant made a gross income of $55,000 when in the same period of April to November 2019, they made around $400,000.

Termination letter via post and email

On 9 July 2020, the owner of the restaurant/bar sent the chef an email informing her that the pandemic had wreaked disaster on their business, and as a result, they will cease all business activity on 16 August 2020.

The restaurant owner apologised for not meeting the chef face to face because of the lockdown.

Attached to the email was a termination letter and the reason for the termination was redundancy. She was given 5 weeks’ pay in lieu of notice. A copy of the same letter was sent to the chef via registered post. The chef felt that she had no reason to respond to the letter or the email as she interpreted her redundancy as a necessary effect of their closing down the business permanently.

Three months later, bar re-opened

However, around 28 October 2020, the chef saw on a Facebook post that the restaurant was reopening on that same day. The post also informed the public that they were looking to hire chefs.

Application for unfair dismissal

The chef then filed an application for unfair dismissal on the ground that there was no genuine case of redundancy.

Her application was filed beyond the 21-day period set by the Fair Work Act 2009 for filing applications for unjust dismissal.

Requirement to consult prior to closing business

The Fair Work Commission (FWC) found that the chef’s position was covered by an Award. Clause 38 of that Award required the restaurant owner to consult with the chef about a major change in the workplace. If the restaurant owner had made a definite decision to make a major change in the organisation or structure of the business, then they must give notice to the chef, discuss who the changes would affect them, and reduce the adverse effects of the changes. A redundancy meant that the role of the chef will no longer be needed in the business.

Restaurant owner failed to consult chef

The restaurant owner admitted that it had not conducted any consultation with the chef prior to or at the same time as it made the decision to close the business as required by the Award.

The restaurant owner felt that the pandemic and the lockdown were unusual circumstances that caused stress. The restaurant owner also felt that any conversation with the chef would be emotionally charged as the chef supported her mother and her daughter who were both ill. The restaurant owner thought that if the chef had any questions, then she would initiate discussions.

Therefore, it is obvious that the restaurant owner failed to satisfy the requirements of consultation with the chef.

Business in genuine financial distress necessitated closure

The FWC also found that given the state of the finances of the business at that time, it would not have been possible for the restaurant to offer the chef an equivalent position or to be redeployed within its enterprise.

At that time of the dismissal, the restaurant/bar had reduced its operations to just one employee who was responsible for the management and kitchen duties of the restaurant which only sold take-away orders.

There was evidence that in November, three months after the chef was made redundant, the restaurant opened its bar and had re-hired its former wait staff but it has not reopened its restaurant business.

No genuine redundancy but closure of business

The FWC found that there was no genuine redundancy because it was not only the chef’s position that had been redundant but the entire restaurant was closed.

Therefore, while there was no genuine redundancy, the dismissal was for a real and bona fide valid reason: the entire restaurant was ceasing operations. The bar business was reopened and they re-hired two of the former wait staff but they had not hired a new chef.

Failure to consult made dismissal unfair

The only violation by the restaurant owner was it failed to comply with the requirements of the Award to consult with the chef prior to dismissing her. The Award required the restaurant owner to consult with the chef to lessen the adverse effects of the closure of the business on her.

This failure to abide by the Award’s requirements made the dismissal unfair. Because if the restaurant owner had consulted with the chef, then the chef could have had more time to mitigate the impact of her termination. She could have had more time to find alternative employment.

The chef was awarded two weeks’ pay as this would have been a reasonable estimation of the time that consultation would have taken if the restaurant owner had complied with the Award.

Source:

Michelle Sposito v Maori Chief Hotel [2021] FWC 700

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