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2010-2011-2012
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
SENATE
FAIR ENTITLEMENTS GUARANTEE BILL 2012
REVISED EXPLANATORY MEMORANDUM
THIS MEMORANDUM TAKES ACCOUNT OF AMENDMENTS MADE BY THE HOUSE
OF REPRESENTATIVES TO THE BILL AS INTRODUCED
(Circulated by authority of the Minister for Employment and Workplace Relations,
the Honourable William Richard Shorten, MP)
Outline
FAIR ENTITLEMENTS GUARANTEE BILL 2012
OUTLINE
The Fair Entitlements Guarantee Bill 2012 (the Bill) will replace the administrative General
Employee Entitlements and Redundancy Scheme (GEERS) which currently assists employees
who have lost their employment due to the liquidation or bankruptcy of their employer and who
are owed certain employee entitlements.
A scheme such as the one created by the Bill is necessary to fulfil a significant community need
to protect the entitlements of Australian employees who would otherwise stand to lose their
entitlements if they lose their jobs due to insolvency of their employer. While alternative
measures for protecting employee entitlements are available on a limited scale (for example,
redundancy trust funds in the construction industry) these are insufficient to adequately protect
employees.
The primary objective of the Bill is to provide a scheme for the provision of financial assistance
(called an `advance') to former employees where the end of their employment is linked to the
insolvency or bankruptcy of their employer. After making an advance, the Commonwealth
assumes the individual's right to recover the amount that was advanced through the winding up
or bankruptcy process of their employer.
Some of the key eligibility requirements for which the Secretary must be satisfied in order for an
advance to be paid include that:
· the person's employment has ended;
· the end of the employment is linked to the insolvency of their employer;
· the employer is in liquidation or bankruptcy; and
· the person has unpaid employment entitlements that cannot be obtained from another
source.
The causal link between the insolvency of the employer and the end of the person's employment
is a crucial element of the eligibility requirement. The Bill assumes that the connection exists
where the end of the person's employment came after or within 6 months of the appointment of
an `insolvency practitioner'. This term is defined broadly to include liquidators, administrators,
receivers of property and persons having possession or control of property of the employer for
the purpose of enforcing a charge, lien or a security interest as defined in the Personal Properties
Security Act 2009.
Once eligibility has been established, the Bill provides for the determination of the amount of an
advance that a person is entitled to. A person's entitlement is comprised of their unpaid
entitlements in relation to unused annual leave, unused long service leave, payment in lieu of
Page 1 Fair Entitlements Guarantee Bill 2012
Outline
notice, redundancy pay and wages for a 13-week period. These entitlements are determined in
accordance with the person's governing instrument (as defined in clause 5 of the Bill).
An advance may be paid directly to the individual, or to the liquidator or a third party contracted
by the Commonwealth for the purpose of passing the advance on to the recipient. Once an
advance has been paid, the Commonwealth assumes the person's recovery rights in the winding
up process to the extent of the advance in order to recover some or all of that advance. If the
recipient is later paid an amount for a particular entitlement from another source, the Bill
provides that an amount not exceeding the amount of the original advance becomes a debt owed
to the Commonwealth.
The Bill also provides for a range of administrative matters, including those relating to how
information obtained through the operation of the scheme is handled by the Department.
Abbreviations used in this EM Meaning
AAT Administrative Appeals
Tribunal
AAT Act Administrative Appeals
Tribunal Act 1975
Bankruptcy Act Bankruptcy Act 1966
Corporations Act Corporations Act 2001
Fair Work Act Fair Work Act 2009
GEERS General Employee
Entitlements and Redundancy
Scheme
FINANCIAL IMPACT STATEMENT
The Bill will legislate existing administrative arrangements under GEERS. Claims for financial
assistance under the Bill are not expected to be more than the claims that would have been
administered under GEERS. The existing funding under the GEERS appropriation will be
carried forward through a demand driven special appropriation under this Bill.
Page 2 Fair Entitlements Guarantee Bill 2012
Part 1--Preliminary
FAIR ENTITLEMENTS GUARANTEE BILL 2012
Part 1--Preliminary
Overview
1. Part 1 sets out various preliminary provisions, including definitions.
Notes on clauses
Clause 1 - Short title
2. Clause 1 provides that, once enacted, the short title of the Bill will be the Fair Entitlements
Guarantee Act 2012.
Clause 2 - Commencement
3. This clause sets out the commencement provisions.
Clause 3 - Objects of this Act
4. This clause sets out the objects of the Bill. The object is to establish a legislative scheme
through which the Commonwealth will pay advances to former employees whose
employment has ended as a result of their employer's insolvency or bankruptcy where the
former employees cannot get payment of their entitlements from other sources. For the
purposes of the scheme, the term `employee' refers to an employee at common law and
does not include contractors. The Bill will provide a legislative basis for the assistance
currently provided under GEERS.
5. The Bill provides that the Commonwealth is able to recover advances through winding up
or bankruptcy proceedings or where the employee receives a payment for an entitlement
from any other source.
Clause 4 - Simplified outline of this Act
6. This clause provides a simplified overview of this Bill.
Clause 5 - Definitions
7. This clause contains a list of terms that are defined in the Bill. It includes a number of
`signpost' definitions that refer readers to the sections in which terms are substantively
defined.
8. The definitions appear in alphabetical order in the Bill. A number of key definitions are
outlined below.
Page 3 Fair Entitlements Guarantee Bill 2012
Part 1--Preliminary
Advance
9. Advance means financial assistance under this Bill on account of employment
entitlements.
Bankruptcy Act 1966
10. References to the `Bankruptcy Act' in the Bill are to be read broadly. References to the
Bankruptcy Act or a provision of that Act, for the purposes of the Bill, includes references
to that Act as it is applied (with or without modification) by another law of the
Commonwealth, a State or a Territory.
Bankruptcy trustee
11. Bankruptcy trustee of a person means the relevant appointed trustee under the Bankruptcy
Act.
Corporations Act 2001
12. References to the `Corporations Act' in the Bill are to be read broadly. References to the
Corporations Act or a provision of that Act, for the purposes of the Bill, includes
references to that Act as it is applied (with or without modification) by another law of the
Commonwealth, a State or a Territory. Examples of this include the Commonwealth's
Corporations (Aboriginal and Torres Strait Islander) Act 2006 and State and Territory
Acts relating to incorporation of associations and cooperatives.
Cost
13. Cost of the winding up or the bankruptcy of an employer is defined to mean an expense
that a liquidator or a bankruptcy trustee incurs in the winding up as described in the
Corporations Act (in the case of a company); or the costs, charges and expenses of the
administration of bankruptcy under the Bankruptcy Act (in the case of individuals).
14. This concept is referred to when working out the basic amount of a person's entitlement in
Division 2 of Part 3, namely clauses 19(2), 20, 21, 22 and 23.
Employer
15. A reference in the Bill to `employer' includes a person's former employer.
Employment entitlement
16. The following entitlements are `employment entitlements':
· Annual leave entitlement;
· Long service leave entitlement;
· Payment in lieu of notice entitlement;
Page 4 Fair Entitlements Guarantee Bill 2012
Part 1--Preliminary
· Redundancy pay entitlement; and
· Wages entitlement.
Governing instrument
17. An individual's employment entitlements will be determined in accordance with the
governing instrument under which they are employed. This includes:
· A written law of the Commonwealth, a State or a Territory;
· An award, determination or order that is made or recorded in writing;
· A written instrument; or
· An agreement (whether a contract or not).
Insolvency event
18. The insolvency event is a crucial trigger for the operation of the scheme. Eligibility for the
scheme cannot be established prior to the occurrence of an insolvency event. This
definition provides that an insolvency event occurs when:
· A liquidator of the employer is appointed (provisionally or otherwise) under the
Corporations Act; or
· The employer becomes a bankrupt under the Bankruptcy Act.
19. Special provision is also made for individuals employed for a partnership by 2 or more of
the partners. The term `2 or more of the partners' is included to deal with situations where
some but not all of the partners in a partnerships are responsible for meeting employee
entitlements. In relation to partnerships, an insolvency event occurs when:
· A liquidator of the partnership is appointed (provisionally or otherwise) under the
Corporations Act; or
· Every partner by whom the person is or was employed in the partnership becomes a
bankrupt under the Bankruptcy Act or is subject to the appointment of a liquidator
(provisionally or otherwise) under the Corporations Act. In such cases, the
`insolvency event' is taken to occur on the date that the last partner becomes
bankrupt or is subject to the appointment of a liquidator.
Insolvency practitioner
20. The date at which an insolvency practitioner is appointed for an employer is an important
element in determining whether an individual is eligible for an advance under the scheme.
Page 5 Fair Entitlements Guarantee Bill 2012
Part 1--Preliminary
21. Eligibility for the scheme only arises if the ending of an individual's employment was due
to the insolvency of their employer. The clearest indication of an employer's insolvency is
the appointment of a liquidator or bankruptcy trustee.
22. While this is the final step in the path towards winding up or bankruptcy, several preceding
steps are recognised in the Bill's definition of `insolvency practitioner' in order to capture
other events that, with the hindsight of an insolvency event, can be used as evidence of an
employer's insolvency. These are:
· The appointment of an administrator under the Corporations Act;
· The appointment of a person as a receiver of property of the employer; or
· A person taking possession or control of property of the employer for the purpose of
enforcing a charge, mortgage, lien, pledge or a security interest as defined in the
Personal Properties Securities Act 2009.
Liquidator
23. A liquidator means a liquidator appointed (provisionally or otherwise) under the
Corporations Act.
Maximum weekly wage
24. The concept of a `maximum weekly wage' is used in Part 3 when determining the amount
of advance that an individual is entitled to under the scheme.
25. The initial maximum weekly wage of $2,364.00 is a continuation of the existing threshold
set under GEERS as has been determined in accordance with the Fair Work Act's `high
income threshold'.
26. Paragraph (b) provides that the maximum weekly wage will be indexed by reference to
estimates of full-time adult average weekly ordinary time earnings published by the
Australian Statistician. The baseline amount for indexation will be the most recently
indexed iteration of the maximum weekly wage. For example, the first indexation will be
applied to the initial maximum weekly wage of $2,364.00. This new maximum weekly
wage will apply until the next indexation, at which point the new figure will be used as the
baseline amount to determine the next maximum weekly wage.
27. Paragraph (b) provides that indexation will take place in accordance with the regulations.
These regulations will determine the method by which indexation is applied.
Wages entitlement period
28. A person's `wages entitlement' (as defined in clause 6) is limited to the 13 weeks ending at
the earlier of:
· The end of the person's employment; or
Page 6 Fair Entitlements Guarantee Bill 2012
Part 1--Preliminary
· The first time an insolvency practitioner has power to control or manage the
employment of the employer or, if the person was employed by a partnership of 2 or
more partners, any of the partners who employed the person.
Clause 6 - Kinds of employment entitlements
29. Clause 6 provides definitions for the employment entitlements of a person who meets the
conditions for eligibility contained in Part 2. All entitlements are determined with
reference to the person's governing instrument (as defined in clause 5).
30. Subclause 2 provides that a person's `annual leave entitlement' will be the amount the
person is entitled to for paid annual leave that the person had accrued at the end of the
employment and had not taken by then.
31. Subclause 3 provides that a person's `long service leave entitlement' will be the amount
the person is entitled to from the employer at the end of their employment. This will
include:
· Long service leave that the person had accrued but not taken by the end of their
employment; or
· Long service leave that, had the person's employment continued until the person
qualified for long service leave, would have been attributable to the period before the
actual end of the person's employment.
· A person will only be entitled to a pro-rata long service leave amount if the relevant
industrial instrument expressly provides for this.
32. Subclause 4 provides that a person's `payment in lieu of notice leave entitlement' will be
the amount the person is entitled to from the employer for a shortfall in the period of notice
of termination of the employment.
33. Subclause 5 provides that a person's `redundancy pay entitlement' is the amount of
redundancy pay that the person is entitled to from the employer for termination of the
employment.
34. Subclause 6 is the amount of `wages' the person is entitled to from the employer for work
done, or paid leave taken, in the wages entitlement period. The `wages entitlement period'
is defined in clause 5 to mean the 13 weeks ending at the earlier of the end of the person's
employment or the first time an insolvency practitioner has power to control or manage the
employment by the employer.
35. Subclause 7 provides that a person's entitlement under clause 6 is not altered by the
person's receipt of some or all of an amount he or she was entitled to under their governing
instrument. In practice, amounts received in relation to a particular entitlement would be
reduced in accordance with clause 19.
Page 7 Fair Entitlements Guarantee Bill 2012
Part 1--Preliminary
Clause 7 - Wages
36. Clause 7 provides that the term `wages' is to have its ordinary meaning.
37. Subclause 1 further clarifies that wages includes the following:
· Allowances;
· Loadings;
· Amounts payable for overtime;
· Amounts payable at penalty rates; and
· Other amounts that the governing instrument for the relevant employment identifies
separately and makes payable regularly.
38. This list is not exhaustive, but rather provides the reader with some examples of what a
`wage' is according to the ordinary meaning.
39. Subclause 2 provides that the term `wages' does not include the following:
· Discretionary payments (such as bonuses);
· Reimbursements; and
· Payments of expenses relating to travel or relocation.
40. Subclause 3 clarifies that amounts that are not payable on an ongoing basis are not `wages'
unless they are amounts described in subclause 1.
Clause 8 - This Act binds the Crown
41. Clause 8 provides that the Crown in each of its capacities is to be bound by the Bill.
Clause 9 - Extraterritorial operation
42. The Bill includes making of payments to, and the recovery of amounts from, persons
outside Australia. This will allow payment to eligible former employees and recovery from
entities and individuals not based in Australia when all other eligibility requirements have
been established by the claimant.
Page 8 Fair Entitlements Guarantee Bill 2012
Part 2--Eligibility for advance
Part 2--Eligibility for advance
Overview
43. Part 2 contains provisions about who is eligible for an advance under the scheme.
44. Division 1 provides the basic criteria for eligibility for an advance under the scheme and
the exclusions from eligibility.
45. Division 2 makes provisions for how an effective claim must be made.
Notes on clauses
Division 1--Conditions of eligibility for advance
Subdivision A--Basic conditions of eligibility
Clause 10 - Conditions of eligibility for advance
46. Financial assistance under the scheme will be called an `advance', which is defined in
clause 5. An individual's eligibility for an advance will be established if the Secretary is
satisfied that all of the criteria contained in subclause 1 have been satisfied. The Secretary
will only be satisfied that the criteria are met when there is sufficient evidence to support
the individual's claim for eligibility.
47. Paragraph (a) provides that the individual's employment must have ended.
48. Paragraph (b) provides that an `insolvency event' (as defined in clause 5) must have
happened to the employer of the individual.
49. Paragraph (c) provides that a link must be demonstrated between the end of the
individual's employment and the insolvency of their employer. This could be demonstrated
in one of three ways:
· The end was due to the insolvency of the employer. This will require sufficient
evidence to satisfy the Secretary that the insolvency of the employer caused the end
of the employment. In practice, this evidence will generally be provided by the
liquidator or bankruptcy trustee following their investigation of the employer's
financial situation. For example, the liquidator or bankruptcy trustee may advise that
an entity was trading insolvent more than 6 months before the date of insolvency
which would generally support a link to insolvency. Individuals will also be able to
submit evidence that demonstrates this link, such as correspondence with their
employer relating to the end of their employment.
· The end occurred less than 6 months before the appointment of an insolvency
practitioner for the employer. Given the proximity of the end of the employment to
Page 9 Fair Entitlements Guarantee Bill 2012
Part 2--Eligibility for advance
the appointment of the insolvency practitioner in these situations, no further evidence
explicitly linking the end to the insolvency of the employer is required.
· The end occurred after appointment of an insolvency practitioner for the employer.
The term `insolvency practitioner' is defined in clause 5.
50. Paragraph (d) provides that an individual must be owed debts relating to their employment
entitlements. The various kinds of employment entitlements are defined in clause 6. In
relation to these debts, the individual must have taken reasonable steps during the winding
up or bankruptcy process to prove those debts (paragraph (e)).
51. In practice, the requirement to take reasonable steps to prove debts in paragraph (e) will
generally be demonstrated by the individual having completed a `proof of debt' form and
submitted this to the liquidator or bankruptcy trustee. This form ensures that the person is
known to the liquidator or bankruptcy trustee and provides the evidentiary basis for their
claim.
52. Paragraph (f) requires a person to have taken reasonable steps to be paid outstanding
entitlements if the debts were owed before the insolvency event happened. The qualifier
`reasonable steps' will ensure that the decision maker is able to consider each individual's
situation on its own merits and avoid unjust outcomes. Where a person was unaware they
were owed a debt, for example, it would generally not be reasonable to expect them to
have taken steps to be paid that amount. Also, it will permit the Secretary to acknowledge
that commencing legal action to recover outstanding entitlements may not have been
reasonable due to either the size of the amount, or the level of education or language skills
that the person holds.
53. Generally, a person will be eligible if they have taken `reasonable steps' such as bringing
the outstanding entitlement to the employer's attention or seeking assistance from the Fair
Work Ombudsman.
54. Paragraph (g) provides that, to be eligible for an advance, an individual must have been an
Australian citizen or held a permanent visa or a special category visa under the Migration
Act 1958 at the time their employment ended.
55. Paragraph (h) limits eligibility to individuals who have lodged a claim in accordance with
Clause 14 of the legislation.
56. Subclause 2 sets out special rules which apply to individuals who were employed by 2 or
more persons for a partnership, and deems that subclause 1, paragraphs (c), (d) and (e)
apply as if the criteria must be met for each of the partners. The purpose of the term `2 or
more of the partners' is described above in the definition of `insolvency event' in clause 5.
Page 10 Fair Entitlements Guarantee Bill 2012
Part 2--Eligibility for advance
Subdivision B--Exclusions from eligibility
Clause 11 - Exclusion for personal connection with employer
57. Subclause 1 is included to ensure that individuals who are an `excluded employee' for the
purposes of the Corporations Act will not be eligible for an advance under the proposed
scheme. This encompasses an employee who, at any time in the 12 months prior to the
winding up, was a director, spouse of a director or a relative of a director of the employer
being wound up.
58. Subclause 2 sets out an `excluded employees' rule for individuals whose employer is or
was a bankrupt under the Bankruptcy Act.
59. Subclause 3 provides that a person employed for a partnership by 2 or more of the partners
will not be eligible for an advance if the conditions in subclause 1, or any of the conditions
in subclause 2, exist in relation to the partners who employed the person. The purpose of
the term `2 or more of the partners' is described above in the definition of `insolvency
event' in clause 5.
Clause 12 - Exclusion for being newly employed after working as contractor
60. In order to be eligible for an advance an individual will have to have been an `employee'
of an employer. For the purposes of the scheme, the term `employee' refers to an employee
at common law and does not include contractors.
61. Subclause 1 provides that a person is not eligible for an advance where the Secretary is
satisfied that:
· A person had been engaged under other arrangements, including as a contractor, and
transfers to employment within 6 months of the end of the employment or the
appointment of an insolvency practitioner (as defined in clause 5) for the employer;
and
· It was reasonable to expect at the start of that employment that the employer would
not be able to meet the employer's obligations under the terms and conditions of that
employment for the actual duration and end of that employment. This includes both
entitlements arising during employment and those that accrue upon termination, such
as payment in lieu of notice and redundancy pay.
62. Subclause 2 sets out a special rule which applies to individuals who were employed by 2 or
more of the partners for a partnership. The purpose of the term `2 or more of the partners'
is described above in the definition of `insolvency event' in clause 5.
63. Subclause 3 provides that the clause has effect despite clause 10 (conditions of eligibility
for advance).
Page 11 Fair Entitlements Guarantee Bill 2012
Part 2--Eligibility for advance
Clause 13 - Exclusion for employment by certain employers
64. Clause 13 provides that a person is not eligible for an advance if their former employer was
within the scope of the Special Employee Entitlements Scheme for Ansett Group
Employees.
Division 2--Claim for eligibility for advance
Clause 14 - Making an effective claim
65. Clause 14 sets out what is necessary for a claim to be `effective' for the purposes of this
Bill.
66. Subclause 1 specifies that a claim for an advance must:
· be in a form approved by the Secretary; and
· be accompanied by any documents required by the Secretary; and
· be made in accordance with subclauses 2 and 3.
67. Subclause 2 specifies the timeframes within which a claim must be made. To be effective,
a claim must be made before the end of 12 months after the later of the following events:
· an insolvency event (as defined in clause 5) happens to the employer;
· the person's employment by the employer ends.
68. Subclause 3 states that if the employer in question is or was bankrupt, the claim must be or
have been made before the discharge of the employer's bankruptcy.
69. Subclause 4 provides that a claim made under the scheme established by this Bill will not
be effective if the individual had already made a claim (the `earlier claim') under GEERS
that was connected with the person's employment by the employer. This will provide
certainty by clarifying that decisions made under GEERS will not be reassessed under this
Bill.
70. Subclause 5 provides that subclause 4 does not apply if the earlier claim was rejected on
the grounds that an insolvency event had not yet happened to the employer. This will
ensure that individuals are not unfairly made ineligible as a result of prematurely seeking
an advance under GEERS.
Clause 15 - Secretary must decide effective claim
71. This clause provides that if an effective claim is made to the Secretary, the Secretary must
decide whether the person is eligible for an advance. If the Secretary decides that the
person is eligible for an advance, the Secretary must then decide the amount of the advance
(subclause 2).
Page 12 Fair Entitlements Guarantee Bill 2012
Part 3--Amount of advance
Part 3--Amount of advance
Overview
72. Part 3 explains how to work out the amount of an advance for a person, taking account of
the person's employment entitlements as identified in clause 6. The amount of the advance
may be reduced for a number of reasons, including where the person has funds available
from another source (e.g. a redundancy trust) or the liquidator or bankruptcy trustee
expects to be able to pay entitlements in full within 112 days.
73. Division 1 provides that the advance of a person's employment entitlements is subject to a
number of exclusions. These include where some entitlements could be transferred to a
new employer, where the employee owes the employer a debt and where the liquidator is
likely to pay the amount of the entitlement within 112 days.
74. Division 2 sets out how a person's employment entitlements are worked out. This involves
working out the basic entitlements for each of the employment entitlements a person is
owed under subdivisions B and C, and then deducting the sums specified in subdivision A.
Notes on clauses
Division 1--Working out the amount of an advance
Clause 16 - General rule for working out the amount of an advance
75. Clause 16 provides that the total amount of an advance a person will be eligible for is the
sum of the entitlements worked out through the operation of Division 2.
76. Subclause 2 provides that entitlements for payment in lieu of notice or redundancy pay will
not form part of an advance if:
· The business in which the employer employed the person is transferred to someone
else (other than the bankruptcy trustee); and
· Within 14 days of the end of the person's employment, the new business operator
offers to employ the person:
To do work that is the same as, or substantially similar to, the work the person
did for the original employer; and
On terms and conditions substantially similar to, and no less favourable than,
the person's original employment terms and conditions.
77. In such cases, notwithstanding that the insolvent employer may have legal obligation to
pay redundancy or payment in lieu of notice, a person is not entitled to have those
entitlements paid as an advance under this Bill as the person's employment status has
continued with only a minor interruption.
Page 13 Fair Entitlements Guarantee Bill 2012
Part 3--Amount of advance
78. However, a person's entitlement to payment in lieu of notice and redundancy pay
entitlements will be revived by subclause 3 if:
· The new business operator terminates the person's employment because the position
is no longer required to be filled by any person, except where this is due to the
ordinary and customary turnover of labour; or
· An insolvency event happens to the new business operator, the person's employment
by the new operator ends; and:
The end was due to the insolvency of the new operator; or
The end occurred less than 6 months before the appointment of an insolvency
practitioner for the new operator; or
The end occurred on or after the appointment of an insolvency practitioner for
the new operator.
79. Subclause 4 provides that subclause 2 will not apply to insolvency events occurring on or
after 1 July 2014. From this time, whether a person is eligible for a particular entitlement
when they have transferred employment will be a question of fact to be determined in
accordance with their governing instrument and other relevant laws, such as the Fair Work
Act.
Clause 17 - Reduction for the person's debts to the employer
80. Clause 17 provides that the Secretary may reduce the amount of a person's advance by any
amount that the person owes to the employer. This amount must not exceed the sum of the
person's debts to the employer.
Clause 18 - Nil amount if liquidator or bankruptcy trustee can fully pay entitlements soon
81. Clause 18 provides that the Secretary may reduce a person's advance to nil, and effectively
not pay an advance, if the Secretary is satisfied that the liquidator or bankruptcy trustee of
the employer expects to have sufficient funds to pay the person the full amount of the
advance within the next 112 days. This reflects the object of the legislation to provide an
advance on employment entitlements only when the person cannot get payment of the
entitlement from another source.
82. If payment is not made within the 112 days, the person may utilise the review mechanisms
available under Division 2 of Part 6 to have this decision reconsidered in light of the non-
payment. In practice, it is anticipated that a review of a person's entitlement will be
undertaken on the Secretary's initiative upon the Department becoming aware of the non-
payment.
Page 14 Fair Entitlements Guarantee Bill 2012
Part 3--Amount of advance
Division 2--Amounts for employment entitlements
Subdivision A--Working out amounts for employment entitlements
Clause 19 - Working out amounts for employment entitlements
83. Clause 19 provides that the amount to be advanced to a person is determined by working
out the basic amount for their employment entitlements (as defined in clause 6) under
Subdivisions B and C of Division 2 and then reducing that amount (but not below nil) by
the sum of the amounts described in subclauses 2 and 3 of clause 19.
84. Subclause 2 deals with amounts that have already been paid to the person and states that
each of a person's employment entitlements should be reduced by amounts that:
· Are attributable to that entitlement; and
· Have been paid by anyone to the person to whom the entitlement is owed or to
someone else for the person's benefit or in accordance with the person's direction;
and
· Are not costs of the winding up or bankruptcy of the employer (a `cost' for these
purposes is defined in clause 5).
85. Subclause 3 deals with amounts that will be paid to the person and provides that each of a
person's employment entitlements should be reduced by the total of amounts that:
· Are attributable to that entitlement; and
· Are payable (and have not been paid) by anyone to the person to whom the
entitlement is owed or to someone else for the person's benefit or in accordance with
the person's direction; and
· Are not payable under the Corporations Act in the winding up of the person's
employer, the Bankruptcy Act from the proceeds of the property of the bankrupt
employer or under this Bill.
86. The reductions provided for in subclause 2 and 3 ensure that, in working out the amount of
an advance, the amount will not include payments that have already been received
(subclause 2) or that will be received in future through another source (subclause 3). This
could include money paid or owed by redundancy trusts or where the entitlement relates to
employment after the appointment of an insolvency practitioner with responsibility for
meeting those debts.
Subdivision B--General rules for basic amounts for employment entitlements
87. Subdivision B sets out the general rules for how the five types of employment entitlements
(as defined in clause 6) are to be calculated. Clauses 20 to 23 provide only for entitlements
Page 15 Fair Entitlements Guarantee Bill 2012
Part 3--Amount of advance
(or part of an entitlement) that are `not a cost of the winding up or bankruptcy of the
employer' (with `cost' being defined in clause 5).
88. Entitlements that are costs of the winding up or costs of the bankruptcy will not be covered
by this legislation as they are expenses required to be borne by an insolvency practitioner
under the Corporations Act or the Bankruptcy Act. A cost of the winding up generally
refers to expenses that are incurred by a liquidator or bankruptcy trustee in the course of
their duties, which includes employee entitlements that accrue for work performed by
employees after the appointment of the liquidator or bankruptcy trustee.
89. Note: section 558 of the Corporations Act and section 109A of the Bankruptcy Act
determine how debts relating to employee entitlements are dealt with when a liquidator or
bankruptcy trustee continues employing staff during the winding up process.
Clause 20 - Basic amount for annual leave entitlement
90. Clause 20 provides that the basic amount for a person's annual leave entitlement (as
defined in clause 6) for his or her employment by an employer is so much of the
entitlement as is not a cost of the winding up or bankruptcy of the employer (as defined in
clause 5).
Clause 21 - Basic amount for long service leave entitlement
91. Clause 21 provides that the basic amount for a person's long service leave entitlement (as
defined in clause 6) for his or her employment by an employer is so much of the
entitlement as is not a cost of the winding up or bankruptcy of the employer ( as defined in
clause 5).
Clause 22 - Basic amount for payment in lieu of notice entitlement
92. Clause 22 provides that the basic amount for a person's payment in lieu of notice
entitlement (as defined in clause 6) for his or her employment by an employer is so much
of the entitlement as is not a cost of the winding up or bankruptcy of the employer (as
defined in clause 5) and does not exceed 5 weeks' pay at the rate relevant to working out
that entitlement.
Clause 23 - Basic amount for redundancy pay entitlement
93. Clause 23 provides that the basic amount for a person's redundancy pay entitlement (as
defined in clause 6) is 4 weeks wages for each year served with the employer where the
employer was required to pay redundancy pay. The basic amount does not include any
redundancy pay entitlement that is a cost of the winding up or bankruptcy of the employer
(as defined in clause 5). The amount is capped at the total of:
· 4 weeks' pay (at the rate relevant to working out that entitlement) for each full year
of the person's service with the employer; and
Page 16 Fair Entitlements Guarantee Bill 2012
Part 3--Amount of advance
· If the employee was entitled to payment of redundancy pay for a proportion of a year
of the person's service, that portion of the 4 weeks' pay (at the rate relevant to
working out that entitlement).
Clause 24 - Basic amount for wages entitlement
94. Clause 24 provides that the basic amount for a person's wages entitlement (as defined in
clause 6, and subject to the `wages entitlement period' as defined in clause 5) is the total of
the wages entitlement, less any amount required to be withheld under Part 2-5 (PAYG
withholding) in Schedule 1 to the Taxation Administration Act 1953 from the wages
covered by the entitlement.
95. Amounts that are required to be withheld by PAYG, will be a debt owed by the employer
to the Australian Tax Office and are not owed to the individual making an application for
an advance.
Subdivision C--Special rules for basic amounts for employment entitlements
Clause 25 - Disregarding recently agreed changes in terms and conditions
96. Clause 25 provides that the Secretary may choose to disregard changes that improve the
terms and conditions of the person's employment in the 6 months prior to the end of
employment or the appointment of an insolvency practitioner (as defined in clause 5) for
the employer. If the Secretary is satisfied that it is appropriate for this clause to apply, the
basic amount of the person's entitlements would be worked out as if the governing
instrument (as defined in clause 5) for the employment had not been changed.
97. This provision will provide an avenue to disregard changes in the rare situation that a
person's entitlements are artificially inflated in the knowledge that an insolvency event is
likely to occur. Before utilising this discretion, the Secretary will first have to be satisfied
that, at the time of the change, it was not reasonable to expect that the employer would be
able to meet their obligations under the new terms and conditions of that employment for
the actual duration and end of that employment. This includes both entitlements arising
during employment and those that accrue upon termination, such as payment in lieu of
notice and redundancy pay. The Secretary may consider, in deciding what is reasonable,
the full context surrounding the increase, including how the employer and employees
agreed to the increase and whether the financial position of the employer was disclosed to
the employees. Where changes are reflected in an enterprise agreement made under the
Fair Work Act, prior to exercising the discretion the Secretary would need to be satisfied
there is evidence of an intention to artificially inflate the terms and conditions of
employment in the knowledge that an insolvency event is likely to occur.
98. When applied to partnerships, the 6 month time period will be triggered by the
appointment of an insolvency practitioner for 2 or more of the partners who employ that
person. The purpose of the term `2 or more of the partners' is described above in the
definition of `insolvency event' in clause 5. In relation to the agreement of the employer to
Page 17 Fair Entitlements Guarantee Bill 2012
Part 3--Amount of advance
change the conditions and the reasonableness of the expectation that the employer would
be able to continue employing the person on those more favourable terms, the reference is
to all the partners who employed the person.
99. This clause will assist in preventing manipulation of the scheme to artificially inflate the
advance that will be owed to their employees.
Clause 26 - Applying maximum weekly wage rate--entitlements except wages entitlement
100. Clause 26 provides for a maximum weekly wage cap, which will effectively limit the
weekly rate at which an entitlement will be paid to an individual. The clause will affect a
person's employment entitlements (except wages entitlement) if their weekly rate of pay,
as determined in accordance with the governing instrument (as defined in clause 5) for his
or her employment, exceeded the maximum weekly wage rate at the end of his or her
employment.
101. If clause 26 does apply, the amount of the entitlement will be calculated as if the
employment entitlement is to be paid at the maximum weekly wage rate. The maximum
weekly wage is defined in clause 5.
102. Subclause 3 clarifies that clause 26 will not apply to a person's wages entitlement, which is
subject to separate arrangements as outlined in clause 27.
Clause 27 - Applying maximum weekly wage rate--wages entitlement
103. Clause 27 provides for how a person's weekly wage rate will be determined for the
purpose of comparing it with the maximum weekly wage cap, which will effectively limit
the amount that may be paid as a wages entitlement to an individual. The clause will affect
a person's wages entitlement if any of the rules in subclauses (2), (3) or (4) apply to the
individual.
104. Subclause 27(6) provides that if clause 27 does affect a person's wages entitlement
(because one of the rules in subclauses (2), (3) or (4) applies), the basic amount will be
worked out as if the governing instrument for the employment had entitled the person, for
each of the weeks for which the employer employed the person in the wages entitlement
period, to wages at the maximum weekly wage rate at the end of that period. The
maximum weekly wage is defined in clause 5.
105. The rule in subclause 27(2) will apply to individuals who have a consistent weekly wage.
The subclause provides that a person's wages entitlement will be affected where their
governing instrument provided for a rate of pay that the instrument envisaged that the
person would do regularly, and that rate, when expressed as a weekly rate, exceeds the
maximum weekly wage rate. The governing instrument is to be taken as the instrument that
was current at the end of the wages entitlement period (i.e. 13 weeks).
Page 18 Fair Entitlements Guarantee Bill 2012
Part 3--Amount of advance
106. Subclause 27(3) will apply to individuals whose weekly wage fluctuates because, for
example, they work under a commission based pay structure. The subclause provides that a
person's wages entitlement will be affected where:
· Their governing instrument did not provide for a rate of pay at the end of the wages
entitlement period for work that the instrument envisaged that the person would do
regularly; and
· The person's actual average weekly wage for that period is greater than the
maximum weekly wage at the end of that period.
107. As the governing instrument does not provide a rate of wages in this situation,
subclause 27(3) provides for the rate to be determined by dividing the wages earned by the
person by the number of weeks he or she was employed by the employer in that period.
108. Subclause 27(4) will apply to an individual where the Secretary is satisfied of certain
matters and applies this rule. This subclause provides that a person's wages entitlement
will be affected where the Secretary is satisfied that:
· Over the weeks for which the person was employed in the wages entitlement period,
there was not a regular pattern of hours worked by the person or wages to which the
person was entitled for work done or leave taken within those weeks; and
· The person's average weekly wage for that period was greater than the maximum
weekly wage at the end of that period.
109. The rate in these situations is determined by dividing the person's wage by the number of
weeks for which he or she was employed by the employer in that period.
Page 19 Fair Entitlements Guarantee Bill 2012
Part 4--Payment of advance
Part 4--Payment of advance
Overview
110. Part 4 places an obligation on the Commonwealth to pay an advance to an eligible person
and outlines how payments may be made.
Notes on clauses
Clause 28 - Payment to eligible person or intermediary
111. Subclause 1 provides that where the Commonwealth is obliged to pay an advance to an
eligible person, payments may be made to the person directly or to the relevant liquidator
or bankruptcy trustee of the employer. Payments may also be made to another person (a
`payee') for the payee to pass on to the eligible person. This situation may arise when a
third party is contracted by the Government to process payments. This range of options
will allow the Department to pay entitlements through the relevant liquidator or bankruptcy
trustee of the employer, or to arrange for direct payment when the claim is determined to
be low risk and low value.
112. Subclause 2 provides that the Secretary may pay an advance to an eligible person in
instalments if doing so would result in the person receiving an instalment of the advance
sooner than if the advance was not paid in instalments. This will provide flexibility to pay
an instalment where, for any reason, it is expected that the determination of a person's full
entitlement may take significant time. In all circumstances, an advance can only be paid in
instalments when a person has been determined to be eligible under the scheme.
113. Subclause 3 provides that the Minister may direct the Secretary to pay an advance in
instalments to either a specified person or to all persons who were employed by a specified
employer. Subclause 4 provides that the Secretary must comply with a direction made
under subclause 3.
114. A decision by the Secretary to pay an advance in instalments or not to pay an advance in
instalments is not reviewable by the AAT under Part 6 of this Bill. This reflects that this
decision by the Secretary will affect only timeframes for payment of an advance and will
not impact upon the actual entitlements of an individual.
115. Subclause 5 clarifies that a direction made in writing under subclause 3 is not a legislative
instrument.
Page 20 Fair Entitlements Guarantee Bill 2012
Part 5--Recovery of advance
Part 5--Recovery of advance
Overview
116. Part 5 deals with the Commonwealth's ability to recover money advanced through this
legislation.
117. Division 1 establishes the framework for recovering money through winding up or
bankruptcy proceedings. It is intended that the Commonwealth will have the same rights
to receive payment from the liquidator or bankruptcy trustee as the employee would be
entitled to receive and that the Commonwealth will stand in the shoes of the employee in
exercising rights to priority for payments under the Corporations Act and Bankruptcy Act.
118. Division 2 allows the Commonwealth to recover money advanced through this legislation
when the employee later receives, from another source, an amount for an employment
entitlement that was part of the advance.
Notes on clauses
Division 1--Recovery through winding up or bankruptcy
Clause 29 - Recovery of advance paid to liquidator
119. Clause 29 supports the object of the Bill to allow the Commonwealth to recover advances
through the winding up of the relevant employer by clarifying how payments of an
advance are to be treated for the purposes of section 560 of the Corporations Act.
Clause 30 - Recovery of some amounts of advance paid to bankruptcy trustee
120. Clause 30 supports the object of the Bill to allow the Commonwealth to recover advances
through the bankruptcy of the relevant employer by clarifying how payments of an
advance are to be treated for the purposes of section 109(2) and (3) of the Bankruptcy Act.
Clause 31 - Recovery in other circumstances
121. Clause 31 provides that, when an advance is paid under this legislation for a person's
employment by an employer then, to the extent of the amount of the advance paid:
· The employer's liability to the person will be discharged;
· The rights the person had in relation to that liability in the winding up or bankruptcy
of the employer become rights of the Commonwealth; and
· So far as the advance was for a particular employment entitlement, the
Commonwealth will have the same priority as the person had for that entitlement.
Page 21 Fair Entitlements Guarantee Bill 2012
Part 5--Recovery of advance
Clause 32 - Amount of advance attributable to particular employment entitlements if
advance reduced for debts to employer
122. Clause 32 provides for how reductions made to a person's advance under clause 17 (which
is about reduction for the person's debts to the employer) are apportioned between the
person's employment entitlements for the purpose of establishing the amount claimed
against the different priorities recognised in the Corporations Act and the Bankruptcy Act.
123. Subclause 2 lists the types of employment entitlement and specifies that if the debt related
to a particular entitlement then it is this amount of this entitlement that will be reduced to
the extent of the debt.
124. Subclause 3 applies if the amount of the debt that is being applied against the person's
advance does not relate to a particular employment entitlement listed in subclause 2. In this
situation, the reduction will be taken to have applied proportionally to the employment
entitlements that the person would have otherwise been entitled to.
Clause 33 - Recovery of advance for employment for partnership
125. Clause 33 creates special provision for partnerships, with the clauses 29, 30 and 31
applying in relation to each of the partners who employed the person. The purpose of the
term `2 or more of the partners' is described above in the definition of `insolvency event' in
clause 5.
126. Recovery of an advance from multiple partners subject to winding up or bankruptcy
proceedings could potentially result in the Commonwealth recovering an advance multiple
times. Paragraph (b) prevents this outcome by stating that the Commonwealth cannot
recover amounts from all partners totalling more than the amount of the advance.
Division 2--Recovery from person eligible for advance
Clause 34 - Recovery from person eligible for advance
127. Clause 34 provides an avenue for recovery of amounts advanced to a person if that person
later receives an amount for an employment entitlement that formed part of the original
advance. This does not include later payments made by the Commonwealth, the liquidator
or bankruptcy trustee of the employer or recipient of the advance. This clause supports the
object of the Bill to only make advances on account of unpaid employment entitlements
where the former employee cannot get payment of the entitlement from another source.
128. If a person who has received an advance for employment entitlements and later receives
an amount from another party for that same entitlement, a debt becomes due by the person
to the Commonwealth for the lesser of the following amounts:
· The totality of the later amount; or
· The difference between the advance and the sum of:
Page 22 Fair Entitlements Guarantee Bill 2012
Part 5--Recovery of advance
The amounts paid to the Commonwealth in the winding up or bankruptcy of
the employer because of Part 5, Division 1 of this Bill; and
The debts (if any) created by previous operations of this section in relation to
the person.
129. A debt arising under this clause may be recovered by the Secretary, on behalf of the
Commonwealth, in a court of competent jurisdiction.
Page 23 Fair Entitlements Guarantee Bill 2012
Part 6--Administration
Part 6--Administration
Overview
130. Part 6 contains provisions about decision-making, internal review of decisions and review
of decisions by the AAT. It also contains provisions relating to information management
and delegation of decision-making.
131. Division 1 provides for decision-making about whether a person is eligible for an advance
for his or her unpaid entitlements, and about the amount of the advance.
132. Division 2 provides for review of decisions about eligibility and advances made in
accordance with Division 1. Decisions may be reviewed on the initiative of the Secretary
or on application by a person seeking payment of an advance.
133. Division 3 makes provisions for the management of information.
134. Division 4 provides for arrangements about information and dealing with payments.
Notes on clauses
Division 1--Decision-making about advances
Clause 35 - Presuming accuracy of certain information
135. This clause provides that for the purposes of deciding whether a person is eligible for an
advance, and the amount of such an advance, the Secretary may presume that information
about the person that is provided by an insolvency practitioner (as defined in clause 5) is
accurate. Information provided by insolvency practitioners forms the evidentiary basis for
determining claims in many situations. Insolvency practitioners also have obligations when
providing information in relation to outstanding employment entitlements in insolvency
events.
136. While this provision allows the Secretary to presume the accuracy of information provided
by insolvency practitioners, this provision is not intended to allow alternative evidence
presented by claimants to be ignored. In such situations, the decision maker will to weigh
up any competing evidence in reaching a determination.
137. This provision also importantly allows the Secretary to choose to not rely on information
provided by an insolvency practitioner, which will allow the Secretary to process claims
that represent low value and low risk claims that are to be paid directly by the Department.
For example, an individual claim at or below $2500 would be a relatively `low value
claim' and where the Commonwealth's right to recover the amount is sufficiently certain,
the claim would be relatively low risk.
138. The Secretary would make decisions about when to process the claim as a `low risk, low
value claim' with reference to internal guidance and established procedures.
Page 24 Fair Entitlements Guarantee Bill 2012
Part 6--Administration
Clause 36 - Giving notice of decisions made under section 15
139. Subclause 1 provides that the Secretary must give a person written notice of a decision
made under subclause 15(1), which is a decision about whether a person is eligible for an
advance. It also provides that the Secretary must give written notice of a decision made
under subclause 15(2), which is a decision about the amount of an advance a person is
eligible for.
140. Subclause 2 provides that the notice must set out the terms of the decision, written reasons
for the decision and the person's rights to have the decision reviewed.
Division 2--Review of decisions about advances
Subdivision A--Internal review on the Secretary's own initiative
Clause 37 - Review on the Secretary's own initiative
141. Subclause 1 provides that if the Secretary is satisfied that there is sufficient reason, the
Secretary may review a decision about whether a person is eligible for an advance, or a
decision about the amount of the advance.
142. Subclause 2 provides that the Secretary may review decisions under subclause 1 even if an
appeal has already been made to the AAT.
143. Subclause 3 provides that the Secretary cannot initiate an internal review in relation to a
decision under subclause 1 if that decision is already the subject of an internal review
under subdivision B - that is, an internal review on application by a person as to whether
they are eligible for an advance, or the amount of an advance they are eligible for.
144. Subclause 4 provides that after reviewing the decision made under subclause 1, the
Secretary can make a `review decision' which can affirm the decision, vary the decision or
set aside the decision and substitute a new decision.
145. Subclause 5 provides that the Secretary must give the person written notice of review
decision, setting out the terms of the decision and reasons for the decision.
146. Subclause 6 provides that failure to comply with subclause 5 does not affect the validity of
the review decision.
147. Subclause 7 provides that the Secretary must give the Registrar of the AAT written notice
of the review decision if the review decision varied, or substituted a new decision for the
decision that was reviewed, and before the review decision on the Secretary's own
initiative was made, the person had already applied to the AAT for review of that decision.
148. Clause 37 allows the Secretary to review decisions on his or her own initiative, without
affecting the rights of a person to make appeals to the AAT. If the Secretary's own
initiative review has an outcome that satisfies the applicant, the applicant's appeal to the
AAT need not continue. The Secretary's notification will inform the AAT of the
Page 25 Fair Entitlements Guarantee Bill 2012
Part 6--Administration
Secretary's review decision; what is done about the notified decision will be a matter for
the AAT.
Subdivision B--Internal review on application
Clause 38 - Application for review by Secretary
149. Subclause 1 provides that a person may apply to the Secretary for review of a decision
about whether a person is eligible for an advance, or a decision about the amount of the
advance.
150. Subclause 2 provides that the application must be made within 28 days after the date of the
notice of the decision, or such longer time as the Secretary allows.
151. Subclause 3 sets out what an application must contain. Paragraph (a) provides that the
application must state the reasons why the application is being made, and paragraph (b)
provides that the application must set out, or be accompanied by, any information or
documents relating to the reasons, other than information or documents referred to in the
notice of decision.
152. Subclause 4 provides that a person may withdraw the application for review at any time
before the review is completed.
153. Subclause 5 provides that the application may be withdrawn orally, in writing or in another
manner approved by the Secretary.
154. Subclause 6 provides that if the application is withdrawn, it is taken to never have been
made.
Clause 39 - Action on application for review
155. Subclause 1 provides that if a person applies for a review of a decision, the Secretary must
review the decision and affirm it, vary it or set it aside and substitute a new decision.
156. Subclause 2 provides that the Secretary must give the person written notice of the decision
made as a result of the review.
157. Subclause 3 provides that the notice must set out the terms of the decision made as a result
of the review, written reasons for that decision and the person's rights to have that decision
reviewed.
Subdivision C--Review by the Administrative Appeals Tribunal
Clause 40 - Application to the Administrative Appeals Tribunal for review
158. Subclause 1 provides that an application may be made to the AAT by a person for review
of 2 types of decisions.
Page 26 Fair Entitlements Guarantee Bill 2012
Part 6--Administration
159. Subclause 1, paragraph (a) provides that an application can be made to the AAT for review
of a decision about whether a person is eligible for an advance, which has been affirmed or
substituted as a result of a person's application for review under subdivision B.
(Subdivision B provides for reviews on application by a person, but not reviews on the
Secretary's own initiative).
160. Subclause 1, paragraph (b) provides that an application can be made to the AAT for review
of a decision about the amount of an advance, which has been affirmed or substituted as a
result of a person's application for review under subdivision B. A person must exhaust a
review under Subdivision B before proceeding with an external review under
Subdivision C.
161. Subclause 2 provides that subclause 1 has effect despite subsection 27(1) of the AAT Act.
Without this provision, any person whose `interests are affected by the decision' would
have standing to seek AAT review of a decision. The pool of individuals `affected by the
decision' could potentially include all other creditors of the employer. Given the purpose
of the scheme is to advance unpaid employee entitlements, it would be inappropriate to
allow other creditors to seek to have decisions about a person's eligibility or entitlements
reviewed by the AAT.
162. Subclause 3 provides that if, after a person has applied to the AAT for review of a
decision, the Secretary varies or substitutes the decision under Subdivision A (which
provides for reviews on the Secretary's own initiative), the application will be taken to be
for a review of the varied or new decision.
Clause 41 - Limit on review of decision on amount of advance
163. Subclause 1 provides that clause 41 applies only to a review by the AAT of a decision
about an amount of an advance that has been reduced because of a debt the person owed an
employer.
164. Subclause 2 provides that the AAT cannot review the power under clause 17 to reduce an
amount of an advance.
165. Subclause 3 provides that the AAT cannot exercise the power under clause 17 to reduce an
amount of an advance.
166. Subclause 4 provides that this clause has effect despite subsection 43(1) of the AAT Act.
167. This provision has been included to recognise the Department's reliance on the information
provided by insolvency practitioners in relation to debts owed by employees to their
former employer. In practice, the advice provided by insolvency practitioners in relation to
debts would be acted on automatically in many situations. Review of this consideration by
the AAT would be problematic as any findings would not affect the decision making of the
insolvency practitioner, who ultimately has the power to decide whether a person's debts to
their employer should be offset against their employment entitlements. Removing the
Page 27 Fair Entitlements Guarantee Bill 2012
Part 6--Administration
ability of the AAT to review the offsetting of debts would not hinder a claimant's ability to
contest the insolvency practitioner's decision under the Corporations Act.
Division 3--Information management
Clause 42 - Use and disclosure of personal information by the Department for
administering this Act
168. This clause sets out what the Department may do with specified personal information for
the purposes of administering this Act.
169. Subclause 1 paragraph (a) provides that for the purposes of administering this Act, the
Department may use personal information about an employer, or a current or former
employee of an employer. Paragraph (b) provides that for the purposes of administering
this Act, the Department can disclose that information to any of the following: an
insolvency practitioner for the employer; a person with whom the Commonwealth has a
contract to pass on to a former employee of the employer payments made under this Act;
or a person who is, will be, or has made, a payment to a former employee, associated with
the amount owing or owed to the former employee.
170. This clause will facilitate the disclosure of information by the Department to support the
payment of an individual's employment entitlements. Subparagraph (b)(iii) is intended to
allow for the disclosure of information to third parties proposing to make payments related
to a person's employment entitlements, such as industry long service leave trust funds.
171. While applicants are asked to agree to a privacy disclosure statement, this provision will
allow the Department to disclosure information relating to non-claimants (such as directors
of a company) or employees who have not yet submitted a claim form.
Clause 43 - Use and disclosure of personal information by insolvency practitioners and
payment intermediaries
172. Subclause 1 provides that, for the purposes of facilitating the administration of this Act, an
insolvency practitioner of an employer may use, or disclose to the Department, personal
information about the employer or a current or former employee.
173. Subclause 2 provides that, for the purposes of facilitating the administration of this Act, a
person with whom the Commonwealth has a contract to pass on to a former employee
payments made under this Act may use, or disclose to the Department, personal
information about the former employee or employer.
Clause 44 - Use and disclosure of personal information by persons making payments to
former employees
174. This clause provides that, for the purposes of facilitating the administration of this Act, a
person who is making, proposes to make or has made a payment to a former employee,
associated with an amount owing or owed to the former employee, may use, or disclose to
the Department, personal information about the former employee or employer.
Page 28 Fair Entitlements Guarantee Bill 2012
Part 6--Administration
Clause 45 - Disclosure of personal information to certain agencies
175. This clause provides that, for the purposes of facilitating the exercise of powers, or
performance of functions, that an agency (as defined in the Privacy Act 1988) has in
relation to the Corporations Act, the Bankruptcy Act or entitlements of current or former
employees, the Department may disclose to the agency personal information that the
Department has in connection with the administration of this Act. That information can be
about an employer, an officer of an employer (as defined in the Corporations Act), an
insolvency practitioner for an employer, or a current or former employee of an employer.
176. This clause will facilitate compliance and regulatory activities undertaken by other
Commonwealth agencies which relate to payment of employment entitlements.
Division 4--Arrangements for information and dealing with payments
Clause 46 - Arrangements for information and dealing with payments
177. Subclause 1 provides that on behalf of the Commonwealth, the Secretary may make, vary,
administer and otherwise give effect to an arrangement, agreement or contract for the
following:
· Provision of information about a person that is relevant to deciding whether a person
is eligible for an advance, and the amount of the advance (paragraph (a))
· Dealing with amounts of an advance that the Secretary has decided a person is
eligible for (paragraph (b)).
178. Subclause 2 provides that this section does not limit the executive powers of the
Commonwealth.
Division 5--Delegation
Clause 47 - Delegation of Secretary's powers and functions
179. This clause provides that the Secretary may delegate certain of the Secretary's powers to
an APS employee.
180. Subclause 1 provides that the Secretary may delegate in writing to an APS employee in the
Department any or all of the Secretary's powers and functions under this Act, except for
the following provisions in this Bill:
· Clause 25 (about disregarding recently agreed changes in terms and conditions);
· Subclause 28(2) (about paying advances in instalments); and
· Subclause 38(5) (about approving the manner of withdrawing an application for
internal review).
Page 29 Fair Entitlements Guarantee Bill 2012
Part 6--Administration
181. The Department received almost 18,000 applications over the 2011/2012 period. Managing
this volume of claims requires significant administrative workflow management and
operational infrastructure, which in turn requires decisions under the Bill to be delegated to
operational staff operating under close supervision. If an applicant feels that a decision has
been improperly made, they may exercise their rights of review as provided for under
Division 2.
182. Subclause 2 provides that, in addition to subclause 1, the Secretary may also delegate in
writing to an SES employee, or acting SES employee, in the Department, any or all of the
Secretary's powers and functions under the following provisions:
· Clause 25 (about disregarding recently agreed changes in terms and conditions); and
· Subclause 38(5) (about approving the manner of withdrawing an application for
internal review).
183. A note indicates that `SES employee' and `acting SES employee' are defined in section 2B
of the Acts Interpretation Act 1901.
184. `APS employee' is also defined in the Acts Interpretation Act 1901.
185. Subclause 3 provides that the Secretary may delegate his or her power under subclause
28(2) about paying advances in instalments. This delegation must be in writing to either an
SES employee, or an acting SES employee, or an APS employee who holds, or is acting in,
an EL2 position (or an equivalent position) in the Department.
186. Subclause 4 provides that in exercising powers or performing functions under a delegation
under this section, the delegate must comply with any directions of the Secretary.
Clause 48 - Delegation of Minister's powers
187. Clause 48 provides that the Minister may delegate in writing the powers he or she has
under clause 49 to the Secretary or an SES employee in the Department who is at or acting
at a Band 3 level.
188. Subclause 2 provides that in exercising powers under a delegation under this clause, the
delegate must comply with any directions of the Minister.
Page 30 Fair Entitlements Guarantee Bill 2012
Part 7--Miscellaneous
Part 7--Miscellaneous
Overview
189. Part 7 deals with miscellaneous matters related to the operation of this legislation.
Notes on clauses
Clause 49 - Extended operation of this Act in relation to employers in administration
under the Corporations Act 2001
190. Subclause 1 and 2 provides the Minister may make a declaration to extend the operation of
the proposed scheme to employees of a specified employer that is under administration
under Part 5.3A of the Corporations Act. The purpose of these provisions is to facilitate
fast tracking of claims for unpaid employee entitlements where:
· There is a high degree of certainty that liquidation of the employer will occur shortly;
and
· It will be practicable to administer the Act in relation to the employees of the
specified employer.
191. Together these requirements provide that the discretion will only be exercised in situations
where there is sufficient certainty about the employer's state of affairs to give effect to the
scheme and where the Commonwealth's recovery rights under the Corporations Act will
be not be compromised.
192. Subclause 3 provides that, for the purposes of administering the scheme, a declaration will:
· Treat the appointment of the administrator as the appointment of a liquidator; and
· Substitute the appointment of the administrator for the `insolvency event' for the
purposes of the time limits contained in subparagraph 14(2)(a)(i).
193. Subclause 4 provides that the Minister may make a legislative instrument revoking a
declaration made under subclause 1.
Clause 50 - Schemes for assistance of workers who were not employees
194. In accordance with the object of the Bill in clause 3, the scheme established under this Bill
provides for the payment of advances to former employees. For the purposes of the
scheme, the term `employee' refers to an employee at common law and does not include
contractors.
195. In recognition of the evolving nature of employment relationships, clause 50 provides for
the making of regulations establishing a scheme to provide financial assistance to
individuals who are owed amounts for work they did for a person specified by the
regulations (except as an employee of that person) who is insolvent or is reasonably
Page 31 Fair Entitlements Guarantee Bill 2012
Part 7--Miscellaneous
expected to be insolvent. Regulations made under subclause 1 would also provide for
recovering amounts of that financial assistance.
196. Subclause 2 provides that regulations made under clause 50 may provide for the following:
· The determination of which individuals are eligible for financial assistance under the
scheme;
· The determination of how much financial assistance individuals are eligible for under
the scheme; and
· Matters relating to the administration of the scheme.
197. Subclause 3 provides that a regulation made for the purposes of clause 50 will not take
effect before the end of the period in which it could be disallowed in either House of
Parliament.
198. Clause 50 provides flexibility to cover employment relationships that extend beyond the
traditional employee/employer paradigm. It is intended that this regulation making power
would be used only when it is necessary to support of the objects of this Bill, as described
in clause 3.
Clause 51 - Appropriation
199. Clause 51 provides that the Consolidated Revenue Fund is appropriated for the purposes of
payments under this Bill.
200. The establishment of a standing appropriation is necessary as it is not possible to predict
the number or value of entitlements that will be advanced in any particular year. A
standing appropriation will also provide certainty to claimants by ensuring that sufficient
funds will be available to meet all eligible entitlements.
Clause 52 - Recoverable payments
201. Clause 52 acknowledges that incorrect payments may be made inadvertently from time-to-
time under the scheme and provides an avenue for the recovery of these funds.
202. Subclause 52 (2) provides that the amount of the payment that was not authorised by the
Bill will be a debt due to the Commonwealth and may be recovered by the Secretary, on
behalf of the Commonwealth, in a court of competent jurisdiction.
Clause 53 - Reports about recoverable payments
203. Clause 53 provides for the reporting of payments made under clause 705.
Page 32 Fair Entitlements Guarantee Bill 2012
Part 7--Miscellaneous
Clause 54 - Right to financial assistance may be reduced, cancelled etc. without
compensation
204. Clause 54 provides that a right to payment of financial assistance under this Bill is granted
on the basis that the amount of assistance may be reduced under Part 3 or cancelled,
revoked, terminated or varied by or under later legislation.
205. Subclause 54(c) provides that no compensation is payable if the amount of financial
assistance is reduced under Part 3 or the regulation, or the right is cancelled, revoked,
terminated or varied by or under later legislation.
Clause 55 - Regulations
206. Clause 55 provides that the Governor-General may make regulations prescribing matters as
required or permitted by this Bill to be prescribed or necessary or convenient to be
prescribed for carrying out or giving effect to this Bill.
Page 33 Fair Entitlements Guarantee Bill 2012
Statement of Compatibility with Human Rights
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Fair Entitlements Guarantee Bill 2012
This Bill is compatible with the human rights and freedoms recognised or declared in the
international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny)
Act 2011.
Overview of Fair Entitlements Guarantee Bill 2012 (the Bill)
The Bill provides a scheme for the provision of financial assistance (called an `advance') to
former employees whose employment has ended as the result of the winding up or bankruptcy of
their employer. After making an advance, the Commonwealth assumes the individual's right to
recover these amounts through the winding up or bankruptcy process of their employer.
Human Rights Implications
Right to Equality and Non-discrimination
Article 2(1) of the International Covenant on Civil and Political Rights (ICCPR) provides:
Each State Party to the present Covenant undertakes to respect and to ensure to all
individuals within its territory and subject to its jurisdiction the rights recognized in the
present Covenant, without distinction of any kind, such as race, colour, sex, language,
religion, political or other opinion, national or social origin, property, birth or other status.
Article 26 of the ICCPR provides:
All persons are equal before the law and are entitled without any discrimination to the
equal protection of the law. In this respect, the law shall prohibit any discrimination and
guarantee to all persons equal and effective protection against discrimination on any
ground such as race, colour, sex, language, religion, political or other opinion, national or
social origin, property, birth or other status.
The rights to equality and non-discrimination in Articles 2 and 26 ensure that no one is denied
their rights because of a prohibited ground (for example race, colour or sex). In addition to the
prohibited grounds specified in these articles, discrimination is also prohibited on 'other status'.
The UN Human Rights Committee has held that `nationality' may be a prohibited ground for
discrimination.
To be eligible for an advance under the Bill, clause 10(1)(g) of the Bill requires a person to be an
Australian citizen or the holder of a permanent visa or a special category visa under the
Migration Act 1958. Since this subclause makes citizenship or visa status a condition of
eligibility for financial assistance under the Bill, it engages and limits the rights to equality and
non-discrimination under Articles 2 and 26.
Page 1 Fair Entitlements Guarantee Bill 2012
Statement of Compatibility with Human Rights
The rights to equality and non-discrimination are not absolute rights and can be subjected to
permissible limits. The UN Human Rights Committee has recognised that 'not every
differentiation of treatment will constitute discrimination, if the criteria for such differentiation
are reasonable and objective and if the aim is to achieve a purpose which is legitimate under the
Covenant'.
The Bill establishes an assistance scheme, which is intended to operate as a safety net for eligible
persons. In this way it is analogous to social security legislation, and care has been taken to
maintain some consistency with conditions of eligibility in analogous social security legislation.
This is a legitimate objective.
The limitation is also reasonable in the context of the Bill's purpose to provide a safety net for
persons whose employment has ended due to the insolvency of their employer. Importantly, the
restriction on eligibility in clause 10(1)(g) will not in any way affect an excluded person's right
to recover any unpaid entitlements from their former employer.
It is considered that the limitations on the right to equality and non-discrimination which are
contained in clause 10(1)(g) of the Bill are not incompatible with the rights. The Bill pursues a
legitimate objective and making citizenship, residency, or visa status a condition of eligibility for
financial assistance under the Bill is reasonable, necessary and proportionate to that objective.
Right to Privacy
The right to privacy in Article 17 of the ICCPR prohibits unlawful or arbitrary interferences with
a person's privacy, family, home and correspondence. It also prohibits unlawful attacks on a
person's reputation. Division 3 of the Bill provides for the sharing of personal information about
an employer or employee between the Department and other parties who have a need for the
information in relation to the administration of the Bill. Because Division 3 of the Bill limits a
person's right to control their personal information, it engages and limits the right to privacy
under Article 17.
Article 17 provides for an implied permissible limitation on the right to privacy to the extent that
the limitations are not arbitrary or unlawful. In order for an interference with the right to privacy
not to be `arbitrary', the interference must be for a reason consistent with the ICCPR and
reasonable in the particular circumstances. Reasonableness, in this context, involves notions of
proportionality, appropriateness and necessity.1
Use of personal information
Clauses 42(a), 43(1)(a), 43(2)(a) and 44(a) of the Bill provide that for the purposes of
administering the Bill, the following parties may use personal information about an employer, or
a current or former employee:
· the Department;
1
Toonen v Australia, Communication No. 488/1992, U.N. Doc CCPR/C/50/D/488/1992 (1994) at 8.3
Page 2 Fair Entitlements Guarantee Bill 2012
Statement of Compatibility with Human Rights
· specified parties, which are:
an insolvency practitioner of an employer;
a person with whom the Commonwealth has a contract to pass on to a former
employee of an employer payments made under this Bill; or
a person, who is making, proposes to make or has made a payment to a former
employee of an employer associated with an amount owing or owed to the
former employee in connection with his or her employment.
The very nature of a scheme which provides for the payment of entitlements necessitates the use
of personal information about the person making a claim. Information will only be used for the
purposes of administering the Bill and, in practice, the administration of the Bill will include
safeguards to prevent the arbitrary use of personal information. For example, applicants making
a claim under the Bill will provide consent to the use of their personal information for the
purposes of administering the Bill.
With respect to information which is about an employer, this information will only relate to the
employer in its professional capacity, and is necessary for the processing of a former employee's
claim.
Disclosure of personal information- assessment of claims
Clauses 42(b), 43(1)(b), 43(2)(b) and 44(b) provide for the disclosure of personal information
about an employer, or a current or former employee, between the Department and the specified
parties. The disclosure of personal information between the Department and the specified parties
under clauses 42, 43 and 44 is considered proportionate, appropriate and necessary to facilitate
the effective administration of the Bill. It is vital that the Department considers personal
information which is provided by the specified parties to determine whether a person is eligible
for an advance and accurately calculate the amount of such an advance. The ability of these
parties to disclose information to the Department is critical in ensuring that applications are
assessed and money disbursed in a timely manner.
Set out below are explanations about each clause, and why disclosure of personal information is
necessary in each particular circumstance.
It is also relevant to note that each specified party or agency to which information will be
disclosed has its own legal and professional obligations about the collection, storage and use of
personal information under privacy laws. In addition, a person who is contracted by the
Commonwealth for the purpose of passing an advance on to a recipient will be bound by the
privacy clauses in that contract.
Furthermore, the administrative safeguards described above in relation to the use of personal
information (for example obtaining consent) will also apply to the disclosure of personal
information.
Page 3 Fair Entitlements Guarantee Bill 2012
Statement of Compatibility with Human Rights
Clause 42
Clause 42(b) provides that for the purposes of administering the Bill, the Department can
disclose personal information about the employer or employee to the specified parties. This
subclause facilitates the disclosure of information by the Department where it is necessary to do
so to assess a person's claim.
It is important that the Department consults the specified parties as they are likely to have
information that would assist the Department to accurately determine a person's eligibility for an
advance, as well as the amount of the advance to be paid under the Bill. For example, if a person
is owed long service leave, clause 42(b)(iii) would enable the Department to provide the person's
identification details (for example name and date of birth) to an industry long service leave trust
fund. This would allow the trust fund to correctly identify the person and thereby provide the
Department with details of the person's long service leave entitlements.
Clause 42(b) limits the Department's ability to disclose information by specifying the parties to
which it can disclose personal information and requiring that the disclosure is only for the
purposes of administering the Bill. Importantly, the specified parties are professional bodies
which have obligations with respect to the collection, storage and use of personal information
under privacy laws. In addition, the Bill does not permit the specified party to disclose the
information to any other party.
Clause 43
Clauses 43(1)(b) and 43(2)(b) enable an insolvency practitioner (including a liquidator or a
bankruptcy trustee) or payment intermediary to disclose personal information about an employer
or current or former employee to the Department for the purposes of administering the Bill.
These provisions facilitate the Department's ability to gather the information required to make
decisions about advances under the Bill.
For example, clause 35 provides that for the purposes of deciding whether a person is eligible for
an advance and the amount of such an advance, the Secretary may presume that information
relating to the person that is provided by the liquidator or bankruptcy trustee is accurate. Clause
43(1)(b) facilitates the operation of clause 35 by enabling the liquidator or bankruptcy trustee to
disclose this information to the Department. In order to accurately determine a person's
eligibility for an advance and the amount of such an advance, it is important that the Department
considers personal information which is provided by the specified parties. In the majority of
cases, this information is held by a liquidator or bankruptcy trustee.
Clause 44
Clause 44(b) enables a person making payments to former employees to disclose personal
information about the former employee or employer to the Department for the purposes of
administering the Bill. Similar to clause 43, this provision facilitates the Department's ability to
gather the information required to make decisions about advances under the Bill.
Page 4 Fair Entitlements Guarantee Bill 2012
Statement of Compatibility with Human Rights
For example, clause 19 provides that the amount to be advanced to a former employee is
determined by working out the basic amount for their entitlements (for example annual leave and
unpaid wages) and then reducing that amount by amounts, such as a payment which has already
been made by another person to the former employee. Clause 44(b) would enable a person who
has made a payment to a former employee to provide details of this payment to the Department.
This information would allow the Department to accurately calculate the amount of the advance,
in accordance with clause 19.
Disclosure of personal information to certain agencies- Clause 45
Clause 45 of the Bill provides that for the purposes of facilitating the exercise of powers, or
performance of functions, that an agency (as defined in the Privacy Act 1988) has in relation to
the Corporations Act 2001 (the Corporations Act), the Bankruptcy Act 1966 or entitlements of
employees or former employees, the Department may disclose to the agency personal
information that the Department has in connection with the administration of the Bill. That
information can be about an employer, an officer of an employer (as defined in the Corporations
Act), an insolvency practitioner for an employer, or a current or former employee of an
employer.
The disclosure of personal information by the Department will facilitate enforcement activities
undertaken by other Commonwealth agencies. For example, the disclosure of information about
a company director to the Australian Securities and Investments Commission would assist in a
civil proceeding against the director for the contravention of the director's duties under the
Corporations Act. Such disclosure would be proportionate, appropriate and necessary to the
enforcement of the Corporations Act.
Further, with respect to information which is provided about an employer, an office or an
insolvency practitioner, this information will only relate to such persons in their professional
capacity. Importantly, each specified party or agency to which information will be disclosed has
its own legal obligations concerning the collection, storage and use of personal information
under privacy laws.
Right to Social Security
Article 9 of the International Covenant on Economic, Social and Cultural Rights (the ICESCR)
provides that, `the States Parties to the present Covenant recognise the right of everyone to social
security, including social insurance.' The Committee on Economic, Social and Cultural Rights
has stated that the right to social security encompasses the right to access benefits, whether in
cash or in kind, without discrimination in order to secure protection from lack of work-related
income caused by unemployment2.
The Bill establishes an assistance scheme, which is intended to operate as a safety net for persons
whose employment has ended due to the insolvency or bankruptcy of their employer. This safety
2
Committee on Economic, Social and Cultural Rights, General Comment 19, The Right to Social Security, U.N. Doc.
E/C.12/GC/19 (2008)
Page 5 Fair Entitlements Guarantee Bill 2012
Statement of Compatibility with Human Rights
net could be characterised as `social insurance' because it ensures that employees' unpaid
entitlements are met when their employer becomes insolvent. It thus seeks to protect individuals
from lack of work-related income due to unemployment, and in this way, promotes the right to
social security. As mentioned above, the Bill limits the right to non-discrimination because
eligibility for an advance is limited to Australian citizens or the holders of a permanent visa or a
special category visa under the Migration Act 1958. However, as highlighted above, this
limitation pursues a legitimate objective and is considered reasonable, necessary and
proportionate to that objective.
Conclusion
The Bill is compatible with human rights because to the extent that it may limit human rights,
those limitations are reasonable, necessary and proportionate.
William Richard Shorten, Minister for Employment and Workplace Relations
Page 6 Fair Entitlements Guarantee Bill 2012
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