Readers of our newsletter may be familiar with the Federal Government’s General Employee Entitlements Redundancy Scheme (GEERS). GEERS is a scheme established for the payment of outstanding entitlements to employees of insolvent companies or individuals.
The scheme is designed to cover the payment of outstanding wages, leave and redundancy payments on the insolvency of the employer. The provisions specifically exclude payment of outstanding superannuation. It also limits the entitlements of directors or relatives of directors to statutory limits that match (at this stage) the priority amounts for those individuals as ‘excluded employees’ under section 556 of the Corporations Act.
Director’s entitlements are set at a maximum amount of $1,500 for leave entitlements and $2,000 for wages. The GEERS provisions set these amounts separately from the Corporations Act, so it is feasible that these amounts may differ at some stage in the future.
GEERS have the final say in determining the amount of any employee’s claim and whether they are eligible for any payment at all. Employees have to show that they are employees of the entity and not just contractors. GEERS requires employees making claims under the scheme to show sufficient evidence of their employment – an employment contract or agreement – and provide evidence showing their outstanding entitlements – such as pay-slips detailing start dates or normal wages.
GEERS have a strict review process that requires the insolvency practitioner to verify the employee’s entitlement against the entity’s records and relevant contracts or awards. GEERS then verifies the claims and this can result in sometimes significant adjustments to the employees’ claims. Once agreement has been reached between the insolvency practitioner and GEERS, the funds will be released to the practitioner for distribution to those employees.
Recently GEERS disallowed the claims of the employees of a company in liquidation where there was insufficient records to prove the amount of any claims. The company records simply were not detailed enough to show any outstanding entitlements were owed in any particular amount.
GEERS have recently made another determination on the eligibility of employee’s claims that warrants mentioning.
A company was placed into administration with us in late 2009. Six weeks prior to the administration, the company took over the employees of an associated company. The companies were proposing to merge however this merger never occurred and our company simply employed the staff for the six weeks prior to the administration. There were no new employment agreements or documents relating to the transfer of the employees.
The employees (including past employees of the associated company) lodged claims with GEERS for their outstanding entitlements. The entitlements of the employees that had always been with our company were paid by GEERS.
Some employees of the associated company claimed entitlements for their entire period of service, i.e. the period employed with the associated company as well as the period employed with our company. Our belief was that the employees could claim entitlements for the period they were employed by our company (about 6 weeks) but nothing for the prior period with other employer.
GEERS disagreed with us and those employees, and deemed that the entitlements of the associated company’s employees could not be claimed at all – not even paying the minimal entitlements for the 6 week period those employees were employed by our company. GEERS said that there was insufficient evidence to show that the merger of the companies occurred and that the company in liquidation had become responsible for those entitlements.
The moral of the story is that employees in particular should not expect GEERS to simply pay out money because a claim is lodged. If the records do not prove outstanding entitlements, and the employees cannot prove eligibility, the claims will simply not be paid.