New FEG laws to curb corporate exploitation

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New FEG laws to curb corporate exploitation

The Morrison government has introduced legislation in a bid to stop corporate misuse of the Fair Entitlements Guarantee (FEG) Scheme.

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The Morrison government has introduced legislation in a bid to stop corporate misuse of the Fair Entitlements Guarantee (FEG) Scheme.

According to the Liberal government, the current scheme allows businesses to strategically restructure in order to avoid paying worker entitlements. 

Under the scheme, the federal government pays entitlements to employees who have lost their job due to the liquidation or bankruptcy of their employer. The Liberal government has made moves in the past to discard the FEG scheme on the grounds it unreasonably burdens the taxpayer. 

Cost of FEG scheme triples


The Corporations Amendment (Strengthening Protections for Employee Entitlements) Bill 2018 will amend the Corporations Act 2001. It introduces stronger penalties for misuse of the scheme with penalties including up to 10 years' jail time. 

According to the Bill’s explanatory memorandum, the average cost incurred by the FEG scheme each year has more than tripled from $70.7 million in the four years to 2009 to $235.3million in the four years to 2018.

“This vital legislation cracks down hard on companies which try to evade their obligations to their workers and shift the burden to the taxpayer,” Ms O’Dwyer said. 

"Misuse of the Fair Entitlements Guarantee scheme by employers places an unfair burden on Australian taxpayers.”

What's in the Bill


The Bill provides stronger options to recover entitlements and powers to deal with companies trying to evade their obligations. It introduces a new civil penalty for entering into a transaction that is likely to avoid, prevent or significantly reduce recoverable employee entitlements, applying a “reasonable person” test to determine what employers entering the contract should have known.

The amendments expand the parties who can commence civil compensation proceedings to include the Australian Taxation Office, the Fair Work Ombudsman and the Department of Jobs and Small Business.

It also strengthens the Australian Securities and Investments Commission’s power to disqualify company directors and other officers with a history of exploiting the scheme. 

The court will be able to make a contribution order against an entity that is closely connected to an insolvent company with unpaid employee entitlements if that entity has unfairly benefited from the work of employees.  

Labor concerns


Shadow Minister for Employment Brendan O’Connor voiced concern about the proposed legislation. 

“Labor will carefully analyse the legislation, but history shows the Abbott-Turnbull-Morrison government has never supported the FEG nor do they have working people’s interests at heart,” said Mr O’Connor.

“As the guardians of workers’ rights, Labor established the FEG so that workers who lose their job through no fault of their own are supported in these tough times.”
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