The Guardian February 23, 2000

Workers' entitlements: maintain the pressure

by Anna Pha

When the Howard Government rushed in to bail out National Textiles and its 
chairman-of-the-board brother Stan, the Prime Minister unintentionally did 
a great deal towards putting the protection of workers' entitlements on the 
political agenda.

Unions have been raising questions about other companies that have been 
liquidated and left workers owed millions of dollars.

Workplace Relations Minister Peter Reith tried to take the heat off by 
proposing an Employee Entitlement Support Scheme for future company 

But his scheme would limit the amount paid to a maximum of $20,000, meaning 
that many workers would not be fully compensated if their employer became 

That is if Reith's scheme ever gets off the ground which is doubtful, as it 
depends on the co-operation of all the States to pay half the funding. Even 
Federal Cabinet is not united on it.

It is possible that a private compulsory insurance scheme will be set up 
instead, where employers as against taxpayers, make contributions.

As a result of considerable trade union and media pressure to actually 
address employer behaviour, the Government last week put forward some 
amendments to Corporations Law.

One amendment seeks to toughen penalties against directors trading while 
their companies are insolvent  something that worries other businesses 
trading with them.

Another provides penalties for anyone entering an arrangement for the 
purpose of avoiding employee entitlements.

This is an important question as more and more companies are setting up 
shelf companies to employ workers. These shelf companies are deliberately 
set up without the necessary assets to meet their obligations to employees.

They pay the shelf company to provide labour at a cost which fails to 
include future leave and superannuation entitlements.

It is doubtful that the wording of this amendment provides any threat to 
these employers.

It seems that workers will need to prove that the directors entered into 
arrangements with the purpose of ensuring that their employees' 
entitlements would be unavailable.

Proving in a court why someone did something is far more difficult 
than just establishing an outcome.

If the Government were really serious then it would punish employers who 
failed to act to make the funds available.

Directors' assets should be on the line, just as they are with the Tax 

The Government is more concerned about the plight of company directors than 
workers, as demonstrated by another piece of legislation which is due to 
come into effect soon  what is known as the business judgement rule.

The aim of this rule is to provide more protection for company directors by 
preventing courts looking at the merits of a director's conduct.

The fact that the Government has moved to take some  albeit inadequate  
action demonstrates that it is feeling the heat. The pressure must be 
maintained, and demands made for tougher laws to prevent employers 
siphoning off workers' entitlements and for workers' entitlements to be 
first in line, before those of secured creditors, when a company goes bust.

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