The potential for conflict
The transfer of business provisions of the Fair Work Act could potentially clash with the priority payment provisions of the Corporations Act (CA) when a company goes into administration.
This may occur when….
This is most likely to occur where Voluntary Administrators are appointed to a company that is part of a group of companies. If one of the associated entities takes on staff from the company in administration then a transfer of business occurs under the Fair Work Act. This means that the associated entity is obliged to recognise service-related entitlements, under workplace law.
Who has priority?
A transfer of business raises the issue of priority payments under s 556 of the CA. It may mean employee entitlements that accrued prior to the Voluntary Administration have priority in a liquidation of the company. This could have severe consequences for the company and prejudice the position of existing creditors.
What could this mean?
For Voluntary Administrators and the company this could potentially:
- increase the pool of creditors
- mean personal liability for Voluntary Administrators for pre-appointment employee entitlements
- the business may not be able to continue
Tips for Employers
- IDENTIFY the true employer of staff
- RECOGNISE what employee liabilities are to be transferred
- seek to BRING FORWARD the payment of an administrators’ remuneration and future costs
- consult a workplace relations expert or HR lawyer for employment law advice
If you have any questions in relation to this article or if you would like any assistance in other employment law matters including employment contracts or employer obligations under the Fair Work Act, please call the leading employment lawyers Sydney, the Matthews Folbigg Workplace Solutions team on 9635-7966 to speak with one of our employment lawyers about your employment law issues.