Associate Professor Christopher Symes:

The Australian Parliament in its Autumn/Winter session is about to debate legislation that deals with the consequences of an employer entering into insolvency (liquidation) with employees being owed wages and other entitlements. The topic was part of the ALP policy on ‘protecting workers’ entitlements package’ taken to the last election.

 The Act will replace the existing General Employee Entitlements and Redundancy Scheme (GEERS) which is not enshrined in legislation as it was introduced administratively nearly 10 years ago.

 GEERS presently covers up to three months unpaid wages, amounts deducted from wages (like employee superannuation contributions that are not passed on to a superannuation fund) for up to three months prior to insolvency, all unpaid annual leave, all long service leave, and up to a maximum of five weeks unpaid payment in lieu of notice. The Bill is expected to cover these wages and entitlements.

 One change that is expected is that the Bill will protect redundancy pay, up to a maximum of four weeks for each year of service. At present under GEERS only 16 weeks of redundancy pay is covered despite the length of service. The ALP believes this will mean that almost all workers will receive all of the redundancy entitlements they are owed and their website claims this will give Australian workers the strongest protection of their entitlements they have ever had. Recently it was commented to me by an overseas expert that the new proposals would position Australia as one of the world’s most generous schemes dealing with employees of insolvent companies. This is such a turnaround from the mid-late 1990s when we merely gave a ‘distribution’ priority in our corporate law to employees, which of course, is subject to their being assets available to be realised and then distributed. For many years before that Australia, despite being a signatory to the ILO convention that expected a Wage Earner Protection Fund had ignored that expectation.

The Fair Entitlements Guarantee Bill will not apply to the portion of income earned above the annually indexed rate of $108,300. Since GEERS was introduced there has been indexation in this area which appears to have worked well. The rationale seems to be that those paid beyond this rate could bear a discount on the payment of their entitlements.

The Bill will not assist directors or ‘excluded employees’ of the employing company as defined by Section 556 of the Corporations Act [i.e. spouse or relative of director]. Whilst a first glance this seems reasonable as they straddle the employee/management/operator divide. However, with some many SMEs featuring in the corporate landscape and therefore the corporate insolvency landscape it is too narrow just to believe that all are undeserving of their employment entitlements. It should be possible to ‘adjudge’ a director or excluded employee as an appropriate recipient of the fair entitlements. Perhaps this could be done by the Fair Work Australia Commissioner or the liquidator. To do otherwise is to deny the many ‘mum and dad’ directors of the 1.7m proprietary companies a fair go.

Finally, we note that there is no mention yet of the government taking the opportunity to extend the scheme to employees of companies subject to a DOCA.