Controversy surrounds Ovato’s redundancy methodology

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For many reasons, layoffs and corporate bankruptcies have become a reality in the printing industry. Declining demand, Covid and an uncertain recession environment affected high-volume web printers the most, while labels and packaging and to some extent signage and display found product offerings alternatives such as Covid Health and Orientation Charts. However, the way Ovato handled his necessary layoffs has drawn criticism.

Closed – Ovato Clayton site, formerly PMP

Ovato is the ASX-listed name (code: OVT) of Australia’s second largest printing group, which includes the merged businesses of IPMG, Hannanprint and PMP. At the end of last year, it closed its remaining Victorian operations in Clayton, resulting in around 200 layoffs there and another 100 in other parts of Ovato’s companies.

Ovato has been doing it the hard way for some time, and given the decline in the printing industries in which the company operates, as well as red ink to the tune of $ 108 million on the balance sheet, has had to take steps to allow its survival. Its stock price has been rebounding around the 1c level and below for months.

The AMWU, to which most of Ovato’s employees belong, acknowledged this and began negotiations in 2020, which resulted in pay cuts of around 40% and a cut in compensation of around half. dismissal, in order to maintain the viability of the company.

AMWU issued a statement saying, “Workers bent over backwards to support their business and colleagues. When the pandemic hit, they suffered a 40% pay cut to try to keep the business afloat. . In a deal that was approved on November 6 (2020), they agreed to limit their severance pay so the company could afford to pay them their rights while remaining viable. “

However, it later emerged that the employee payroll belonged to four companies which are currently in the process of liquidation, thus removing them as direct employees of Ovato. In McGrath Nichol’s restructuring paper, the author wrote that after the restructuring, approximately 300 workers would be employed by four Ovato companies with “few assets” and an estimated $ 18.3 million in rights. workers. He added: “(Businesses) … will have no current activity or goal and therefore, in my opinion … will be insolvent. “

These four Ovato companies are currently being liquidated by Marcus Ayres and Stephen Parbery of Duff & Phelps, an international business financial advisory firm headquartered in New York, with revenues of over A $ 1 billion and $ 4,000. employees. It appears that the employees were on the books of companies for which there was no intention to “carry on a business” and which became vehicles with the aim of becoming “zombie companies” – insolvent with insufficient funds to cover employee rights already discounted …. thus forcing liability on FEGS and the taxpayer.

Marcus Ayres, in a report by David Ross of The Australian on Jan. 2, is quoted as saying that employees will need to take action to receive their severance pay from the federal government’s Fair Entitlement Guarantee Scheme (FEG) after Ovato leaves the four entities without sufficient funds to cover the payments.

That Ovato was able to accomplish this within days of a New South Wales Supreme Court ruling that approved his restructuring and $ 40 million fundraising, from sources at the Hannan Company and Mercury Capital , the private equity firm that controls the former Bauer Media (now ‘ARE’) – Ovato’s biggest client.

A terrible precedent?

Lorraine Killer
Lorraine Cassin from AMWU “It’s a shame”

In response, Lorraine Cassin of AMWU said: “In my 23-year career, I have never seen such behavior. The taxpayer foots the bill – that is not what the FEG has been doing. created. It is a terrible precedent in the corporate world. “

In an earlier statement just before Christmas, when it was evident that workers would not receive payment for many weeks, Cassin said:

“It is a complete shame that these workers who were dedicated and worked hard during a pandemic were sidelined just before Christmas and now receive no pay and find themselves without cash at a crucial time of the year.

“Ovato has renounced all of the commitments they made to these workers… it is nothing less than an attempt to grab and seize, avoiding paying these workers what is owed to them.

“We cannot stand idly by and watch the abuses of the FEG which aims to protect workers, and not to be a tool exploited by big companies not to pay workers their rights.

“FEG was created to make sure workers don’t miss a thing when a business collapses. It was not designed as a fund to finance corporate restructuring at taxpayer expense. “

AMWU and ACTU then joined the controversy, calling on Attorney General and Minister of Industrial Relations Christian Porter to step in – ACTU President Michele O’Neil saying:

“The workers carried this country through the pandemic. Ovato has obligations to its employees and these must be honored. This is clearly a case where a company is trying to use accounting tricks to avoid paying what is owed to its employees, and the fact that this happens at Christmas after an incredibly trying year is incredibly cruel.

“We stand with these workers and AMWU and call on Minister Porter to do the right thing and protect the rights of these workers. “

Editor’s comment Andy McCourt

It is a delicate situation. On the one hand, you have a company that has an obligation to its shareholders and ASX regulators to come back in the dark, while on the other hand, there are families, livelihoods, and much-needed rights payments. stake.

Sadly, layoffs will continue to be a reality, but there are ways to deal with them fairly and ways that, say, extend the principles under which labor agreements are enforced. I don’t think, if the credible assessments of McGrath Nichol and Duff & Phelps are correct, that it can be about right and honorable to get employees to agree to pay and entitlement cuts and then shift the responsibility on “zombie” companies used for the purpose of liquidation and denying them rights – forcing taxpayers to foot the bill. For a company listed on the ASX, this is particularly upsetting. I have always thought that businesses were meant to ‘run a business’.

The survival instinct is just as strong with pressurized boards as it is in the jungle – and rightly so. In the face of continued existence and the protection of remaining investments and jobs, they can do desperate things. I’m sure those involved wouldn’t have done it on purpose – serious reputations of “print royalty” are at stake. It’s pretty obvious that cuts and restructuring need to take place, but I find that the Using workers, some with 30-year careers, as financially “sacrificial lambs”, is deplorable. Luring them for a moment into a false sense of security by forcing them to agree to pay cuts and halving layoffs – and, once won, tossing them into “zombie” companies to be liquidated, may be legal but does not evoke hardly meet the high standards of corporate governance demanded by ASX and ASIC.

To say that it was to protect 800 more jobs and the company does not stand up. The layoffs could have happened anyway, the cash injection could have been increased from $ 15 million to $ 17 million and 300 former Ovato / PMP / IPMG / Hannanprint employees – not to mention the government and the FEG – would have been more understanding and more forgiving of the conditions.

And it would have been a sweeter Christmas for around 300 families in the printing and allied industries.


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