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
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
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.
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
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
Under the Bill, eligible employees will be covered for unpaid
entitlements in relation to:
Long service leave
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.
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.
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
heightens the potential moral hazard that may arise if
employers agree under duress to increased redundancy pay, leaving
tax payers to foot the bill
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
Kemp Strang has received acknowledgements for the quality of
our work in the most recent editions of Chambers & Partners,
Best Lawyers and IFLR1000.
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Long experience representing many of Australia's leading employers has taught us that in employment litigation the identity of an employee's representative is a major factor in how employee litigation runs.
Australian employees receive certain entitlements (such as annual leave and superannuation) where contractors do not.
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