Redundancy entitlements - when the company liquidates

Analysis

Redundancy entitlements - when the company liquidates

The recent collapse of the large construction company, Walter Construction, has again highlighted the problems associated with the non-payment of employee entitlements when a company becomes insolvent.

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The recent collapse of the large construction company, Walter Construction, has again highlighted the problems associated with the non-payment of employee entitlements when a company becomes insolvent.

Whilst many of its former employees within the company's construction divisions may be eligible for redundancy payments under the Construction Employees Redundancy Trust (CERT), the white-collar, professional and managerial staff have no such recourse to CERT.

The experience of the collapse of companies such as Ansett resulted in the Federal Government introducing legislation which provides some financial assistance to employees whose termination entitlements have been lost as a result of an employer's insolvency or bankruptcy.

Employees who have been terminated from their employment since 12 September 2001 may be able to access this Federal Government assistance through the General Employee Entitlements and Redundancy Scheme (GEERS). The scheme is administered by the Federal Department of Employment and Workplace Relations.

Eligible entitlements to claim under GEERS

Where an employee has a legal entitlement derived from legislation, an award, a statutory agreement or a written contract of employment, as at the date of the former employer's insolvency, an employee may be eligible to receive payments equivalent to the following:

  • All unpaid wages including allowances such as shift allowance and overtime;

  • All accrued annual leave including annual leave loading;

  • All accrued long service leave;

  • All unpaid pay in lieu of notice; and

  • Up to 8 weeks redundancy pay.

Payments made under GEERS are subject to an annual income cap of $90,400 for 2004-2005.

Eligible claimants who earn more than the scheme's cap will be paid as if they earned a rate equivalent to the scheme's income cap.

The income cap applicable to each claim is that applying for the financial year in which the date of termination of employment falls.

Who is not eligible under GEERS

A person is not eligible if the person:

  • Was a shareholding director or a relative of a shareholding director of the former company;

  • Is a defined relative of the former employer;

  • Is an independent contractor;

  • Lodged a claim 12 months or later after the employment was terminated;

  • Resigned from the employment (employees who can satisfactorily prove that they resigned because of non-payment or underpayment of wages, in circumstances that would be likely to lead to a finding of constructive dismissal, will be considered as if their employment was terminated by the employer); or

  • Employment was terminated before 12 September 2001 (in which case the employee may be eligible under the Employment Entitlements Support Scheme).

How to make a GEERS claim

To apply for GEERS the person must submit a completed GEERS claim form, preferably to the insolvency practitioner managing the winding up of the former employer's business.

The claim should be submitted as soon as possible as an application for GEERS must be made within 12 months of the date of termination otherwise a person has no access to the scheme.

Delays in an employee receiving GEERS can occur, as in the case with Walter Construction, where the insolvency practitioner indicated to staff that there may be a delay of four months before the scheme considered their claim for government assistance.

For further information and a copy of the GEERS claim form see www.workplace.gov.au under 'Employee entitlement schemes'.

Related

Tighten termination entitlement rules: ACTU

Ansett deal collapses, up to 7000 jobs gone

 

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