Unpaid wages … Employer going into liquidation … What are my rights?

Employees who have been under or not paid may be worried that the employer may be unable to pay.  If this is the case, how can the employee expect to recover those wages?

In a recent case, the employer claimed that it had no money to pay outstanding wages.  The ERA did not accept this as an excuse and awarded over $4,000 in unpaid wages to an employee.  This order won’t necessarily mean that the employee will get paid however.

Where a company cannot afford to pay money that it owes, it may be insolvent and be put into liquidation.  If this happens, any “Secured Creditors” can enforce their securities.

The Official Assignee then collects and sells all remaining company assets and distributes any proceeds among the company’s creditors.

“Preferential Creditors” are paid in priority to “Unsecured Creditors”.

Persons employed by the company in the four months prior to liquidation are a class of Preferential Creditor and are entitled to claim wages owing (up to $20,340) as well as certain other payments.

In this case, the employee’s wage claim related to payments due almost 12 months ago, and the employer had not yet been liquidated.  This means that the employee is an Unsecured Creditor – not a Preferential Creditor.

An Unsecured Creditor should file a claim with the Official Assignee to receive a share of any funds left over after the Secured and Preferential Creditors have been paid.  It may also be possible to bring a claim against the directors of the company in a personal capacity in some circumstances.

If you are concerned about unpaid wages, it is important to seek assistance early on.