Why would my employer shut up shop?
Sometimes employers close their business if it’s not sustainable to continue to run the business. If the business is not making any money and is unable to pay its debts, then the business is what’s known as insolvent. If a business becomes insolvent it may go bankrupt or into liquidation.
The difference between bankruptcy and liquidation
Bankruptcy is a legal process for a person who is unable to pay outstanding debts. It relates to the individual and their debts.
In comparison ‘liquidation’ most commonly refers to the legal process for closing a company that cannot pay company debts.
How does this affect me as an employee?
If a business cannot pay its debts, then there’s a risk that it cannot pay its employees.
In some situations, employees may lose their jobs and the employer may not be able to pay the employees their wages or accrued entitlements such as annual leave, long service leave or superannuation.
If your employment is being terminated, generally you should receive notice of this and it’s likely the termination is effective immediately.
This can be a very stressful time for an employee as the termination could occur very suddenly and leave employees without access to their hard-earned entitlements.
But that’s my money, what can I do to get it?
When an employer has declared bankruptcy or gone into liquidation then the employee may be able to recover their owed entitlements through the Fair Entitlements Guarantee.
The Fair Entitlements Guarantee is a legislative scheme run by the Australian Government, Department of Jobs and Small business. The specific purpose of the scheme is to help employees by providing financial assistance to those who lost their jobs because their employer went bankrupt or into liquidation. This means that an employee can make a claim to the government to be paid their employee entitlements because their employer cannot pay them.
Under the Fair Entitlements Guarantee employees may be able to claim the following:
Up to 13 weeks of unpaid wages;
Long service leave;
Up to 5 weeks of payment in lieu of notice;
Redundancy pay (limited to 4 weeks per full year of service).
You will not be able to claim unpaid superannuation guarantee contributions through the Fair Entitlements Guarantee.
To be eligible to make a claim an employee must meet certain criteria. Some of the criteria includes:
The employer is owed entitlements by the employer;
The employee is an Australian citizen or at the time termination the employee is allowed to work in Australia because they have a permanent visa or special category visa holder;
The employee lodges a claim within 12 months of the date they lost their job or the date their previous employer went bankrupt or into liquidation;
The employee lost their job because of the employer’s liquidation or bankruptcy, or they lost their job less than six months before the liquidation or bankruptcy.
Some people are not eligible to make a claim such as a contractor, a director of the company or a relative of the director if the director held that position within 12 months before the company went into liquidation.
Eligible employees can lodge a claim with the Fair Entitlements Guarantee by submitting a claim online (https://www.jobs.gov.au/fair-entitlements-guarantee-feg) or posting in a claim form.
If your employer was a company, you might be able to make a claim to the liquidator for your employee entitlements. A liquidator may ask employees to submit claim if the liquidator thinks a payment might be able to be made from money or assets the company has left. This is called a proof of debt form and if accepted the employee is treated as a creditor. The company may have other creditors, so the employee may not be able to recover all of what they are entitled to if there is not enough money left.
The team at Coutts understands that this can be a stressful and confusing time for employees. Coutts can assist in giving you further guidance on the processes involved and assistance on submitting a claim to recover your employee entitlements.
For further information please don’t hesitate to contact:
02 4607 2110
02 4607 2124
This blog is merely general and non specific information on the subject matter and is not and should not be considered or relied on as legal advice. Coutts is not responsible for any cost, expense, loss or liability whatsoever in relation to this blog, including all or any reliance on this blog or use or application of this blog by you.