22 June 2012

High Court decision may put workers' redundancy pay at risk, says Clayton Utz

Sydney, 22 June 2012: Employees of collapsed companies may be adversely affected by the High Court's ruling that the Commonwealth's funding of the school chaplains program is constitutionally invalid.

Clayton Utz insolvency partner David Cowling says that the Government's General Employee Entitlements and Redundancy Scheme (GEERS)* may suffer from the same problems as the now-failed school chaplaincy funding program.

"GEERS was established by the Howard Government. Effectively, it operates as a lender of last resort to liquidators, to allow them to make redundancy payments to employees of collapsed companies," he said.

Like the school chaplaincy scheme, there is no legislation for GEERS. It is simply an administration arrangement operated by the Department of Education, Employment and Workplace Relations.

As a result, Mr Cowling said the High Court ruling against the funding of chaplains could potentially affect GEERS as well and has called on the Federal Government to move quickly to clarify the situation.

"The status and operation of GEERS is particularly crucial at the moment, given the recent spate of corporate collapses, especially in the construction sector. The Government needs to do two things. The first is to make a public statement about the effect of the chaplaincy decision on GEERS. If GEERS is part of the collateral damage, the Government also needs to outline how it will fill the gap until legislation can be put through Parliament."

Although the High Court case has implications for many Federal Government programs, Mr Cowling said that GEERS deserved priority treatment.

"We're talking here about workers who have suffered the double blow of losing their jobs and coming under immediate financial distress. In that situation, they do not need the additional stress of uncertainty about their redundancy payments."


*The General Employee Entitlements and Redundancy Scheme (GEERS) is a basic payment scheme established to assist employees who have lost their employment due to the liquidation or bankruptcy of their employer and who are owed certain employee entitlements.

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.
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