The Federal Government has introduced the Fair Entitlements Guarantee Bill 2012 (the Bill) to replace the existing administrative General Employee Entitlements and Redundancy Scheme (GEERS) applying to employees of businesses that fail to pay redundancy entitlements.
During the 2010 election campaign, Labor promised to remove the existing 16-week cap on protected redundancy payments imposed under GEERS and replace it with an uncapped scheme. The Bill will now provide for up to four weeks of redundancy pay per year of service.
The Explanatory Memoranda to the Bill states that the primary objective of the Bill is to provide financial assistance (an 'advance') to former employees where the end of their employment is linked to the insolvency or bankruptcy of their employer. After making an advance, the Commonwealth assumes the individual's right to recover the amount that was advanced through the winding up or bankruptcy process of their employer.
Eligibility
To be eligible for an advance, an employee must meet the following
requirements (set out in clause 10(1) of the Bill):
- the person's employment has ended
- the end of the employment is linked to the insolvency of their employer
- the employer is in liquidation or bankruptcy
- the person has unpaid employment entitlements that cannot be obtained from another source
The scheme will extend to employees subject to a deed of company arrangement, or equivalent bankruptcy proceedings.
The Bill maintains the existing arrangements under GEERS that advances will not be payable to people who are excluded under the Corporations Act- contractors, directors and family members of a director. This Bill also mirrors GEERS in that assistance will not be available to support business restructures or where insolvent entities are able to pay employee entitlements within a reasonable period.
The entitlements
Under the Bill, eligible employees will be covered for unpaid
entitlements in relation to:
- Redundancy
- Annual leave
- Long service leave
- Wages
- Payment in lieu of notice
These entitlements are determined in accordance with the employee's governing instrument (as defined in clause 5 of the Bill). The Bill will only enable payment of unpaid wages for up to 13 weeks and will provide payment in lieu of notice at 5 weeks.
Payment
An advance may be paid directly to the individual, or to the
liquidator or a third party contracted by the Commonwealth for the
purpose of passing the advance on to the recipient.
Workplace Relations Minister Bill Shorten has said that the Bill will provide the flexibility to make payments ahead of liquidation, early advance payments and the power to make regulations to provide for payments to non-employees.
Concerns
Some of the concerns that have been expressed by the Australian
Industry Group include that the Bill:
- favours employers of large, unionised employers, who are most likely to have large severance entitlements
- is potentially expensive, as the insolvency of one major company could induce a major payout and hence cost to the Federal Budget
- heightens the potential moral hazard that may arise if employers agree under duress to increased redundancy pay, leaving tax payers to foot the bill
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