The plight of employees of the failed OneTel company illustrates the need for action by the Federal Governments to improve the state of corporate governance in Australia. It is unacceptable that quite low-paid workers should have to queue up with a large-scale trade creditors in order to get some of their entitlements in the winding up of the company.
It is made more unacceptable by the fact that this is not an isolated incident. Last year when National Textiles went belly up with 300 employees owed about $11 million, politicians from all sides acknowledged the need to reform corporations law and to set up under government schemes to ensure there was no repeat. In that that case, the Federal and NSW Governments did a one-off bale out. As it happened, the Prime Minister’s brother, Stan Howard, was a key figure in at the management of National Textiles. On a charitable interpretation, the Federal Government showed concern for national textiles employees by organising the bale-out. Given the conduct of the Federal Government since then, it seems that its concern for employees was short lived. There have been several other company collapses with employees owed substantial sums of money and the government has done little.
True, it has set up a scheme whereby employees of failed companies can it get some of their entitlements back from a federal government fund. However, the scheme that falls well short of giving employees all of their holiday, long-service and redundancy payments. In any event, it should not be for taxpayers to pick up the shortfall. Rather the corporations which hire people should be required to ensure that there are enough of funds at hand to satisfy their obligations to their employees.
In the case of OneTel, about 1400 employees are owed a total of $25 million. As of last week, they were not entitled to any redundancy payments from the Federal scheme because technically they are all contractors and have no legal award entitlement to redundancy payments. A move to bring them under an award is still being heard. But once again, why should at the taxpayer after pick up the tab?
Last month, employees of Brad Mills quite rightly accused of the government of double standards last month when that they were facing a loss of accrued entitlements when their company faced liquidation. They questioned why there was one it set of rules for the Prime Minister’s brother’s company and another for everyone else.
Something needs to be done to quarantine money for employees’ entitlements from the rigours of liquidation procedures. Populist talk about taking away executive bonuses is meaningless because many failed companies have not paid such bonuses. Given so many corporate failures, the Government should think about requiring them to set up trust funds to preserve employee entitlements, in the same way that state governments have set up rental bonds boards to which landlords must pay bond money, at least for holiday and long-service pay which – like rental bonds — is really money held on trust to which employees are immediately entitled. Redundancy pay, however, might be in a slightly different category in that it would be unreasonable for a robustly trading company to have to put into trust large sums of money which might never become owed it to employees.
Whatever the plan, it is not good enough to have only a half-hearted tax-payer funded scheme.