FAIR ENTITLEMENTS GUARANTEE (EXTENDED OPERATION OF THE ACT IN RELATION TO OVATO GROUP OF COMPANIES IN ADMINISTRATION) DECLARATION 01/2022
EXPLANATORY STATEMENT
Issued by authority of the Minister for Employment and Workplace Relations
under section 49 of the Fair Entitlements Guarantee Act 2012
Purpose and operation of the Instrument
The purpose of this instrument is to declare that the Fair Entitlements Guarantee Act 2012 (the Act) applies to persons who were employed, but are no longer employed by, Ovato Limited (Administrators Appointed), Ovato Print Cairns Pty Ltd (Administrators Appointed) and Ovato Packaging Pty Ltd (Administrators Appointed) (together called ‘Ovato Group of Companies’) which are entities under administration under Part 5.3A of the Corporations Act 2001 (the Corporations Act). Subject to a declaration made under s 49 of the Act, the Act does not otherwise apply to persons whose former employer is in administration.
Legislative background
The Act commenced on 5 December 2012 and creates a scheme to provide financial assistance for workers who have not been fully paid for work done for insolvents or bankrupts.
Section 10 of the Act sets out the conditions for an individual’s eligibility for an advance under the Act. One of the conditions is that an ‘insolvency event’ has happened to the person’s employer. An ‘insolvency event’, as defined in section 5 of the Act, happens when a liquidator of the employer is appointed (provisionally or otherwise) but does not include the employer being under administration under Part 5.3A of the Corporations Act.
Section 49 of the Act allows the Minister to declare that the Act applies to persons who were employed, but are no longer employed, by a specified person that is in administration under Part 5.3A of the Corporations Act if satisfied that:
- The employer’s creditors are expected to resolve at a meeting convened under section 439A of the Corporations Act that the employer be wound up; and
- If the declaration is made, it will be practicable to administer the Act as it will apply because of the declaration in relation to the specified employer.
Effect of the declaration
The effect of the declaration is that the Act applies to former employees of Ovato Group of Companies as if the relevant administrator were a liquidator appointed when the administrator was appointed, and the reference to an ‘insolvency event’ in paragraph 14(2)(a) of the Act is a reference to this declaration being made.
This will allow any former employees of Ovato Group of Companies to make a claim under the Act and receive an advance if they are eligible.
CONSULTATION
To be satisfied of the factors listed in subsection 49(2) of the Act, consultation was undertaken with the insolvency practitioner responsible for the administration of Ovato Group of Companies.
The instrument is a legislative instrument subject to the Legislative Instruments Act 2003.
REGULATION IMPACT STATEMENT
The Office of Best Practice Regulation has advised that a Regulation Impact Statement is not required (reference 03279).
STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Fair Entitlements Guarantee (Extended operation of the Act in relation to Ovato Group of Companies in Administration) Declaration 01/2022
This Legislative Instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Overview of the Legislative Instrument
The purpose of this instrument is to declare that the Fair Entitlements Guarantee Act 2012 (the Act) applies to persons who were employed, but are no longer employed by, Ovato Limited (Administrators Appointed), Ovato Print Cairns Pty Ltd (Administrators Appointed) and Ovato Packaging Pty Ltd (Administrators Appointed) (together called ‘Ovato Group of Companies’) which are entities under administration under Part 5.3A of the Corporations Act 2001 (the Corporations Act). Subject to a declaration made under s 49 of the Act, the Act does not otherwise apply to persons whose former employer is in administration.
Legislative background
The Act commenced on 5 December 2012 and creates a scheme to provide financial assistance for workers who have not been fully paid for work done for insolvents or bankrupts.
Section 10 of the Act sets out the conditions for an individual’s eligibility for an advance under the Act. One of the conditions is that an ‘insolvency event’ has happened to the person’s employer. An ‘insolvency event’, as defined in section 5 of the Act, happens when a liquidator of the employer is appointed (provisionally or otherwise) but does not include the employer being under administration under Part 5.3A of the Corporations Act.
Section 49 of the Act allows the Minister to declare that the Act applies to persons who were employed, but are no longer employed, by a specified person that is in administration under Part 5.3A of the Corporations Act if satisfied that:
- The employer’s creditors are expected to resolve at a meeting convened under section 439A of the Corporations Act that the employer be wound up; and
- If the declaration is made, it will be practicable to administer the Act as it will apply because of the declaration in relation to the specified employer.
Effect of the declaration
The effect of the declaration is that the Act applies to former employees of Ovato Group of Companies as if the relevant administrator were a liquidator appointed when the administrator was appointed, and the reference to an ‘insolvency event’ in paragraph 14(2)(a) of the Act is a reference to this declaration being made.
This will allow any former employees of Ovato Group of Companies to make a claim under the Act and receive an advance if they are eligible.
Human rights implications
Article 9 of the International Covenant on Economic, Social and Cultural Rights (the ICESCR) provides that, ‘the State Parties to the present Covenant recognise the right of everyone to social security, including social insurance.’ The Committee on Economic, Social and Cultural Rights has stated that the right to social security encompasses the right to access benefits, whether in cash or in kind, without discrimination in order to secure protection from lack of work-related income caused by unemployment.[1]
The Fair Entitlements Guarantee Act 2012 establishes an assistance scheme that is intended to operate as a safety net for persons whose employment has ended due to the insolvency or bankruptcy of their employer. This safety net could be characterised as ‘social insurance’ because it ensures that employees’ unpaid entitlements are met when their employer becomes insolvent. It thus seeks to protect individuals from lack of work-related income due to unemployment.
This declaration expands the operation of the Act to an employer in administration under the Corporations Act 2001. The effect is advances of unpaid employment entitlements can be made to eligible former employees. This supports the right to access benefits in order to secure protection from lack of work-related income caused by unemployment.
Conclusion
The Legislative Instrument is compatible with human rights as it does not raise any human rights issues.
The Hon Tony Burke MP
Minister for Employment and Workplace Relations
Attachment A
NOTES ON SECTIONS
Section 1 – Name
Section 1 provides that the title of the instrument is the Fair Entitlements Guarantee (Extended operation of the Act in relation to Ovato Group of Companies in Administration) Declaration 01/2022.
Section 2 – Commencement
Section 2 provides that the instrument commences on the day after it is registered on the Federal Register of Legislation.
Section 3 – Declaration
Section 3 provides that, for the purposes of section 49 of the Fair Entitlements Guarantee Act 2012, that Act applies in relation to persons who were employed, but are no longer employed, by the entities listed in the instrument.
[1] Committee on Economic, Social and Cultural Rights, General Comment 19, The Right to Social Security, U.N. Doc. E/C.12/GC/19 (2008)