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	Alternative Law Journal

Employees: ‘Brassed Off’ — Australian version

An update from CHRIS SYMES on workers’ unpaid entitlements resulting from insolvency of the employer.

Chris Symes teaches commerce at Flinders University

Many readers may have seen the movie now out on video titled ‘Brassed Off’. It is a story about retrenched UK mine workers who play in a brass band and how they rally to look after each other in times of trouble. On Tuesday, 22 June 1999, Australian mine workers and their representatives marched on Parliament House in Canberra led by a brass band. They too were rallying, in particular, for their unpaid employee entitlements lost when their employer closed down their mine.

The Oakdale mine in NSW closed and the loss of entitlements, as reported by the Financial Review, was $6.3m owed to 125 miners.[1] Some of these miners had worked in the mine for 30 years.

This is not an isolated incident. In the past three years, some closures of businesses that have left employee entitlements unlikely to be met include the Cobar mine, Exicom (formerly AWA) factory, Grafton Meatworks, Roadmark Transport and the Woodlawn mine (as mentioned in federal parliament). With between 8-10,000 corporate insolvencies recorded every year in Australia, there are many less newsworthy businesses closing and the assumption can be made that some of these do not meet their worker entitlements. Another version occurred with the Patrick group of companies when they legally restructured the company within the corporate group allowing the shifting of assets out of one company into another leaving the workers and the debts, such as entitlements, behind in the so-called ‘bad’ company. The appointed insolvency administrator had little option but to retrench the workers. The so-called Patrick Tactic of 1998 at least resulted in the establishment of a government Redundancy Fund. Finally, there is the phoenix phenomenon where Corporations Law is unable to deal with the company that closes down one day only to reopen business under a similar but different name the next in the same premises. The doctrine of separate legal entity creates the legal difficulty of tracing the assets into the ‘new’ company so as to claim them back to meet the debts of the ‘old’ company.

Ways do exist to solve this problem of unpaid employee entitlements resulting from insolvency of the employer. However, the government maintains that factors of ‘costs’ and ‘complexity’ must be considered. These are merely excuses for inertia. The Janice Crosio Private Members’ Bill is still before parliament (see (1998) 23(4) Alt.LJ 198) and it offers a solution by way of a privately administered insurance fund imposed on employers. Other solutions include publicly administered Funds which are commonplace in many other countries.

The lack of a parliamentary solution has forced unions to tackle the problem in other ways. The AMWU is developing a privately operated fund to provide mobile entitlements to workers like long service leave. The Union suggests that a private fund manager, who would levy employers for the entitlement and then invest this money, should operate it. The Fund Manager would then be responsible for the payment of long service leave and, should the employer suffer insolvency, the assets to pay the workers are separate from those of the insolvent employer and thus protected. The Union hopes that the Fund would become self-funding and so would have market appeal to the employers as well.[2]

The CFMEU has proposed, as a response to Oakdale, that a levy of 10 cents per tonne be introduced and paid by all coal producers to ensure workers in the coal industry could be paid out their entitlements on a mine closure.

The Prime Minister’s response to Oakdale, on Tuesday, 22 June 1999, was to suggest amendment to the Corporations Law. He said, in parliament, the amendment ‘will create an offence whereby company directors who deliberately arrange the affairs of their companies so as to defeat the entitlements of workers and bona fide entitlees to particular benefits will be subject to criminal penalties and criminal liability’.[3] This idea of ‘beefing’ up the Corporations Law may have the effect of altering directors’ behaviour but will not secure the payment to employees of money owed due to entitlements. The Corporations Law already provides penalties for breaches by directors who allow their companies to continue trading when the company is insolvent. However, the current law is difficult for employees to use for reasons such as the uncertainty as to the exact timing of when the debt for entitlements, such as long service leave, arises.

The ABC TV’s Lateline[4] and Radio National’s PM and Background Briefing programs have tried to highlight the debate; yet there appears to be a stalemate. The government seems unable to come to terms with imposing more cost on business while the opposition is eager for a resolution, but lacks the numbers to really make legislation out of the Crosio Bill or to push the government into drafting a Bill to debate. The last few years have seen a variety of solutions in the forms of a Redundancy Fund for Patrick workers, an ASIC brokered settlement for the Cobar miners,[5] and the Union developments already mentioned.

Clearly, it is now time for the entitlements problem to be resolved by legislation so that Australians can march to the same brass band as others in world who enjoy, not just unemployment insurance, but employment insurance!

References

[1] The Australian Financial Review, 23 June 1999. ‘Government Rejects plan to Pay Laid Off Miners’, p.7.
[2] ‘Workers Online’, 26 March 1999, www.labor.net.au/workers/magazine/6/news
[3] Taken from Radio National PM program’s recording of parliamentary proceedings in the House of Representatives, 22 June 1999.
[4] For example, ‘Shafted’, Lateline 23 June 1999, and earlier program ‘Down Payments’ 24 March 1998.
[5] ASIC Media Unit 98/375.