Liquidating responsibility for employees’ entitlements?

With thousands in job losses and potential losses from the collapse of Queensland Nickel and given the current difficulties faced by Arrium’s Whyalla steel works, the fate of the accrued entitlements of the workers concerned appears uncertain. Taxpayers may be required to pay these entitlements to the order of hundreds of millions of dollars.

Indeed, the Federal Government last week indicated that the Commonwealth will pay some of the $70 million plus owed to former Queensland Nickel employees.

A recent article by John-Paul Redmond in Workpace Review (Spring 2015, Vol 6 No 3) reviews the operation of ss 433 and 561 of the Corporations Act 2001 (Cth), which provide for priority to the payment of employee entitlements in cases of companies in receivership and liquidation, respectively.

John-Paul explores the evolution of the case law, particularly through the significant decisions of Finkelstein J of the Federal Court in cases such as McEvoy v Incat Tasmania Pty Ltd (2003) 130 FCR 503 and Re ExDVD Pty Ltd (in liq) (2014) 223 FCR 409. John-Paul notes Finkelstein J’s rationale for treating the operation of ss 433 and 561 differently on the basis that a company in receivership often continues in existence, and therefore it would be “discriminatory” to put employees in such a company on the “same footing” as the employees of a company in liquidation “as the former employees will both keep their jobs and be paid out as if they had lost them”.

Via a consideration of the consequences of subrogation in these circumstances, John-Paul reaches the conclusion that employees of companies in receivership may lose entitlements they would otherwise receive depending on the time at which a company enters administration or liquidation, and often “at the direct cost … through the operation of the General Employee Entitlements and Redundancy Scheme, to the taxpayer.”

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