FWC examines employment transfers and financial necessity in dismissals
The Fair Work Commission (FWC) recently dealt with an unfair dismissal application filed by a cafe worker against his employer. The worker argued that despite only working for the new cafe owner for about 3.5 months, his previous employment with the old owner should count toward the minimum employment period required for unfair dismissal protection.
The worker claimed his employment transferred seamlessly when the business changed hands, with the cafe continuing to operate under the same trading name. He further argued that the restructuring of his position was not a genuine redundancy, as another employee had allegedly been promoted to take over his former duties.
At stake in this case were questions about employment continuity when businesses change hands, and what constitutes a genuine redundancy in a small business context.
The cafe, known as Greenwich Deli, changed ownership in September 2024 when it was purchased by a 22-year-old business investor with limited hospitality experience. The worker had been employed as head chef by the previous owner (Tasty Trading Pty Ltd) since November 2022 and continued working when the new owner (AJL Industries Pty Ltd) took over.
Shortly after the change of ownership, the worker was promoted from head chef to cafe manager with a significant salary increase from $77,064 to $84,968 per year plus superannuation. According to the worker, he was the only full-time employee, supported by five casual staff members.
The worker testified that since there was no assistant manager or sous chef, he was responsible for the entire business including front of house, kitchen and overall management. This expanded role meant he effectively took on the operational responsibilities previously handled by the former owner.
By late November 2024, the cafe was facing severe financial difficulties. Evidence showed the business had lost approximately $40,000—far more than the $10,000 the worker had anticipated.
The employer blamed these losses on the worker's management decisions. The FWC noted that "[the worker's] idea for burger nights each Thursday, Friday and Saturday together with 7-day trading where excessive staff numbers were rostered on the quietest days, all contributed to major financial losses."
The situation became so dire that the cafe owner and bookkeeper "were forced to negotiate payment terms with suppliers, and this was a direct result of [the worker's] challenges with ordering (which he admitted to [the cafe owner])," according to the decision.
On December 29, 2024, the employer sent the worker documents outlining operational improvements and cost-cutting measures. This was followed by discussions in early January 2025 about reducing trading from seven to five days per week.
During these discussions, the worker reportedly resisted the proposed changes and indicated he would resign if his salary was reduced to his previous level. As the Commission noted, "[The cafe owner] further gave evidence of [the worker's] threat that should he be returned to his previous role at $75,000 per year he would be walking out the door."
The worker was dismissed on January 15, 2025, with the employer claiming the position was made redundant due to financial constraints. The worker disputed this characterisation, arguing his dismissal wasn't a genuine redundancy because another employee had been promoted to perform his former duties.
A key aspect of the case was whether the worker had met the minimum employment period required for unfair dismissal protection. For small businesses with fewer than 15 employees, workers must complete 12 months of service before they can access unfair dismissal protections.
The worker had only been employed by the new owner for approximately 3.5 months. However, he argued that under the Fair Work Act 2009, his nearly two years of service with the previous cafe owner should count toward this requirement since there was a "transfer of business."
The Commission agreed, finding that the worker was likely a "transferring employee in a transferred business" under section 311 of the Fair Work Act. The FWC stated: "On this limited evidence I am not satisfied that [the worker] was not a transferring employee in a transferring business. Therefore, I find that [the worker] was most likely a transferring employee in a transferred business."
Despite finding the worker had likely met the minimum employment period requirement, the Commission ultimately dismissed his application because it determined the dismissal was a genuine redundancy.
The FWC found that the cafe manager position was not replaced after the worker's dismissal. Instead, the burger chef was transferred from casual to full-time work as cafe chef, while the owner took over the management responsibilities.
As the Commission noted, "[the cafe owner] now does all of the front of house ordering, the cleaning, rostering and communicates directly with staff. Consequently, the absence of a manager shows there is no need for one."
The Commission concluded: "I find that [the worker's] dismissal was a genuine redundancy. His position was not replaced and alternatives to redundancy were considered. [The employer] determined rightfully that decisions had to be made to restructure the business, [the employer] could no longer sustain the operational costs committed to largely through [the worker's] mismanagement and his high salary was unsustainable."
Under section 385 of the Fair Work Act, a dismissal cannot be unfair if it was a genuine redundancy. The Commission's final ruling stated: "Therefore, I find that as a genuine redundancy [the worker] was not unfairly dismissed in accordance with s.385 of the Act and is not entitled to press his application as an unfair dismissal."
