Commander enters VA – employee entitlements ?
Last Friday, the board of Commander Communications called in administrators. The Telstra spin-off, burdened by recent poor performance, could not hold off the banks any longer.
No doubt the one question on the minds of Commander’s 1,200 employees is: what about our entitlements ?
There’s already a thread on Whirlpool discussing this.
The creditor pecking order
Commander is reported to owe $355 million to the banks, its secured creditors. If the company is liquidated, they get first dibs on the takings. Generally, employee entitlements rank ahead of all other unsecured creditors but behind secured creditors.
A slight gloss on this is where a receiver has been appointed – in this instance employee entitlements rank behind assets secured by a fixed charges but take priority over floating charges. This may be of little help to employees as bank documents are often structured to overcome this pecking order and ‘fix’ what might otherwise be a floating charge.
It’s a stark position for Commander’s employees to be in. They are essentially in a bit of a limbo. While the banks’ receivers are saying it’s ‘business as usual’ while they try to find buyers, employees know that, given the company has been faltering for some time, their entitlements can’t be guaranteed. And until the company is actually liquidated, they don’t have access to GEERS.
Where GEERS fits in
The General Employee Entitlements and Redundancy Scheme was introduced in 2001 to protect employees from corporate collapses.
Basically, under GEERS, an employee who loses or resigns their employment as a result of the insolvency of their employer and who is owed entitlements can apply to the government for payment of outstanding wages and leave and redundancy entitlements before money actually comes in from the liquidation.
There are certain limits on how much can be paid out under GEERS. There are exceptions which may allow employees to recover entitlements even if their employment is not terminated as a result of liquidation, but the general rule is that GEERS is only available where a company is in liquidation. Entitlements are paid to terminated employees by the government which then seeks to recover it from the liquidator.
The best case scenario for Commander’s employees is that the business (or parts of it) is sold to a buyer. Generally, a buyer who takes on employees also takes on their entitlements. But chances are employees won’t fancy sitting it out to see if the company can be sold or goes into liquidation. Those lucky enough to secure other jobs will only be half lucky – they don’t yet have access to GEERS and they never will if they leave before the company is liquidated.
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What about ex-staff who were made redundant a few months back? Can they be asked to pay anything back to the company??