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This is a Bill, not an Act. For current law, see the Acts databases.
New South Wales
Employees (Priority of Debts and Wage
Protection Insurance) Bill 2001
Explanatory note
This explanatory note relates to this Bill as introduced into Parliament.
Overview of Bill
The object of this Bill is to give priority, where companies are insolvent, to the
payment of employee entitlements over other company debts, to provide for the
establishment and administration of an insurance scheme to guarantee the payment
of wages and certain other liabilities owed to employees in the event of employer
insolvency.
b98-603-p03.842
Employees (Priority of Debts and Wage Protection Insurance) Bill 2001
Explanatory note
Outline of provisions
Part 1 Preliminary
Proposed Part 1 (clauses 1 and 2) sets out the name (also called the short title) of
the proposed Act and provides for the commencement of the proposed Act 3
months after the date of assent, unless commenced sooner by proclamation.
Part 2 Priority of employee entitlements
Proposed Part 2 (clauses 3-5) contains provisions that alter the priority of
payment of debts on the winding up of an insolvent company. Clause 5 provides
that employee entitlements (as specified in that clause) will take priority over other
debts.
Part 3 Wage protection insurance
Proposed Part 3 (clauses 6-24) establishes a wage protection insurance scheme to
guarantee the payment of wages and certain other liabilities owed to employees in
the event of employer insolvency. All employers (other than employers whose
employees are not employed for the purposes of a trade or business carried on by
the employer and employers who employ less than 20 employees) will be required
to take out, and maintain, policies of wage protection insurance with an approved
insurer for the employer's workforce.
Part 4 Miscellaneous
Proposed Part 4 (clauses 25-27) contains provisions of a miscellaneous nature.
The provisions provide for an offence of giving false or misleading information in
insurance claims, deal with how proceedings for offences against the proposed Act
or the regulations are to be dealt with and empower the Governor to make
regulations in connection with the proposed Act.
Explanatory note page 2
Introduced by the Revd the Hon F J Nile, MLC First print
New South Wales
Employees (Priority of Debts and Wage
Protection Insurance) Bill 2001
Contents
Page
Part 1 Preliminary
1 Name of Act 2
2 Commencement 2
Part 2 Priority of employee entitlements
Division 1 Interpretation
3 Definitions 3
4 Application of Part 4
Division 2 Ranking of debts
5 Priority of employee entitlements 4
b98-603-p03.842
Employees (Priority of Debts and Wage Protection Insurance) Bill 2001
Contents
Page
Part 3 Wage protection insurance
Division 1 Interpretation
6 Interpretation 6
7 Insolvency 7
Division 2 Policy of wage protection insurance
8 Nature of policy of wage protection insurance 8
9 Extent of employee's protection 8
Division 3 Obligation to hold insurance
10 Obligation to hold wage protection insurance 8
11 Exempt employers 9
Division 4 Information about insurance
12 Employer to give information to employees about wage
protection insurance 9
13 Requests for information 9
14 Insurer to notify policy of wage protection insurance 9
15 Minister to give information on request to employee 10
Division 5 Claims
16 Entitlement to make claim 10
17 Making of claim 11
18 Insurer's response to claim 11
19 Conciliation of disputes 11
20 Proceedings in court 12
21 Insurer's rights of subrogation 12
Division 6 Administration
22 Powers of Minister 12
23 Supervisory powers--Minister may obtain information and
material 13
24 Delegation 13
Contents page 2
Employees (Priority of Debts and Wage Protection Insurance) Bill 2001
Contents
Page
Part 4 Miscellaneous
25 False or misleading information in claims 14
26 Proceedings for offences 14
27 Regulations 14
Contents page 3
New South Wales
Employees (Priority of Debts and Wage
Protection Insurance) Bill 2001
No , 2001
A Bill for
An Act to give priority, where companies are insolvent, to the payment of employee
entitlements over other company debts, to provide for the establishment and
administration of an insurance scheme to guarantee the payment of wages and
certain other liabilities owed to employees in the event of employer insolvency, and
for other related purposes.
Clause 1 Employees (Priority of Debts and Wage Protection Insurance) Bill 2001
Part 1 Preliminary
The Legislature of New South Wales enacts: 1
Part 1 Preliminary 2
1 Name of Act 3
This Act is the Employees (Priority of Debts and Wage Protection 4
Insurance) Act 2001. 5
2 Commencement 6
This Act commences 3 months after the date of assent, unless 7
commenced sooner by proclamation. 8
Page 2
Employees (Priority of Debts and Wage Protection Insurance) Bill 2001 Clause 3
Priority of employee entitlements Part 2
Interpretation Division 1
Part 2 Priority of employee entitlements 1
Division 1 Interpretation 2
3 Definitions 3
In this Part: 4
company means a company incorporated in New South Wales, or 5
taken to be incorporated in New South Wales, that is being wound up. 6
employee, in relation to a company, means a person: 7
(a) who has been or is an employee of the company, whether 8
remunerated by salary, wages, commission or otherwise, and 9
(b) whose employment by the company commenced before the 10
relevant date. 11
excluded employee, in relation to a company, means: 12
(a) an employee of the company who has been: 13
(i) at any time during the period of 12 months ending on 14
the relevant date, or 15
(ii) at any time since the relevant date, 16
or who is, a director of the company, or 17
(b) an employee of the company who has been: 18
(i) at any time during the period of 12 months ending on 19
the relevant date, or 20
(ii) at any time since the relevant date, 21
or who is, the spouse of an employee of the kind referred to in 22
paragraph (a), or 23
(c) an employee of the company who is a relative (other than a 24
spouse) of an employee of the kind referred to in paragraph (a). 25
non-priority day, in relation to an excluded employee of a company, 26
means a day on which the employee was: 27
(a) if paragraph (a) of the definition of excluded employee 28
applies--a director of the company, or 29
(b) if paragraph (b) of that definition applies--a spouse of an 30
employee of the kind referred to in paragraph (a) of that 31
definition, or 32
Page 3
Clause 3 Employees (Priority of Debts and Wage Protection Insurance) Bill 2001
Part 2 Priority of employee entitlements
Division 1 Interpretation
(c) if paragraph (c) of that definition applies--a relative (other than 1
a spouse) of an employee of the kind referred to in paragraph 2
(a) of that definition, 3
even if the day was more than 12 months before the relevant date. 4
relevant date has the meaning given to it by section 9 of the 5
Corporations Law. 6
retrenchment payment, in relation to an employee of a company, 7
means an amount payable by the company to the employee, by virtue 8
of an industrial instrument, in respect of the termination of the 9
employee's employment by the company, whether the amount 10
becomes payable before, on or after the relevant date. 11
spouse includes a de facto spouse. 12
superannuation contribution, in relation to a company, means a 13
contribution by the company to a fund for the purposes of making 14
provision for, or obtaining, superannuation benefits for an employee 15
of the company, or for dependants of such an employee. 16
4 Application of Part 17
This Part has effect despite any provision of the Corporations (New 18
South Wales) Act 1990 or the Corporations Law. 19
Division 2 Ranking of debts 20
5 Priority of employee entitlements 21
(1) Despite any other law, in the winding up of a company the following 22
debts and claims must be paid in priority to all other debts, whether 23
preferential, secured or unsecured: 24
(a) first, subject to subsection (2)--wages and superannuation 25
contributions payable by the company in respect of services 26
rendered to the company by employees before the relevant date, 27
(b) next, amounts due in respect of injury compensation, being 28
compensation the liability for which arose before the relevant 29
date, 30
(c) subject to subsection (3)--next, all amounts due: 31
(i) on or before the relevant date, and 32
(ii) because of an industrial instrument, and 33
(iii) to, or in respect of, employees of the company, and 34
Page 4
Employees (Priority of Debts and Wage Protection Insurance) Bill 2001 Clause 5
Priority of employee entitlements Part 2
Ranking of debts Division 2
(iv) in respect of leave of absence, 1
(d) subject to subsection (4)--next, retrenchment payments payable 2
to employees of the company. 3
(2) The amount or total paid under paragraph (1) (a) to, or in respect of, 4
an excluded employee of the company must be such that so much (if 5
any) of it as is attributable to non-priority days does not exceed $2,000. 6
(3) The amount or total paid under paragraph (1) (c) to, or in respect of, 7
an excluded employee of the company must be such that so much (if 8
any) of it as is attributable to non-priority days does not exceed $1,500. 9
(4) A payment under paragraph (1) (d) to an excluded employee of the 10
company must not include an amount attributable to non-priority days. 11
Page 5
Clause 6 Employees (Priority of Debts and Wage Protection Insurance) Bill 2001
Part 3 Wage protection insurance
Division 1 Interpretation
Part 3 Wage protection insurance 1
Division 1 Interpretation 2
6 Interpretation 3
In this Part: 4
approved insurer means an insurer approved by the Minister for the 5
purposes of this Act. 6
contract of employment includes: 7
(a) a contract of apprenticeship, and 8
(b) a contract under which a person works for commission, and 9
(c) a contract that is wholly or principally for the labour of a 10
person, and 11
(d) a contract under which a person performs or presents, or 12
participates in the performance or presentation of, any music, 13
play, dance, entertainment, sport, display or promotional 14
activity or any similar activity involving the exercise of 15
intellectual, artistic, musical, physical or other personal skills, 16
and 17
(e) a contract under which a person provides services in connection 18
with an activity referred to in paragraph (d), and 19
(f) a contract under which a person performs services in, or in 20
connection with, the making of any film, tape or disc or of any 21
television or radio broadcast. 22
employee means a person who provides services under a contract of 23
employment and includes a former employee. 24
employer means a person who is liable to pay for the services of 25
another under a contract of employment and includes a former 26
employer. 27
exempt employer has the meaning given by section 11. 28
insolvent has the meaning given by section 7. 29
Page 6
Employees (Priority of Debts and Wage Protection Insurance) Bill 2001 Clause 5
Priority of employee entitlements Part 2
Ranking of debts Division 2
insurer means: 1
(a) a person authorised by the Insurance Act 1973 of the 2
Commonwealth or a law of a State to carry on insurance 3
business, or 4
(b) a body corporate that is, under the law of a State, responsible 5
for administering a scheme of workers compensation. 6
wages includes any payment made, or to be made, by an employer to 7
or for the benefit of an employee under a contract of employment. 8
workforce means the total body of an employer's employees (and, if 9
an employer has only one employee, is a reference to that employee). 10
7 Insolvency 11
(1) A person is insolvent if the person is unable to pay debts as they fall 12
due. 13
(2) Without limiting subsection (1), an individual is to be regarded as 14
insolvent if the individual: 15
(a) has become bankrupt, or 16
(b) has applied to take the benefit of a law for the benefit of 17
bankrupt or insolvent debtors, or 18
(c) has compounded with his or her creditors, or 19
(d) has assigned his or her remuneration for the benefit of 20
creditors. 21
(3) Without limiting subsection (1), a company is to be regarded as 22
insolvent if: 23
(a) the company has entered into a compromise or arrangement 24
with its creditors, or a class of its creditors, and the 25
administration of the compromise or arrangement has not yet 26
ended, or 27
(b) a receiver, or a receiver and manager, of property of the 28
company has been appointed and is acting, or 29
(c) the company is under administration within the meaning of the 30
Corporations Law, or 31
(d) the company has executed a deed of company arrangement 32
under the Corporations Law and the arrangement has not yet 33
terminated, or 34
(e) the company is under official management, or 35
Page 7
Clause 7 Employees (Priority of Debts and Wage Protection Insurance) Bill 2001
Part 3 Wage protection insurance
Division 1 Interpretation
(f) the company is being wound up, or 1
(g) a provisional liquidator has been appointed for the company 2
and has not since been removed. 3
Division 2 Policy of wage protection insurance 4
8 Nature of policy of wage protection insurance 5
A policy of wage protection insurance is a policy of insurance under 6
which an approved insurer insures an employer's workforce against 7
loss resulting from the employer's insolvency. 8
9 Extent of employee's protection 9
An employee is entitled to be indemnified under a policy of wage 10
protection insurance for liabilities of the following kinds owed by an 11
insolvent employer to the employee: 12
(a) a liability for unpaid wages, 13
(b) a liability resulting from termination of employment without 14
notice or with insufficient notice, 15
(c) a liability for annual leave or long service leave, 16
(d) a liability for repayment of a premium or other amount paid by 17
the employee to the employer for training in a particular trade 18
or profession. 19
Division 3 Obligation to hold insurance 20
10 Obligation to hold wage protection insurance 21
An employer (other than an exempt employer) must take out, and 22
maintain, a policy of wage protection insurance with an approved 23
insurer for the employer's workforce. 24
Maximum penalty: 150 penalty units. 25
Page 8
Employees (Priority of Debts and Wage Protection Insurance) Bill 2001 Clause 11
Wage protection insurance Part 3
Obligation to hold insurance Division 3
11 Exempt employers 1
An employer is exempt from the requirement to hold a policy of wage 2
protection insurance if: 3
(a) the employer's employees are not employed for the purposes of 4
a trade or business carried on by the employer, and 5
(b) the employer employs less than 20 employees. 6
Division 4 Information about insurance 7
12 Employer to give information to employees about wage protection 8
insurance 9
An employer must provide each employee with an information booklet 10
in a form approved by the Minister: 11
(a) explaining the employee's rights under the policy of wage 12
protection insurance maintained by the employer, and 13
(b) stating the name of the employer's insurer under the policy of 14
wage protection insurance. 15
Maximum penalty: 50 penalty units. 16
13 Requests for information 17
An employer must, at the request of the employee, notify the employee 18
of the name and address of the insurer under the employer's policy of 19
wage protection insurance. 20
Maximum penalty: 50 penalty units. 21
14 Insurer to notify policy of wage protection insurance 22
An insurer must, on issuing a policy of wage protection insurance for 23
an employer's workforce, give the Minister written notice: 24
(a) stating the name and address of the employer, and 25
(b) containing the information required by the regulations. 26
Maximum penalty: 50 penalty units. 27
Page 9
Clause 15 Employees (Priority of Debts and Wage Protection Insurance) Bill 2001
Part 3 Wage protection insurance
Division 4 Information about insurance
15 Minister to give information on request to employee 1
(1) The Minister must, at the request of an employee, notify the employee 2
of the name and address of the insurer under the employer's policy of 3
wage protection insurance, as shown in the Minister's records. 4
(2) If it appears from the Minister's records that the employer does not 5
have a current policy of wage protection insurance, the Minister must 6
notify the employee of that fact. 7
Division 5 Claims 8
16 Entitlement to make claim 9
(1) An employee is entitled to make a claim under a policy of wage 10
protection insurance if: 11
(a) the employer is insolvent, and 12
(b) an amount covered by the policy has fallen due for payment by 13
the employer, and 14
(c) the employer has failed to pay the unpaid amount in full within 15
14 days after receiving a written claim for payment made by or 16
on behalf of the employee. 17
(2) If: 18
(a) an employer is insolvent, and 19
(b) written notice of the insolvency is given to an employee by: 20
(i) the employer, or 21
(ii) a trustee in bankruptcy, liquidator or other person 22
authorised to administer the employer's affairs, or 23
(iii) an insurer under a policy of wage protection insurance, 24
and 25
(c) the notice contains information required under the regulations, 26
the employee's right (if any) to make a claim under the policy of wage 27
protection insurance is extinguished if the claim is not brought within 28
4 months after the date the written notice was given. 29
Page 10
Employees (Priority of Debts and Wage Protection Insurance) Bill 2001 Clause 17
Wage protection insurance Part 3
Claims Division 5
17 Making of claim 1
(1) A claim by an employee under a policy of wage protection insurance 2
must be made in writing. 3
(2) The claim must set out: 4
(a) the name and address of the claimant, and 5
(b) the name of the insolvent employer, and 6
(c) the dates when the claimant's employment with the insolvent 7
employer started and ended, and 8
(d) the amount claimed by the claimant under the policy and the 9
basis on which it is claimed. 10
(3) The claimant must at the request of the insurer provide any further 11
information or materials that the insurer may reasonably require to 12
determine the claim. 13
18 Insurer's response to claim 14
(1) An insurer must, within 1 month after receiving a claim under a policy 15
of wage protection insurance, respond to the claim by giving written 16
notice to the claimant stating: 17
(a) whether the insurer rejects or accepts the claim, and 18
(b) if the insurer accepts the claim in part, stating the amount to 19
which the insurer believes the claimant to be entitled under the 20
policy. 21
(2) If, within 14 days after receiving the claim, the insurer reasonably asks 22
the claimant to provide further information or materials to enable the 23
insurer to determine the claim, the insurer is not required to respond to 24
the claim until 14 days after the information or materials are provided. 25
19 Conciliation of disputes 26
If a claim under a policy of wage protection insurance is disputed, 27
either the insurer or the claimant may refer the dispute for conciliation 28
in accordance with conciliation procedures approved by the Minister. 29
Page 11
Clause 20 Employees (Priority of Debts and Wage Protection Insurance) Bill 2001
Part 3 Wage protection insurance
Division 5 Claims
20 Proceedings in court 1
(1) If: 2
(a) an insurer does not respond to a claim as required under this 3
Act, or 4
(b) a disputed claim is not resolved in conciliation proceedings, 5
the claimant may bring an action against the insurer to recover the 6
amount of the claim in a court with jurisdiction to determine claims in 7
contract up to the amount of the claim. 8
(2) In an action brought under subjection (1), an employee protected by a 9
policy of wage protection insurance is to be regarded as having the 10
same rights to claim under the policy as if the employee were a party 11
to the insurance contract. 12
21 Insurer's rights of subrogation 13
If an insurer makes any payment on a claim under a policy of wage 14
protection insurance, the insurer is subrogated to the rights of the 15
claimant against the claimant's employer. 16
Division 6 Administration 17
22 Powers of Minister 18
For the purpose of undertaking the general administration of this Act, 19
the Minister has the power to do all things that are necessary or 20
convenient to be done in connection with the administration of the Act 21
and, without limiting the generality of that power, has power: 22
(a) to promote the development of facilities for handling inquiries 23
in relation to wage protection insurance, and 24
(b) to monitor complaints in relation to wage protection insurance, 25
and 26
(c) to liaise generally with other persons or bodies having a 27
responsibility to deal with inquiries, complaints and disputes 28
concerning protection of employees, and 29
(d) to review information and returns given by insurers under this 30
Act, and 31
Page 12
Employees (Priority of Debts and Wage Protection Insurance) Bill 2001 Clause 22
Wage protection insurance Part 3
Administration Division 6
(e) to monitor legal judgments, industry trends and the 1
development of community expectations that are, or are likely 2
to be, of relevance to the efficient operation of this Act, and 3
(f) to promote the education of employers, employees and the 4
insurance industry as to the objectives and requirements of this 5
Act. 6
23 Supervisory powers--Minister may obtain information and material 7
(1) The Minister may, for a purpose connected with the administration or 8
enforcement of this Act, by notice in writing, require an employer or 9
insurer, within 30 days of receipt of the notice, or such longer period 10
as is specified in the notice: 11
(a) to give the Minister written answers to questions stated in the 12
notice, or 13
(b) to give the Minister copies of documents specified in the notice. 14
(2) The answers to questions must, if the notice so requires, be verified by 15
statutory declaration. 16
(3) A person to whom a notice is given under subjection (1) must not fail, 17
without reasonable excuse, to comply with the requirements of the 18
notice. 19
Maximum penalty: 150 penalty units. 20
(4) It is a reasonable excuse for an individual to refuse or fail to comply 21
with the requirements of a notice under subsection (1) if to do so 22
would tend to incriminate the individual. 23
24 Delegation 24
The Minister may delegate to a person any of the Minister's powers 25
under this Act or the regulations. 26
Page 13
Clause 25 Employees (Priority of Debts and Wage Protection Insurance) Bill 2001
Part 4 Miscellaneous
Part 4 Miscellaneous 1
25 False or misleading information in claims 2
A person is guilty of an offence if: 3
(a) the person makes a claim against an insurer under this Act, and 4
(b) the claim contains information that the person knows is false or 5
misleading in a material particular. 6
Maximum penalty: 30 penalty units. 7
26 Proceedings for offences 8
Proceedings for an offence against this Act or the regulations are to be 9
dealt with summarily before a Local Court constituted by a Magistrate 10
sitting alone. 11
27 Regulations 12
The Governor may make regulations, not inconsistent with this Act, for 13
or with respect to any matter that by this Act is required or permitted 14
to be prescribed or that is necessary or convenient to be prescribed for 15
carrying out or giving effect to this Act. 16
Page 14
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