Wednesday, 24 October 2018
Corporations Amendment (Strengthening Protections for Employee Entitlements) Bill 2018; Second Reading
In summing up, I would firstly like to thank those members who contributed to this debate. The Corporations Amendment (Strengthening Protections for Employee Entitlements) Bill 2018 amends the Corporations Act 2001 to address corporate misuse of the Fair Entitlements Guarantee scheme. The FEG scheme should be a last resort. It provides financial assistance to employees left with unpaid employment entitlements when they lose their job due to the insolvency of their employer. Evidence shows that some employers are structuring their corporate affairs to avoid paying employee entitlements when their business becomes insolvent. This results in the improper shifting of costs of meeting employer liabilities that can and should be paid directly by the employer onto Australian taxpayers through the drain on the taxpayer funded scheme.
Corporate misuse of the FEG scheme hurts all hardworking Australians by placing an unfair burden on Australian taxpayers, who ultimately bear the cost of those employers improperly relying on the scheme. Corporate misuse of the FEG scheme also creates unfair commercial advantage over their honest competitor businesses who do the right thing by their employees.
The amendments in part 1 of schedule 1 of this bill strengthen enforcement and recovery options under the Corporations Act to deter and penalise company directors and other persons who engage in or facilitate transactions that are directed at preventing, avoiding or significantly reducing employer liability for employee entitlements in insolvency.
The amendments in part 2 of schedule 1 of this bill enable a court to make a contribution order against an entity in a corporate group or closely connected economic relationship with an insolvent company, where that insolvent company has unpaid employment entitlements; the other entity has unfairly benefited from the work done by the insolvent company's employees; and it would be just and equitable for the court to make the order.
The amendments in part 3 of schedule 1 of this bill strengthen the ability of the Australian Securities and Investments Commission to disqualify company directors and other officers, either directly or on application to the court, where they have a track record of corporate contraventions and inappropriately using the FEG scheme to pay outstanding employee entitlements. The reforms are the result of extensive public consultation processes conducted during 2017-18. They have been developed with the government's insolvent trading safe harbour reforms in mind and are tightly targeted to deter and punish only those who seek to avoid their employee entitlement obligations and exploit the FEG scheme. They will not affect the overwhelming majority of companies who are doing the right thing.
The reforms build on other actions the government has taken to protect employees entitlements—for example, amending the Fair Work Act to more effectively deter unlawful practices that involve deliberate and systemic exploitation of all workers, particularly vulnerable workers; introducing legislation to tackle nonpayment of the superannuation guarantee by targeting employers that fail to meet their superannuation obligations; releasing draft legislation to combat illegal phoenix activities involving the deliberate avoidance of company debts, including employee entitlements, by company operators and pre-insolvency advisers who facilitate this activity; and legislating that a company must pay its employee entitlements when they fall due for its directors to rely on the insolvent trading safe harbour.
Through this bill we'll clamp down on sharp practices that result in improper reliance on the Fair Entitlements Guarantee. We will penalise company directors and others who engage in or facilitate transactions that seek to prevent, avoid or reduce liability for employment entitlements in insolvency. We will strengthen protection of employee entitlements in insolvency and ensure employers are held to account for meeting their employee entitlements when they can and should, even if their business fails. We will safeguard the sustainability of this very important Fair Entitlements Guarantee scheme into the future. I commend the bill to the House.
The original question was that this bill be now read a second time, to which the honourable member for Gorton moved as an amendment that all words after 'That' be omitted with a view to substituting other words. The honourable member for Mayo has moved as an amendment to that amendment that all words after 'the House' be omitted with a view to substituting other words. The immediate question is that the amendment moved by the honourable member for Mayo be agreed to.
A division having been called and the bells having been rung—
As there are fewer than five members on the side for the ayes in this division, I declare the question negatived in accordance with standing order 127. The names of those members who are in the minority will be recorded in the Votes and Proceedings. The question now is that the amendment moved by the member for Gorton be agreed to.