New Laws to Protect Workers – Update

Last week the Federal Government passed two new bills through the House of Representatives which provide greater protections for employees.

The first is an amendment to the Fair Work Act (FWA) designed to protect the state government entitlements of public sector workers who are transferred to another employer as a result of outsourcing or privatising arrangements in state governments.

The second bill passed last week is more relevant for private sector employers and employees. The bill boosts the protection of workers’ entitlements by replacing the government’s General Employee Entitlements and Redundancy Scheme (GEERs) and expanding the protections provided by this scheme. The Minister’s Fair Entitlements Guarantee Bill provides for payment from a central fund to cover workers’ entitlements in cases where the employer is bankrupt or insolvent. The expanded program offers up to 4 weeks’ pay per year of service.  Unlike its predecessor, the new program is no longer capped. According to the Minister, this means that most workers can expect to receive redundancy payments owed to them in full, regardless of the financial circumstances of their employer.

While we applaud the security this new program provides for workers’ pay in circumstances where they are often oblivious or at least powerless to have any say in the financial situation of their employer, there are dangers posed in this new legislation. The program has the potential to be very costly to the government. In a more difficult economic environment, during which you might expect more claims to be made, fully funding a scheme of this type might place a great strain on the government’s finances. In addition, the fact that the scheme exists and that it secures the entitlements for workers, might reduce the burden which should properly be shouldered by the employer. Employers may take advantage of the scheme by arranging for part payout of employee entitlements and leaving the balance to be picked up by the government scheme.

While we welcome the fact that both new bills enshrine protections for workers, the government should be mindful of the ramifications these have for employers and the distortions they may create in the private sector and the operation of free market principles.

Guest Post by Andrew Gordon, Solicitor, BlandsLaw

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