Dave Oliver op ed: Hastie case puts the spotlight on corporate behaviour

Dave Oliver sitting at desk
The scenes from this week’s collapse of the Hastie Group are distressing, but unions aren’t just here to help pick up the pieces. There is something we can do to stop this from happening again.

The engineering services company was placed into administration this week, owing about $500 million to a string of lenders.

Whenever a company collapses, there are plenty of victims: shareholders, suppliers, customers. But none more so than the company’s loyal workers.

The Hastie case again demonstrates how the actions of a few company directors can impact on the lives of thousands of people.

In the case of Hastie, there are 4000 Australian workers spread across 44 businesses. These businesses have varying profitability, but roughly three-quarters of them are marginal.

Already, more than 300 electricians and apprentices have been made redundant in Victoria.

It needs to be stressed that the administrators PPB Advisory are yet to make a full investigation of the causes of the collapse, from which they will make findings and report to the corporate regulator.

However, the early indications are that the company may have been trading while insolvent, and suffered from poor accounting practices and mismanagement.
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Union members meet to discuss the options after the collapse of the Hastie Group.

The collapse of the Hastie Group highlights two ongoing issues of concern for unions: guaranteeing workers’ outstanding annual leave, long-service leave, superannuation and redundancy entitlements are protected; and, punishing bad corporate behaviour.

Too often, when a company goes bust, workers are left out of pocket when they can least afford it.

Workers need to know that the wages and entitlements they earn are safe.

When a worker loses their job, through no fault of their own as in the case of the Hastie Group, they need those entitlements to make ends meet until - hopefully - they can find another position.

These entitlements have been earned over years of loyal service, and employers have a legal obligation to pay them.

But all too often businesses go broke leaving nothing in the bank. Frequently, companies treat workers entitlements as a kind of interest-free loan to help their cash flow - without telling the workers and often with no intention of ever paying it back.

Sadly, the well known cases at Ansett, One.Tel or ABC Learning are only the tip of the iceberg.

The General Employee Entitlements and Redundancy Scheme (GEERS) was introduced in 2001 to provide some protection for workers, but it was always a flawed scheme.

Its guarantee was capped at 16 weeks of redundancy pay, which is a lot less than what a worker can build up over a long period of service.

At the last election, the Labor Government promised a new Fair Entitlements Guarantee, which would mean almost 100 per cent of eligible workers would receive all the redundancy pay they were owed.

This means that not only is redundancy pay of four weeks per year of service guaranteed, but so are annual leave, long service leave and up to three months of unpaid wages.

Under the old scheme a worker on $65,000 a year who had been with the same company for two decades, would end up $55,000 out of pocket. The changes are now in effect, but they still need to be set in legislation, which is scheduled to happen during the winter sitting of Federal Parliament.

When this happens, the taxpayer-funded scheme should also be able to provide the earliest possible assistance to workers, even if there is a delay in formally putting a company into liquidation which can often take months.

But GEERS cost taxpayers $199 million in 2011-12, and is budgeted to rise to $214 million in 2015-16.

So the question remains, why should taxpayers be forced to pick up the tab when company directors have failed to fulfil their legal responsibilities?

Taxpayer support for worker entitlements shouldn’t be seen as a green light for employers to behave unethically. Nor should it be treated as a “get out of jail free” card for dodgy company directors.

Unions don’t just want a scheme to cover the workers after the company has gone broke. We want directors held accountable to try and prevent this from happening in the first place.

Guaranteeing worker entitlements must be backed by strong laws to enforce good corporate behaviour and punish bad behaviour with appropriate penalties.

We want to see strengthening of Corporations Law to ensure there is an obligation on employers to make proper provisions for workers entitlements, and to clamp down on companies or directors that seek to block the recovery of worker entitlements.

Directors’ responsibilities must be strengthened to require earlier action where companies are likely to become insolvent and to place the onus on directors in cases where they have allegedly avoided their obligations or traded while insolvent.

Alongside, the policing powers of the Australian Securities and Investments Commission should be enhanced for more effective pursuit of directors of insolvent firms, particularly those who fail to pay employee entitlements in full.

Stronger measures must be introduced to prevent “phoenixing”, where companies close down one day and open up the next under a different but similar name, as a way of avoiding paying entitlements or tax.

And finally, when a company is made insolvent employee entitlements should be paid before other creditors such as banks.

Until corporate laws are strengthened the sad fact is that the Hastie Group collapse will not be the last time workers face losing a lifetime of earnings through no fault of their own.


Originally appeared in the Herald Sun 31.05.12