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What about the Worker? Fair Entitlements Guarantee (FEG) and COVID-19

Written by Andrew Wright

April 17, 2020

Covid-19 | Boylan Lawyers

The International Labour Organisation (ILO) has suggested that 1 billion workers globally are at risk of a pay-cut or losing their job. Of that billion, 25 million jobs are likely to be lost globally in the foreseeable future.

Recent predictions suggest Australia’s jobless rate will double – so over 10% of the population will be without a job. 800,000 Australian businesses appear to be in significant strife after registering for the JobKeeper payments.

Unfortunately, there are many businesses that simply cannot last, and indeed haven’t been able to last, even up till now. As such they will close and may do so with significant debt.

It’s the debt that cannot be repaid that requires the business to go down the track of bankruptcy. There is no denying this is devastating for the business but spare a thought also for the employees working for that business.

What happens to workers, who were relying and had budgeted on their next fortnights wage?

Or what happens to their entitlements that accrue as a result of being loyal employees over the many years, such as entitlements (that’s right, entitlements) to Annual Leave and Long Service Leave?

What about a further entitlement to ‘notice’ if their employment abruptly comes to a halt?

All the above are part of the National Employment Standards (NES) which are clearly articulated within the pages of the Fair Work Act. They are rights that workers have under Commonwealth law, and dare I say it, International law.

FAIR ENTITLEMENTS GUARANTEE

Under The Fair Entitlements Guarantee Act 2012, workers who are unable to recover their statutory entitlements from their employer due to an insolvent event (enters administration and then liquidation), are able to be reimbursed that shortfall from the Federal Government.

The entitlements workers can claim back from the Government if the employer is unable to pay due to their insolvency consists of:

  1. Wages (capped at 13 weeks)
  2. Annual Leave
  3. Long Service leave
  4. Payment in Lieu of Notice
  5. Redundancy pay (capped at 4 weeks per year of service)

The amount a worker is entitled to be paid will be determined according to the existing terms in the employment contract but the application for assistance needs to be made no later than 12 months after termination, or the insolvency event (whichever is longer).

Stand downs

Continuity of service still applies with respect to a stand down under s524 of the FWA and so workers are not entitled to redundancy pay and therefore notice. Indeed, they are not entitled to a wage during their time in ‘limbo’.

Whilst the worker in the short term can access the increased job seeker payment, it must be borne in mind that enhanced job seeker payment will soon expire. Stand downs are also for a limited duration (though we do not know exactly how long) and so workers who are not reinstated within a reasonable time should be paid a redundancy through their employer, and if the employer cannot afford to pay, through FEG.

Workers shouldn’t have to wait twice!

The insolvent event requirement under FEG is the second waiting game that workers would have to endure. That criteria worked to an extent prior to the pandemic, but it must, like the rest of society, be flexible and change with the times. If you let workers wait too long, then the adage of ‘too little too late’ is obliviously clear!

Employers Paying Less Than The Minimum

Section 119 of the FWA articulates out how much a worker is to be paid for a redundancy. It’s the bare minimum a worker can receive for a redundancy. Any EA’s or contracts of employment are subjected to the best-off overall test (BOOT) and therefore must ensure they are at least the same as, or better than s119.

Despite what I have said above Section 120 of the Fair Work Act 2009 provides an exception to the bare minimum under s119.

It allows an employer to reduce a redundancy payment by up to 100%, if amongst other things they can establish significant financial difficulty (not an ‘insolvent event’). And so even though the employer avoids bankruptcy, the worker may not.

Mason Architectural Joinery is a Sydney business who recently requested respite (likely as a result of the downturn in business due to the pandemic) from the FWC by making an application under s120 FWA. Their application was successful such that the 7 weeks redundancy the worker would have received was reduced to 1 week.

No FEG would apply to the worker as the Order of the FWC provides the new statutory entitlement as 1 week.

Whilst there isn’t an immediate issue with the FWC assisting a business to remain open, there is an issue if it’s at the expense of the worker.

What of the scenario where the FWC allows a reduction for the employer under s120 but then bankrupts the individual in the process?

There must be a widening of the scope of FEG whenever the FWC decides that businesses should be given respite under s120 at the expense of the worker.

Whilst this issue is pertinent now, I suggest any FWC Order reducing a worker’s minimum entitlement under s120 be at the expense of the government, not the worker.

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