A High Court decision on the separation of church and state could put in jeopardy the federal scheme that shields financially the employees of failed companies such as transport firm 1st Fleet, experts warn.
The General Employee Entitlements and Redundancy Scheme (GEERS) − a basic payment scheme that assists employees of firms suffering liquidation or bankruptcy − exists under the same funding arrangements as the school chaplaincy scheme that came to legal grief last week.
By Rob McKay | June 26, 2012
A High Court decision on the separation of church and state could put in jeopardy the federal scheme that shields financially the employees of failed companies such as transport firm 1st Fleet, experts warn.
The General Employee Entitlements and Redundancy Scheme (GEERS) – a basic payment scheme that assists employees of firms suffering liquidation or bankruptcy – exists under the same funding arrangements as the school chaplaincy scheme that came to legal grief last week.
The decision could affect transport and infrastructure spending as well.
“GEERS was established by the Howard Government,” Clayton Utz insolvency partner David Cowling says.
“Effectively, it operates as a lender of last resort to liquidators, to allow them to make redundancy payments to employees of collapsed companies.
“Like the school chaplaincy scheme, there is no legislation for GEERS.
“It is simply an administration arrangement operated by the Department of Education, Employment and Workplace Relations.”
Cowling believes the Government needs to make a public statement about the effect of the chaplaincy decision on GEERS and, if it is in danger, to outline how it will fill the gap until legislation can be put through Parliament.
Although the High Court case has implications for many Federal Government programs, he says the scheme deserves priority treatment.
“We’re talking here about workers who have suffered the double blow of losing their jobs and coming under immediate financial distress,” Cowling says.
“In that situation, they do not need the additional stress of uncertainty about their redundancy payments.”
Brendan Richards, a partner at accountancy Ferrier Hodgson, agrees.
“The interesting thing about GEERS is that the Federal Government has demonstrated a recent willingness to flex it to enable quicker access to funds for employees,” Richards says.
“This has particularly been highlighted in recent collapses such as 1st Fleet, Hastie and CMI, where the Government has enabled employees to apply for the scheme while the employer is in administration, rather than waiting for liquidation, effectively reducing the waiting time by as much as a month.
“To think that the scheme may now be jeopardised by a court decision surely will bring a quick response from Canberra.”
Employment and Workplace Relations, Financial Services and Superannuation Minister Bill Shorten exercised discretion to expedite access to the scheme on May 10 after 1st Fleet went under.
So far, the Federal Government has focused on a pledge to ensure the chaplaincy program will receive funding but Attorney General Nicola Roxon says this legislation will tackle the situation of other programs.
Roxon says that that “given the time constraints, a decision only handed down on Wednesday, the last sitting week now that we are in” and that there will u”ndoubtedly be other programs that will be identified that will not be included in this particular piece of legislation and therefore we are also making a regulation making power so that additional programs could be added in the future”.
On what sorts of other programs might be affected overall, she mentions the Tasmanian Freight Equalisation Scheme and such infrastructure funding as is not covered by State spending.
Responses from the Transport Workers Union and other accountancies were still awaited at deadline.