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company insolvencies stock-xchng2000 - The loss of entitlements following a company insolvency - download Word
It is opportune on the Feast of St Joseph the Worker during this year of Jubilee, to consider the rights of all those workers who have been made redundant by company insolvencies and who have not been paid their entitlements.  Theirs is a debt that must be paid.

When companies become insolvent workers can lose jobs, and even their entitlements.  The closure of Oakdale Colliery in May 1999, Braybrook Manufacturing in September 1999 and National Textiles in January 2000, all focused attention on this issue:  workers were denied the wages owing to them for work already done; unused long service leave and annual leave, superannuation, pay in lieu of notice, redundancy pay, and other entitlements.  The hardship of unemployment was compounded by the loss of these entitlements and by the bitter injustice of the situation.

People with any sense of justice are rightly outraged to think that companies can enter into arrangements with the specific purpose of avoiding liability for employee entitlements, and that company directors can simply ignore the rights of employees to what is theirs.  No one can countenance employees, some having provided many faithful years of service to a company, being treated simply as unsecured creditors.

The Government, the Opposition, and the Union Movement have all suggested ways to protect employees when companies go broke.  While their preferred schemes may differ, all agree that there should be sanctions against company directors who enter into agreements that may force an organization into insolvency or who enter into an agreement that avoids the payment of what is rightfully owing to the employees.

Employers have a moral obligation to pay employees their due.  This includes the payment of entitlements when a company becomes insolvent.  The issue is a basic matter of justice as Leo XIII explained in Rerum Novarum:

"Among the most important duties of employers the principal one is to give every worker what is due to them.  To defraud anyone of the wage due to them is a great crime … Finally the rich must religiously refrain from harming in any way the savings of the workers either by coercion, or by fraud, or by the arts of usury…" (Rerum Novarum, n 32)

Accrued entitlements are an important form of saving for many working people and employers ensure these are not lost.  They must exercise due diligence to ensure that all entitlements will be paid should the company cease trading or become insolvent.  Employers have a moral responsibility not to place accrued entitlements at risk as these funds have been earned by the same employees whose labour has generated the company's profits.

Governments too have a duty to respond to the situation by providing a legislative framework that will ensure that employees are, in practice, able to receive their entitlements.  Amendments to the Corporations Law can provide one part of a framework for protection but will not be sufficient in itself to ensure that employee entitlements are adequately protected.

The Australian Catholic Commission for Employment Relations and the Australian Catholic Social Justice Council:

  • Support amendments to the Corporations Law that will effectively deter company directors from not meeting their obligations to employees;
  • Support the payment of compensation by company directors who do not engage in due diligence with respect to meeting their obligations to employees;
  • Support the prosecution of company directors who enter into uncommercial transactions that may affect the solvency of the organization or that may affect the payment to creditors;
  • Support the inclusion of provisions that would protect employees from an organizations that modifies its company structure n order to avoid employee entitlements;
  • Suggest that proper disclosure about company structures to employees should be provided by directors;
  • Suggest that employee entitlements should be recovered from related companies, where a company structure has been modified; and
  • Seek reconsideration of the current priority allocated to employees as unsecured creditors.

Workers have an inalienable dignity and rights.  They should never be treated as just part of the production process.  Justice demands that their wages and entitlements must always be paid in full.

Bishop Kevin Manning
Bishop of Parramatta
Chairman, Australian Catholic Social Justice Council

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