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Employers and unions trade blows on redundancy scheme

GEERS payouts spike leads to union call for greater penalties for managers and stout defence from industry

July 12, 2012

The General Employee Entitlements and Redundancy Scheme (GEERS) has become an industrial relations and regulatory football, two weeks after its near-death experience in the High Court.

Federal Employment and Superannuation Minister Bill Shorten fast-tracked GEERS payment to 1st Fleet employees amongst others two months ago but
industry and union heads are now engaging in robust debate on the issue sparked by a recent
surge in payouts.

The latest into the fray is Australian Industry Group (Ai) CEO Innes Willox, who lambasted the Australian Council of Trade Unions (ACTU) over accusations that employers were milking GEERS.

“Union assertions that the $1 billion paid out to the employees of insolvent employers under the scheme over the past decade is money taken by employers from their employees is arrant nonsense,” Willox says.

ACTU Secretary Dave Oliver, in a statement reportedly in tune with the thinking in Shorten’s office,
put the issue at the door of managers.

Oliver has called for tougher penalties for company directors who breach corporations laws, including trading insolvent or failing to make superannuation contributions, saying the taxpayer should not have to pay for employer malfeasance.

“The amount of money being covered by taxpayers highlights the important role this scheme plays, but also backs up union calls for greater penalties,” he says.

“It should be the responsibility of employers to make provision for workers’ entitlements, and directors who run their companies into the ground with no funds left for workers should be punished.

“These entitlements have been earned over years of loyal service, and employers have a legal obligation to pay them.

“But all too often businesses go broke leaving nothing in the bank. Frequently, companies treat workers’ entitlements as a kind of unsecured, interest-free loan – without telling the workers and often with no intention of ever paying it back. It is left to taxpayers to come to the rescue.

“This type of behaviour must be punished through tougher penalties.”

But Willox hit back, describing the union
imputation as “deserving of the strongest condemnation”.

“Under the Corporations Act, directors have a legal duty not to trade insolvently and penalties for individuals of up to $220,000 or imprisonment for up to five years apply,” Willox says.

“Directors can also become personally liable for debts incurred while the company is insolvent.”

He points out that, under the Act, to enter into an agreement or transaction with the intention of avoiding the payment of employee entitlements is an offence.

A court can order those convicted to compensate employees who have suffered loss or damage because of the agreement or transaction.

Penalties of up to $110,000 or imprisonment for up to 10 years apply.

“When companies go broke there are no winners,” Willox says.

“Often directors and business owners experience great hardship.

“Employees are in a different position; they have the GEERS scheme to prevent hardship in these unfortunate circumstances.”

He adds that Ai had warned the Government in January 2011 that increasing redundancy protection from a maximum of 16 weeks to an entitlement of up to four weeks per year of service “could create a huge budget shortfall” if even one large company with a generous redundancy scheme failed.

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