Reforms to address corporate misuse of FEG
Under the Fair Entitlements Guarantee (FEG) scheme, the Australian Government provides financial assistance for certain unpaid employee entitlements to eligible employees who have lost their jobs due to the insolvency of their employers. It is a scheme of last resort to support redundant workers.
Costs of the FEG scheme have been increasing. This is due, in part, to the adoption of certain practices by select employers and parties associated with them, that shift costs to the scheme and through it, to taxpayers.
To address these issues and ensure the FEG scheme remains viable, the government introduced amendments to the Corporations Act 2001.
The Corporations Amendment (Strengthening Protections for Employee Entitlements) Act 2019 began operation on 6 April 2019. The Act introduced changes to:
- deter and penalise company directors and other persons who engage in, or facilitate, transactions that are aimed at preventing, avoiding or reducing employer liability for employee entitlements in insolvency
- recover employees’ entitlements from other entities in a corporate group, or closely connected economic relationship, where it would be just and equitable and where those other entities have unfairly benefited from the work done by the employees
- strengthen sanctions for directors and company officers with a track record of corporate contraventions and insolvencies where FEG is repeatedly and inappropriately relied on.