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A Critical Analysis Of The Employee Entitlements Support Scheme And The Application Of This Scheme To One Tel Employees

Introduction

The protection of employee entitlements in the event of employer insolvency is a relatively new concept under Australian corporate and labour law. This essay critically analyses the effectiveness of the current scheme compares this with the alternatives and applies the scheme to the One Tel employees.

When an employer becomes insolvent, the likelihood of employer entitlements covered in redundancy packages being readily accessible is poor. There is also no guarantee that after payment to secured creditors, that there would be funds available for employee entitlements. This requires the formation of a scheme that protects these entitlements, thus assuring the entitlements of all employees.

The Employee Entitlements Support Scheme

In this context, the Australian federal government introduced the Employee Entitlements Support Scheme (EESS). The aim of the Scheme is to provide a national safety net for the basic protection of entitlements of employees whose employment has been terminated as a result of their employer’s insolvency. This is a guarantee of minimum payment that is solely funded by taxpayers’ money and is administered by the Department of Employment, Workplace Relations and Small Business.

The EESS operates a fund designed to be financed jointly by state and federal governments. State governments have not agreed to this system, and thus only half of all potential payments are funded. The scheme allows employees to claim unpaid entitlements including annual leave and redundancy pay with limits on each up to a maximum payout of 29 weeks of ordinary pay. The scheme also has a dollar value payout limit of $20,000 per employee.

By limiting the scheme in the types of entitlements it protects, the criticism has been that there is no justification for excluding payment for other entitlements that the employee is entitled to. These excluded entitlements include sick days and rostered days off, which are generally paid out in the...