The Fair Entitlements Guarantee Act 2012 (‘FEG’) replaced the General Employee Entitlements and Redundancy Scheme (‘GEERS’) when it commenced on 5 December 2012. FEG provides financial assistance to cover certain unpaid employment entitlements to eligible employee who have lost their job as a result of the liquidation or bankruptcy of their employer.

FEG is a legislative safety net scheme of last resort and can provide assistance for:

  • wages – up to 13 weeks of unpaid wages
  • annual leave
  • long service leave
  • payment in lieu of notice – maximum of 5 weeks
  • redundancy pay—up to 4 weeks per full year of service

To be eligible for FEG and employee must have been terminated as a direct result of the insolvency of the employer (liquidation or bankruptcy). If an employee is terminated for another reason, regardless of whether they are owed money, they are not eligible to make a claim under FEG.

FEG have the discretion as to whether or not you are entitled your claim. Employees are required to show that they are in fact an employee, rather than a contractor. This usually involves proving evidence of employment such as an employment contract, pay slips etc.

FEG will NOT pay individuals who are characterised as an ‘excluded employee’ (the officers of the company, and their relatives) under the Corporations Act.

The employees’ entitlements and priorities are dependent on whether the Bankruptcy Act or the Corporations Act applies. Determining which Act applies depends on the legal form of the employer – an individual, company, partnership etc. The Corporations Act will apply if the employer is a company. On the other hand, the Bankruptcy Act will apply if the employer is a natural person or a business.

The Corporations Act:

Generally, employees are still owed entitlements when a liquidator is appointed. The Corporations Act deems all employee entitlements payable in the event a liquidator is appointed. This gives the employees the right to claim for any outstanding leave. Employees are entitled to be paid their full entitlements prior to other unsecured creditors.

The priorities set out in the Corporation Act are as follows:

  1. Wages, superannuation contributions, and any superannuation guarantee charge
  2. Leave entitlements
  3. Retrenchment payments

The Bankruptcy Act:

The Bankruptcy Act deals with employee claims differently to the Corporations Act, although they still provide employees with priority over any unsecured creditors.

The Bankruptcy Act does not have an ‘excluded employee’ provision, therefore employees that are related to the bankrupt may make a claim under FEG.

The priorities set out in the Bankruptcy Act are as follows:

  1. Wages, some superannuation or other amounts due with some exceptions – to a limit of $4,300
  2. Injury compensation with no limitation
  3. Any type of leave entitlements with not limitation.

If you require any further information in regards to the above, contact The Quinn Group on (02) 9223 9166 or submit an online enquiry.