Workers' entitlements: maintain the pressure
by Anna Pha When the Howard Government rushed in to bail out National Textiles and its chairman-of-the-board brother Stan, the Prime Minister unintentionally did a great deal towards putting the protection of workers' entitlements on the political agenda. Unions have been raising questions about other companies that have been liquidated and left workers owed millions of dollars. Workplace Relations Minister Peter Reith tried to take the heat off by proposing an Employee Entitlement Support Scheme for future company collapses. But his scheme would limit the amount paid to a maximum of $20,000, meaning that many workers would not be fully compensated if their employer became insolvent. That is if Reith's scheme ever gets off the ground which is doubtful, as it depends on the co-operation of all the States to pay half the funding. Even Federal Cabinet is not united on it. It is possible that a private compulsory insurance scheme will be set up instead, where employers as against taxpayers, make contributions. As a result of considerable trade union and media pressure to actually address employer behaviour, the Government last week put forward some amendments to Corporations Law. One amendment seeks to toughen penalties against directors trading while their companies are insolvent — something that worries other businesses trading with them. Another provides penalties for anyone entering an arrangement for the purpose of avoiding employee entitlements. This is an important question as more and more companies are setting up shelf companies to employ workers. These shelf companies are deliberately set up without the necessary assets to meet their obligations to employees. They pay the shelf company to provide labour at a cost which fails to include future leave and superannuation entitlements. It is doubtful that the wording of this amendment provides any threat to these employers. It seems that workers will need to prove that the directors entered into arrangements with the purpose of ensuring that their employees' entitlements would be unavailable. Proving in a court why someone did something is far more difficult than just establishing an outcome. If the Government were really serious then it would punish employers who failed to act to make the funds available. Directors' assets should be on the line, just as they are with the Tax Office. The Government is more concerned about the plight of company directors than workers, as demonstrated by another piece of legislation which is due to come into effect soon — what is known as the business judgement rule. The aim of this rule is to provide more protection for company directors by preventing courts looking at the merits of a director's conduct. The fact that the Government has moved to take some — albeit inadequate — action demonstrates that it is feeling the heat. The pressure must be maintained, and demands made for tougher laws to prevent employers siphoning off workers' entitlements and for workers' entitlements to be first in line, before those of secured creditors, when a company goes bust.