The Guardian August 29, 2001

Protecting workers' entitlements

by Warren Smith

The question of workers' entitlements and their protection is firmly on the 
national agenda. Corporate crashes and the theft of workers' entitlements 
is fresh in the minds of much of the Australian public, workers in 
particular. HIH, OneTel, Cobar Mines STP and National Textiles are just a 
few of the most publicised collapses. Workers are losing in the vicinity of 
$400 million annually because of the failure of companies to safeguard 
their hard earned legal entitlements.

The collapse of many companies and subsequent loss of workers' entitlements 
is not always due to genuine financial ruin or the unstable economic 
system. Many of these company collapses have been deliberately orchestrated 
with the sole purpose of robbing workers of their entitlements.

The actions of stevedore C Corrigan come to mind. The Patrick Company 
restructured so that its assets were not in the company employing its 
workforce. Many other companies have carried out similar restructures, 
setting up $2 companies that hire labour, and fold up when its suits the 
parent company.

They sack unionised workforces as well as avoid paying all the outstanding 
wages, long service leave, annual leave, severance pay and other costs 
associated with redundancies.

The parent company, which has the assets, has no legal obligation to pay 
the workers, and is free to set up another company to hire a new, non-
unionised workforce on individual contracts.

This trend in cheating workers of their entitlements epitomises the 
outright corruption of the capitalist system. The Corporations Law of 
Australia, which is the responsibility of the Federal Government, fails 
dismally to protect employees' entitlements.

The anger and determination of workers around this issue can be seen by the 
ever increasing amount of struggles breaking out, not only to regain lost 
entitlements but to protect them from marauding employers who are in many 
instances using their employees' entitlement money to bankroll their 

The activity around the entitlements issue and the struggle to achieve 
gains is indeed positive. While some gains have been made, such as at 
Tristar and Tenneco, there is still a long way to go before workers' 
entitlements are secured.

At present when a company goes belly up workers have first call on liquid 
assets, such as cash in the bank, income from the sale of stock or 
creditors who pay outstanding debts. But once a company is in that 
situation there is usually no money in the bank.

(Assets such as these are termed floating charge assets.)

However, workers are much further down the list and hardly likely to 
benefit from the sale of fixed assets such as property, land or equipment. 
It is generally the case that when a company goes bankrupt that these 
assets form the large part of the funds available and "secured creditors" 
such as banks have priority.


The Australian Manufacturing Workers' Union (AMWU) is campaigning for the 
establishment of an industry trust fund  Manusafe  to cover all workers 
in the manufacturing sector.

The Manusafe campaign has the aim of providing maximum security for 
workers' entitlements by having employers place them in the trust fund as 
they accrue.

It also seeks to have all previously accrued entitlements placed in the 
trust fund over time.

Attempts are being made to get employers at each work site to contribute 
between $5 and $10 weekly per worker to cover the ongoing accrual of 
entitlements. The employers in the main are vigorously rejecting this.

The AMWU is also asking employers to make a down payment of 1.5 per cent 
for long service leave and on a site-by-site basis, provision for severance 

Where a transmission of business takes place, the AMWU is demanding that 
all accrued entitlements be placed in the trust fund.

There have been some bitter experiences with a change in ownership or 
company restructurings, where the company has gone bust and no money was 
left in the kitty for workers' entitlements.

In the case of Steel Tank and Pipe, which had been part of Southcorp, the 
company collapsed four years after its sale, and 80 workers with up to 20 
years experience lost the lot.

The AMWU is also looking at giving casuals (e.g. labour hire which is so 
prevalent) protection through Manusafe. One idea being considered is 
converting part of their leave loading into payments to Manusafe so that 
they can accrue paid leave (sick, long service or holiday) to be taken when 

While unions need to continue to oppose casualisation of work, the reality 
is that there are many causal workers who have no access to the benefits of 
permanency. Protection through a scheme such as Manusafe could have the 
additional benefit of acting as a disincentive to employers hiring casual 

Employer opposition

The Australian Industry Group (manufacturing employers) reject outright the 
concept of a trust fund for workers' entitlements. They claim that the loss 
of entitlements and the fact that companies go bust is a social problem and 
that the taxpayer should foot the bill. Private profit, public 

The main social problem, however, is the system itself. Companies will 
continue to go bust. The point is to protect the innocent victims who have 
no say in the way companies or the system is run and who pay for the 
consequences of capitalism's anarchic and corrupt mode of production.


The Tristar workers settled their dispute with provisions for an insurance 
bond to cover their entitlements in their enterprise agreement.

The company wanted strings attached to the bond, with the right to cease 
making payments if the workers took industrial action.

The union rejected this approach and has secured workers' accrued and 
future entitlements for the life of the enterprise agreement, with Tristar 
agreeing to pay $1.4 million upfront to cover the life of the agreement.

This money is dead money.

Insurance not the answer

While the Tristar workers have made gains and achieved a good outcome, 
insurance does not provide a long-term solution. It is fraught with 

There are usually long delays associated with insurance payouts. Imagine 
the time investigations might take chasing the Bonds, Skases, and Corrigans 
of this world, before the insurance company was prepared to pay-up.

If the loss of entitlements is associated with criminal activity, would the 
insurance company still pay out?

What happens if an employer fails to make insurance payments?

If the policy was in the name of the company (and not the individual 
workers or union), the workers might never see their money.

Australian midwives are currently facing enormous difficulties in relation 
to being able to secure insurance for their profession. Can anybody legally 
force an insurance company to take out a policy?

The debacle with HIH must also not be forgotten. Insurance companies like 
any other company can, and do, go broke.

The Labor Party proposal, outlined by Kim Beazley and Arch Bevis in 
February last year, is based on an insurance scheme.

Their media release said: "Labor's scheme provides for 100% protection for 
employees' entitlements paid for by a small increase in the compulsory 
Superannuation Guarantee.

"This increase would provide a premium which would be passed on to an 
accredited insurer who would offer a product providing 100% insurance for 
employees' leave, superannuation and other entitlements. Employers with 
fewer than 20 employees would not have to pay the increase in the 
superannuation guarantee, the Federal Government providing the payment for 

The Howard Government's employee entitlements support scheme is also 

At best it offers one-third to one-half of workers' entitlements with a 
ceiling of $20,000. It is based on award entitlements (often less than in 
an enterprise agreement) and is not guaranteed after June 2003. It operates 
completely at the whim of the Minister.

This fraudulent scheme lets the Howard Government's employer friends off 
the hook, and gives it the appearance of doing something on an issue that 
has generated considerable public concern. It does not protect workers.

Genuine protection

A reinvigorated award system varied to include trust funds for entitlements 
offers workers far more security. A national scheme along the lines of 
Manusafe offers far more protection than any of the other alternatives 
being pushed, and has the additional advantage of providing portability of 
entitlements where workers change jobs.

In addition to campaigns such as Manusafe, it is also important to pressure 
the Government and Labor Opposition for changes to the Corporations Law to 
ensure employees are first in line to receive what is rightfully theirs 
before other creditors and the Taxation Office get their hands on it.

The law also needs to be changed to make parent companies responsible for 
the debts of their subsidiaries so that they cannot duck responsibilities 
through shelf companies.

The issue has been brought to a head because of the trade union campaigns 
and the overwhelming support from workers and the wider community. It is 
vital the growing momentum is maintained.

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