Workers' Entitlements and Corporate Insolvency

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Advice on legislation or legal policy issues contained in this paper is provided for use in parliamentary debate and for related parliamentary purposes. This paper is not professional legal opinion.

Briefing Paper No. 17/1999 by Roza Lozusic

  • When the Oakdale Colliery closed, it brought into sharp focus the predicament of workers in situations of corporate insolvency. This event, and other significant closures reported in the media, has sparked widespread debate about the protection of workers' entitlements in the event of insolvency of a corporation. The debate culminated in protests across the state and nationally, and led to calls for reform from various disparate groups. As a result, the Federal Minister for Employment, Workplace Relations and Small Business, has now issued an options paper which invites comment on its proposed models for reform. The two models referred to in the federal options paper are: an insurance scheme, and a wage fund. This briefing paper is designed to explore the issue of corporate insolvency and its effect on workers' entitlements. It sets out the legal position (pages 4-10) and then discusses some of the arguments for reform. It highlights examples from overseas (pages 19-20) and finally outlines the current reform proposals. (pages 20-24)
  • Part 1 of the paper sets out the background to the issue of workers' entitlements and corporate insolvency. It gives a summary of the events surrounding the more prominent closures as documented by the media: Oakdale Colliery, Mountain Maid and Cobar Mine. (pages 1 - 4)
  • Part 2 sets out the current legal position with respect to corporate insolvency as it arises under the Corporations Law. In particular, it focuses on the issue of priority of creditors in the event of insolvency. (pages 4-10)
  • Part 3 is a discussion of the different reform models and includes commentary about the pros and cons of the different options. (pages 10-19)
  • Part 4 outlines, in brief, the state of play in other jurisdictions such as the United Kingdom and Germany. (pages 19-20)
  • Finally, Part 5 looks at the previous reform attempts in the federal sphere and also sets out the preferred models of reform as well as the Federal Government response to the issue. (pages 20-24)