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Labor Members’ and Senators’ minority report
We have also considered carefully the Corporations Law
Amendment (Employee Entitlements) Bill 2000, the submissions to the Committee,
and the evidence heard from the witnesses.
We also agree that the submissions and evidence
reflect wide and diverse views on the Bill. We consider that these views
present a strong case for making amendments to the Bill.
Chapter 2 of this report states that the second
reading speech for the Corporations Law Amendment (Employee Entitlements) Bill
2000 advised that the purpose of the Bill was to amend the Corporations Law to
increase protection for employee entitlements.
Many of the submissions state that the Bill is aimed
at deterring directors and other persons from acting to jeopardise employee
entitlements. The NSW Attorney-General and Minister for Industrial Relations,
the Hon J.W. Shaw, QC MLC submitted that the section 588G amendments was not a
specific measure to address employee entitlements, because it only extended the
scope of an existing provision which provides general protection to creditors.
Another submission stated that applying sanctions to impecunious directors
would do little or nothing to increase the funds available in a company
failure.
These submissions suggest strongly that the Bill’s
direct focus is not on reassuring employees that the entitlements due to them
as employees are guaranteed, but on penalising directors in the hope this will
create incentives for directors and other persons to not defray or put in
jeopardy the entitlements of employees. We would suggest that this is not a
sufficient means for protecting employee entitlements and does not address
adequately the position of employee entitlements that have been lost and which
employees now need to recover. As was stated in the submission from Mr Noakes:
“[t]he
problem with this ex post facto approach is that the company is already
insolvent, and the prospects for recovering unpaid wages and entitlements do
not improve markedly with this punishment”.
Accordingly, a number of submissions suggest
additional measures which would more directly assist employees to obtain their
entitlements.
Several submissions suggested extending “employer”
liabilities for entitlements to related companies by enabling an application to
be made to Court for a related corporation to pay the debts of an insolvent
company. Both the ACTU and the TCFUA stated that in recent years there has been
a proliferation of deliberate restructuring of companies.
Other submissions suggested changing the priority
accorded to employee entitlements. The Department of Treasury submitted there
may be considerable problems with this approach. We understand that the AICD
has offered to provide further information to the Committee on dealing with
some of the transitional problems which may arise if this approach was adopted.
The Committee also heard evidence in relation to an
insurance scheme, under which employers would be obliged to obtain and maintain
insurance covering entitlements owed to employees. Both the AICD and the ACTU
suggested this approach and both called for flexibility in the arrangements
which would govern the insurance scheme.
Evidence from the TCFUA also revealed that companies
were failing to make regular superannuation contributions and that companies
were going insolvent owing employees a year or two years superannuation
payments.
These suggestions lead us to conclude that there are
more adequate ways of dealing with the issue of employee entitlements than is
contemplated by the Bill.
The Committee also heard submissions and evidence in
relation to the specific provisions of the Bill.
Several submissions expressed concern with the need
the prove the intention in order to establish the new offence in Part 5.8A.
Many submissions suggested this would be difficult to prove or such a test
could be easily frustrated. An alternate test of the effect of the transaction
or arrangement was proposed. This would be balanced by a range of defences such
as where it could be shown that there was a process of due diligence or an
inability to influence the conduct that led to the failure to pay entitlements.
These defences would need to be considered carefully in order to ensure that
the persons and transactions caught by this offence did not curtail legitimate
economic activity. There is also an issue of seeing that fairness is done to
all parties.
The Committee also heard evidence from Mr Wilton of
the Law Council of Australia that section 596AB was a fairly blunt instrument
because it requires an intention to prevent, as opposed to dissipate, the
recovery of employee entitlements.
Several submissions also expressed concern that the
Bill only dealt with the situation of insolvency. The Committee heard evidence
that companies were increasingly using deeds of arrangements but under the Bill
employees could only recover compensation when the company was wound up..
The Committee also received submissions and heard
evidence that the costs of bringing legal action to seek compensation was
generally prohibitive and may make the provisions proposed in the Bill
ineffectual. It was proposed that a “small-claims” tribunal in relation to
employee entitlements might address these issues.
These submissions again suggest that the Bill is not
an adequate solution to a pressing and important problem.
Recommendation
We do not believe that the Bill adequately addresses
the protection of employee entitlements, instead focusing on penalising
directors.
We recommend that the amendments and other proposals
suggested above be given further consideration.
We recommend that the Bill not be opposed but reviewed
in 12 months to ascertain what actions have been taken under the provisions
proposed in the Bill.
________________________________ _____________________________
Mr Bob Sercombe, MP Senator
Stephen Conroy
_______________________________ _____________________________
Senator Barney Cooney Mr
Kevin Rudd, MP
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