Michael.1
Insolvency and related law and policy, and more

Michael Murray is an Australian author and commentator on corporate and personal insolvency law and related issues, in Australia and internationally. He has a strong law and policy background, is independent of any connections, and his views are his own. He gives no legal advice. 

Employees’ loss of FEG redundancy payments through their misguided “acts of decency and loyalty” to assist

The AAT has described its decision confirming a lack of government assistance under fair entitlements guarantee (FEG) for “two dedicated, loyal, hardworking, long-term employees of a company which was placed into liquidation” as “both unfair and unjust” but one which had to be made because that was the legal outcome.

The company’s business was sold on 4 October 2019 but the liquidators asked two employees to stay on to do various tasks and they agreed – the IT expert for one day, and the finance manager for almost two weeks, helping to finalise payrolls and entitlements.  While the liquidators notified them both verbally of the intention to terminate their employment on 4 October, their written termination notices were given days after that date by which time the company had ceased to have more than 15 employees and had “morphed” into a “small business”.  The provisions in the fair work legislation of the small business FEG exclusion provisions for employees came into play.[1]

The employees’ “acts of decency and loyalty” led to them losing their FEG entitlements to redundancy payments in the sums of approximately $32,000 and $37,000.

There was no discretion in the Tribunal to vary or back-date the dates of termination.

Critical of the liquidators

The Tribunal was critical of the role of the liquidators who “had an option to take over their employment itself, but it chose instead to keep them on the Company’s books”. They “knew, or at least ought to have known”, the legal consequences.  Neither employee would have stayed on had the liquidators properly advised them of the financial consequences.

The Tribunal had in an earlier matter[2] made it clear that it expected insolvency practitioners to be fully aware of these provisions.

Critical of the lack of law reform

As well, the Tribunal was critical of the failure of governments to address this “unintended inequity” in the law, despite an earlier request to do so by the AAT.[3]

See Tjoputra and Secretary, Attorney-General’s Department [2021] AATA 1596.

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[1] See s 5 Fair Entitlements Guarantee Act 2012 and ss 117(1), 119 121(1)(b) and 23(1) of the Fair Work Act 2009.

[2] Bullivant and Secretary, Attorney-General’s Department [2020] AATA 2047 at [53].

[3] Bower and Secretary, Attorney-General’s Department, [2020] AATA 4353 at [20].

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