Small and Family Business Minister Craig Laundy during Question Time in the House of Representatives at Parliament House in Canberra.
Small and Family Business Minister Craig Laundy during Question Time in the House of Representatives at Parliament House in Canberra. MICK TSIKAS

Govt aims to crack down on employers who don't pay

A FEDERAL Government crackdown on corporate misuse of the Fair Entitlements Guarantee (FEG) system for employees could penalise company directors and other persons found to have engaged in transactions directed at preventing, avoiding or reducing employer liability for employee entitlements.

It follows a rash of insolvencies, particularly in the construction and retail sectors, that have left employees to the mercy of the taxpayer-funded guarantee.

Small and Family Business Minister Craig Laundy said the reforms would strengthen the ability under the law to sanction directors and company officers with a track record of insolvencies where FEG is repeatedly relied upon.

And they would ensure recovery of workers' entitlements from other entities in a corporate group where they have benefited from the work done by the insolvent entity's employees.

Lawyer Lachlan Thorburn, of Bennett and Philp, said the reforms came as the upswing in claims under the FEG system had gotten out of control.

Mr Thorburn said the reforms aimed to capture groups of directors or individuals who have taken advantage of FEGs.

"The current law doesn't adequately deter avoidance," he said.

Mr Thorburn said certain company structures were in cases set up to hold employees while assets were moved over time in a deliberate attempt to avoid paying entitlements.

"There's been a significant increase in companies relying on FEGs to make payments."

He said the crackdown would allow the targeting of individuals associated with one or more insolvent events where there was clearly identified conduct to deliberately avoid paying entitlements.

"Those who act in a manner to avoid responsibilities face the concern if the law comes in," Mr Thorburn said.

"The penalties would be substantial. There are significant issues directors could face."

Brisbane employment law expert Michael Coates said employers needed to be aware that under proposed new laws, unpaid wages from a collapsed business could be recovered from related business entities that are not insolvent in circumstances where it is just and equitable (that is, "fair") to do so.

"However what exactly is 'fair' is yet to be determined," he said.

The proposed laws were in response to a blow-out of the Fair Entitlement Guarantee system; the most notable recent example being the failure of Clive Palmer's Queensland Nickel Refinery, which collapsed in 2016, leading to a $70 million taxpayer-funded payout to about 760 QNI workers.