FEG, NES and making it fair

Last month, the Fair Entitlements Guarantee Amendment Bill 2014 (Cth) (Bill) was introduced into Federal Parliament.

Currently being debated in the Senate, the Bill will amend the operation of the Fair Entitlements Guarantee Act 2012 (Cth) (commonly the FEG Scheme).

Current scheme

Under the current iteration of the FEG Scheme financial assistance is provided to eligible employees who lose their job due to the insolvency of their employer to cover certain unpaid employment entitlements.  This includes financial assistance for:

• up to 13 weeks of unpaid wages;
• unpaid annual and long service leave;
• up to five weeks’ payment in lieu of notice; and
• redundancy pay, which is currently capped at four weeks per full year of service.

Amendments

The major proposed amendment to the current scheme is to align the maximum redundancy pay entitlement under the FEG Scheme with the maximum set by the National Employment Standards (NES) contained in the Fair Work Act 2009 (Cth) (Act).

If the amendment is passed, the new maximum redundancy pay entitlement under the FEG Scheme will be 16 weeks’ pay.

A number of technical non substantive amendments are also proposed, including to:

• clarify that where a claimant is eligible for an advance under the FEG Scheme, the claimant’s initial entitlement under the Act will be calculated without reference to any amounts required to be withheld by law, such as pay as you go tax withholding;
• clarify that the death of a person does not prevent the person being eligible for an advance (ie to enable the next of kin or estate to pursue a claim); and
• remove the eligibility requirement that a person who was owed debts prior to the relevant insolvency event happening (under the FEG Scheme) must have taken reasonable steps to be paid those debts and instead allow the Department of Education, Employment and Workplace to reduce a person’s entitlement by the amount of any debts that he or she did not take reasonable steps to be paid.

Lavan Legal comment

The changes to the FEG Scheme are to commence on 1 January 2015 (assuming it is passed by the Senate prior to that time) or the day after Royal Assent is given.

The changes to the FEG Scheme will bring consistency and predictability to claims and adjudication of unpaid employee entitlements.