Andrew Giles (Scullin, Australian Labor Party) Share this | Hansard source

I rise to speak in opposition to the Fair Entitlements Guarantee Amendment Bill 2014. The purpose of the bill before us is to amend the Fair Entitlements Guarantee Act 2012 to reduce the maximum redundancy pay entitlement under the act. It removes a significant support and an important form of social insurance afforded to hardworking Australians: ensuring earnt entitlements are paid.

I was pleased to be in the chamber to hear the contribution of the member for Throsby, the previous speaker in this debate. He touched on the particular impact of this scheme on workers in the manufacturing sector. He asked the pertinent question: 'What is it about manufacturing in Australia that this government is so vehemently opposed to? Why does this government hate manufacturing workers?' The bill also makes some technical amendments to clarify the operation of the act. I note that the recommendation which apparently gave rise to this bill was contained in the work of the Commission of Audit, which shows the ideological foundation it rests upon.

Through the Fair Entitlements Guarantee the Commonwealth government assists workers whose employers have gone bankrupt or into liquidation by paying certain of their entitlements. The present act replaced the GEERS, the General Employee Entitlements and Redundancy Scheme, which had operated since 2001. The act sets out details of the maximum entitlements available and how they are to be calculated. There is presently no overall cap on the potential payment, but some individual entitlements are capped. The scheme pays moneys in respect of unpaid wages up to 13 weeks, annual leave, long service leave, payment in lieu of notice to a maximum of five weeks and also redundancy pay to a maximum of four weeks per full year of service. In addition, the level of wages to be paid is capped at a maximum weekly rate. This was $2,364 when the scheme began and has been indexed by movements in the average weekly ordinary time earnings. At present it is $2,451.50. This rate has now been frozen until 30 June 2018.

Government members in this place seem to like history, so I think it is worth going back to the last time when this parliament debated the bill. During the debate in 2012 the then opposition opposed the level of redundancy payment now included in the act on the grounds that it was higher than the community standard, that it would become a new community standard, that it was an extra imposition on employers and that it would eventually lead to a loss of jobs. In a confused speech, Senator Abetz described the former GEERS scheme as:

…a good scheme. It remains a good scheme and it is a scheme that provides protection for Australian workers who have earned and accrued entitlements. As a community, I believe it is appropriate to fund those entitlements in circumstances where people lose their jobs as a result of business failure.

Hear hear! I am surprised to find myself agreeing with Senator Abetz—to this point. However, the senator went on to describe Labor's changes as 'somewhat over-generous' and sought to move an amendment to cap entitlements. But more on the senator's contribution to this debate later.

Labor believes that the government simply has not made the case for the changes contained in this legislation and has instead relied upon a series of falsehoods and misrepresentations to walk away from its responsibilities—responsibilities to workers who deserve our support. I want to debunk some of the furphies used by the Minister for Education in his second reading speech to justify these changes—there is not time to deal with all of them. The minister claims that the current system:

… is very generous…it creates a moral hazard … it provides an incentive for employers and unions to sign up to unsustainable redundancy entitlements.

Really? I think the Bills Digest nails this bizarre rationale, saying:

It does not seem plausible either that employees would value highly a provision contingent on insolvency in the future.

It is pretty hard to disagree with the assessment of the Bills Digest. It stands in stark contrast to the assertion of the minister.

There is also the other side of this moral hazard argument, which, not surprisingly, does not play a role in the minister's consideration—namely, the employers. The Textile Clothing and Footwear Union of Australia, in their submission to the Senate Education and Employment Committee, noted that this moral hazard:

… lies not with groups of employees who enter into enterprise bargaining agreements in good faith but with employers (and their advisors) who:

•   Fail to operate their businesses in a professional and sustainable manner;

•   Who treat employees entitlements (including employee's superannuation) as an interest-free loan for their company;

•   Who fail to make proper provision for their employees' accrued and contingent entitlements; and

•   Who liquidate one company (to avoid debts) only to open up another the next day in a different name, at the same premises, with the same assets to perform the same work.

These are real issues that go to a moral hazard at the heart of how some businesses are operating in Australia. But here we see the government ignoring these concerns and essentially punishing workers for a business's sometimes deliberate and avoidable misfortune. Ironically, the bill before us may actually have the effect of increasing the moral hazard before us. The Bills Digest also notes that this bill:

… does not include the old cap on the rate of accrual, so that redundancy entitlements accruing at, say, eight weeks a year would be paid to someone who had worked for two years for a business that becomes insolvent. At the very least, the new provision, because of the removal of the maximum rate of accrual, could increase any moral hazard that exists.

These are words that the minister and government members should have serious regard to.

I now turn to the minister's assertion that some agreements are 'overly generous'. Surely this is a matter for employers and employees to decide in good faith at an enterprise level. Beyond that, I think it is telling that the minister has simply asserted this notion of excessive generosity in agreements without providing any substantiation. As with much of the work of the Commission of Audit, we see ideological assertions in place of evidence—a speciality this government has carried over from the Commission of Audit into much of its work.

I note that the Parliamentary Library has found that:

… in the same way that the maximum wage that is covered by the FEG, $2,451, is "generous", being 69 per cent above full-time adult average weekly ordinary time earnings of $1,454.22 … fewer than five per cent of employees earn that amount. These are maximum entitlements, so by definition they might be expected to be above the average.

So what the library is telling us is that these are not excessively generous provisions, they simply recognise seniority and experience; and, of course, they also recognise the contributions of the employers, direct as well as indirect.

I note that, in their submissions to the Senate Education and Employment Legislation Committee, neither the ACCI nor the AIG were able to give a specific example of where a generous entitlement could be linked to the FEG rules, and these stakeholders were, unsurprisingly, in favour of the legislation we are debating here. Like so many of the government's attacks on workers, it is all assertion and no substantiation. Take, for instance, the old canard that our existing industrial relation laws somehow impede our national productivity. It is repeated endlessly by members opposite and yet those making the claims are never able to substantiate their assertions—because they cannot. In this case surely an evidence based approach would be best and fairest. I ask members opposite to think about the impact on workers affected—the trauma of job loss, often long-term job loss, through no fault of their own, compounded by being short-changed in entitlements properly payable to them.

In respect to responsibility, the minister states:

… the government is firmly of the belief that it is the responsibility of employers to meet the cost of their employees. This includes making … provision for redundancy pay when employees are made redundant.

Again, so far so good from the minister, yet this bill makes no provision for enforcing this responsibility. This bill is in fact an exercise in walking away from responsibilities. Alternatives are open to achieve the stated aim of the minister but clearly he is not interested in fixing the real problem.

This bill sees the government's role as if it were to make a welfare payment, not provide a safety net or social insurance properly understood, as if money owed to employees by their employer were an optional extra. Workers in good faith sell their labour to their employer for an agreed price. It is the wages-work bargain. It is a pretty fundamental concept. This price includes entitlements. This again is hardly a new concept. It is also the law, even under this government. So I ask myself and members opposite: where are the government bills that seek to stop employers from walking away from their responsibilities to their employees? As the ACTU and Slater and Gordon, my former employer, note in their submissions, this government should be looking at more vigorous pursuit of rogue employers to achieve its desired savings. This would be the responsible thing to do. It might militate against a real, and not confected, moral hazard.

If, as the government claims—though again, it never even attempts to substantiate—the Fair Entitlements Guarantee is unsustainable, other options for reducing the cost, such as ranking employee entitlements above other creditors in an insolvency and improving the Australian Securities and Investments Commission's ability to enforce penalties for trading while insolvent, should be considered. These are real matters for consideration. Instead, the government simply notes the bad behaviour by some employers and does nothing to remedy the mischief.

Consistency is another issue that must be touched upon in respect of the minister's contribution to this debate. The minister makes the erroneous claim that this bill before us achieves consistency with the National Employment Standards by capping the entitlement at 16 weeks. Again I prefer the view of the Parliamentary Library to the assertion of this minister. The Parliamentary Library found the exact opposite. It is worth quoting at length. They state:

This is not accurate, as the entitlement to 16 weeks redundancy pay after nine years of service provided for in section 119 of the Fair Work Act 2009 is a minimum entitlement for that length of service, rather than a maximum, as section 61 of that Act makes clear. While there is a case for tying employment related, taxpayer funded benefits to minimum standards—for example, the current paid parental leave scheme pays the entitlement at the minimum wage—other elements of the FEG are not tied to minimums, and the case for doing so with redundancy payments has not been made.

By adopting a simple maximum entitlement expressed in weeks of pay, without the structure set out in the National Employment Standards, the amendment introduces a new anomaly. For example, an employee subject to an agreement which provides four weeks’ pay for each year of service will reach his or her 16 weeks entitlement after four years; an employee whose agreement follows the national minimum will reach his or her 16 weeks after nine years. This could result in a 25 year old employee and a 45 year old having the same entitlement.

This from a government and a minister who presume to lecture on moral hazards! Whatever word play amuses the minister—and we saw some of that in question time today—cannot avoid the facts of this debate. Government members need to grapple with the work of the Parliamentary Library and interrogate the assertions of the minister.

Of course, we are talking about morals. Another aspect of morality is keeping one's promises and yet this bill represents another broken promise from this government. Before the election, in a letter to a concerned citizen, the then shadow minister for employment and workplace relations, Senator Abetz, wrote:

It is a matter of regret that you have somehow been led to believe that the Coalition would abolish the 'entitlements guarantee' if elected … you can be assured that the Coalition would not seek to do anything that would water down these important protections for Australian workers … We have not flagged any changes to the slightly modified entitlements guarantee that currently exist.

Accordingly, you can be satisfied that there is no risk to your entitlements and I would invite you to pass a copy of this letter to all your fellow workmates …

Again in part I agree with what the senator has said and I certainly encourage the wide dissemination of this correspondence, particularly amongst those opposite, who I note have been backwards in coming forwards to participate in debate on this bill. We have seen only one coalition member backing the minister—and it was an unusual contribution from the member for Hume, to say the least.

I would be interested to know how the government reconciles this bill with the commitment made in Senator Abetz's correspondence. It is a matter the minister can take up when he makes his final contribution to this debate. I imagine the reconciliation would be much like the manner in which this government has walked away from its other promises by pretending they either were never made or are not broken. Indeed, we saw something of a master class in that regard from the minister in question time today. He said over and over again that white is black in terms of the cruel broken promises in his higher education portfolio. He failed to accept the plain facts, much less the real impact on people's lives.

I would like to think that all of us in this place want businesses in Australia to succeed and of course for their employees to be paid everything that they are owed. However, I think all of us here understand also the reality is that some employers go bust and that rogue employers do not make provisions for what they owe their workers. So we are faced with the choice of letting employees lose money owed to them or stepping in to prevent this injustice. As the Parliamentary Library has noted, the real impact of this is a substantial financial impact on a small number of people, so a substantial budgetary saving is being borne by a few people. This simply is not fair. This is a broken promise. It is a breach of faith with Australian workers. Labor does not and will not support this mean-spirited bill.

See this speech in context