Updated Advice: Can Employers Mandate Vaccines?
Since our last update on mandatory vaccines in the workplace, the Fair Work Ombudsman has provided some further guidance as to what circumstances it considers will give rise to a valid lawful and reasonable direction from an employer in respect of vaccinations.
The FWO considers there are four (4) broad categories of work in respect of risk of exposure:
- Tier 1 work, where employees are required as part of their duties to interact with people with an increased risk of being infected with coronavirus (for example, employees working in hotel quarantine or border control).
- Tier 2 work, where employees are required to have close contact with people who are particularly vulnerable to the health impacts of coronavirus (for example, employees working in health care or aged care).
- Tier 3 work, where there is interaction or likely interaction between employees and other people such as customers, other employees or the public in the normal course of employment (for example, stores providing essential goods and services).
- Tier 4 work, where employees have minimal face-to-face interaction as part of their normal employment duties (for example, where they are working from home).
The FWO considers that the risk of exposure that an employee faces, as well as other factors such as risk of exposing others could form a basis for a legally valid direction.
Accordingly, workers falling into Tiers 1 and 2 may have the most reasonable prospects of being validly directed to get vaccinated. The position is less clear for Tier 3 and will require a closer consideration of all the factors relating to the worker’s role. For Tier 4 workers it is less likely that a mandatory vaccine direction will be reasonable.
The Tier system is not legally binding, it is simply a general guide to assist employers and employees in determining their particular needs and position in respect of any direction. The FWO encourages all parties to seek advice for their specific situation and not rely on general advice.
Ultimately what is needed is a case-by-case assessment of the circumstances including the work performed, the requirements of the business, and the potential health risks. The factors for consideration are very broad and may not always apply across work forces. We outlined some of these factors in our previous update.
Our firm is able to assist you with advice on the above whether you are an employee or an employer. Please do not hesitate to contact us.
High Court Clarifies Casual Employee Entitlements in Landmark Decision
Yesterday, the High Court handed down its decision in the case of WorkPac v Rossato & Ors [2021] HCA 23 (WorkPac v Rossato). This decision was an appeal from last year’s decision of the FCFCA in Workpac Pty Ltd v Rossato [2020] FCAFC 84 and the precedent set in the 2018 judgment of Skene v WorkPac Pty Ltd (2018) 264 FCR 536 (Skene), where controversially, it concluded that a casual worker was able to claim statutory paid leave entitlements.
These earlier Federal Court decisions led to panic from employers, who believed thousands of employees could potentially ‘double dip’, they could get their 25% casual loading as well as the statutory entitlements reserved for permanent workers.
These decisions were also the catalyst for the Federal Government to amend the Fair Work Act 2009 (Cth) (FW Act) in March of this year to include a statutory definition of a casual worker for the very first time and created a National Employment Standard entitlement for casuals to request conversion to permanent employment.
This article will look at the background of Rossato and then contrast the reasoning from the FCFCA decision and the High Court decision.
Background
Mr Rossato was employed from 2014 - 2018 by Workpac, who are a labour hire company that provides services to clients in the coal industry. During his employment Mr Rossato was employed under six employment contracts as a casual and was categorised as a casual under Workpac’s Coal Industry Enterprise Agreement (Enterprise Agreement). He was also paid as such, with the casual loading added to his pay but he did not have any statutory leave entitlements that a permanent would have.
After ending his employment, Rossato followed the Skene decision and wrote to Workpac claiming that his ongoing employment meant that he was entitled to payments. Workpac rejected his claim and promptly filed an originating application in the FCA.
Workpac sought declarations that pursuant to sections 86, 95 and 106 of the FW Act, Mr Rossato was employed on a casual basis and was therefore not entitled to paid leave. Further, they contended that section 116 of the FW Act prevented Mr Rossato from claiming payment for public holidays. Finally, WorkPac sought declarations that as a ‘Casual Field Member’, Mr Rossato was barred from claiming corresponding entitlements under the Enterprise Agreement. If the Federal Court found against them, they also sought declarations that they were retrospectively entitled to Mr Rossato’s 25% causal loading as restitution.
Federal Court Decision
The Federal Court looked at the substance of Mr Rossato’s work, rather than the form of his employment contracts, to determine whether he was a casual employee for the purposes of the FW Act and the Enterprise Agreement. This required analysis on whether there was a firm advance commitment to employment.
They found that while Rossato was employed and paid as a casual, the way his employment contracts were performed pointed against this characterisation. The factors that contributed to this were:
- His contact included a pattern of full-time hours.
- The work roster was supplied sometimes up to a year in advance, with little evidence he could elect not to work.
- His ‘Drive In – Drive Out’ and accommodation arrangement was inconsistent with intermittent employment.
The Court also rejected WorkPac’s claim for restitution for the causal loading paid to Mr Rossato, contending there was no mistake and no failure of consideration in the employment contract. (You can read the JCL insight written at the time of this decision here).
High Court Appeal
In December 2020, the High Court of Australia granted WorkPac special leave to appeal the Federal Court decision in an attempt to clarify casual employment.
WorkPac submitted that the characterisation of an employee as "casual" depends entirely on the express or implied terms of the employment contract without reference to post-contractual conduct. Workpac clearly communicated to Mr Rossato through his contracts that he was a casual, and Mr Rossato accepted each offer of employment on this basis.
The High Court upheld the test of casual employment advanced by both parties, being employment where the employee has no firm advance commitment. However, the majority rejected the Full Federal Court and the Skene decision’s approach of looking at the conduct of parties, rather than the written contract.
The majority also held that “a court can determine the character of a legal relationship between the parties only by reference to the legal rights and obligations which constitute that relationship” [57].
Therefore, using this reasoning, Mr Rossato was correctly paid as a casual employee under his employment contract and Enterprise Agreement with Workpac, and was therefore not able to access any of the paid statutory entitlements for permanent workers.
Comment
This decision, combined with the passing of the FW Act amendments, gives employers confidence and certainty when it comes to their casual employees. According to a Sydney Morning Herald article, the Federal Government had predicted that if this decision had gone the other way, it could have cost businesses $40 billion dollars in backpay. JCL welcomes this decision.
Statutory Demand Threshold Increases to $4,000
On 27 May, the Corporations Amendment (Statutory Minimum) Regulations 2021 passed Parliament. This permanently increases the statutory demand threshold from $2,000 to $4,000.
A statutory demand is issued under section 459E of the Corporations Act. Most commonly it is used by a creditor to force a company to pay their debts within 21 days. If a company is unable to comply with the demand, they are presumed to be insolvent.
Throughout most of 2020, as part of the Federal Government’s Coronavirus Economic Response package, the threshold was increased to $20,000 and debtors were given six months to pay back debts. This package was subject of a prior post here. However, these measures ended on 31 December 2020.
Now the new changes are part of the government’s longer term insolvency reform plans to better address the needs of smaller businesses and create a more resilient economy post-pandemic.
Proponents of the increase say that a $4,000 threshold better adjusts to inflation and also acknowledges the typical legal fees associated with issuing a statutory demand. On the flip side, some say that a lower debtor company will now be able to slip under the threshold more easily.
Note: These changes will come into effect on 1 July 2021. If you issue a statutory demand prior to this, the $2,000 threshold will still apply.
Can Employers Mandate Vaccines?
The rollout of the COVID vaccinations has raised the question of whether the vaccine will be mandatory. This is particularly important in employment where employers may demand that their employees receive the vaccine or face discipline/termination.
Regulatory Position
The Federal Attorney-General released a media statement outlining the Federal Government position on mandatory vaccines.[1] In summary the Government’s position is that vaccines should be voluntary but notes that the health agencies may mandatorily require workers in certain high-risk industries to receive the vaccine.
The statement otherwise defers to the views of the Fair Work Ombudsman (FWO) and Safe Work Australia (SWA) but makes the following general statements:
- the overwhelming majority of employers should assume they will not be able to require their employees to be vaccinated;
- it is unlikely in the majority of circumstances that employees could refuse to come to work because, for instance, a colleague had not been vaccinated.
The FWO notes there are limited circumstances where a vaccine may be mandatory. This is highly dependent upon the particular workplace and each employee’s individual circumstances. Relevant considerations include:[2]
- whether a specific law (such as a state or territory public health law) requires an employee to be vaccinated;
- whether an enterprise agreement, other registered agreement or employment contract includes a provision about requiring vaccinations;
- if no law, agreement or employment contract applies that requires vaccination, whether it would be lawful and reasonable for an employer to give their employees a direction to be vaccinated;
- whether employees have a legitimate reason for not being vaccinated.
SWA also note that it is unlikely that an employer can impose a mandatory vaccine condition except in particular circumstances.[3] SWA states that employers have a duty to eliminate or minimise the risk of exposure to COVID-19 in the workplace as far as reasonably practicable. What is reasonably practicable will depend on the operative needs of the business. To determine these operative needs the following should be considered:
- Is there a health agency requirement or recommendation for the industry requiring vaccine;
- The risk of exposure in the course of work (e.g., whether workers face customers, work in close proximity, etc.);
- Whether the business serves or works with high risk/vulnerable people;
- What control measures can be put in place.
Lawful Direction
As noted by the FWO, in certain circumstances an employer may legitimately give employees a direction to obtain the vaccine. The key requirements for a direction to be effective is that it must be reasonable and lawful. A direction by the employer is not necessarily limited to the scope of an employment agreement, rather it may encompass all matters connected with the job performed by an employee and any related.[4]
For a direction to be lawful it must not violate State/Territory or Commonwealth law or require the employee to violate any law. Whether a direction is reasonable will depend on the circumstances of the case such as:
- The operational requirements of the business;
- The usual operational practices of the business;
- The terms of any employment agreement;
- The nature of the employees work;
- The relevant qualifications, ability or skillset of the employee;
- The risks (if any) to the health or safety of the employee or other workers;
- The relevance of the direction to any of the above.[5]
Where a decision of an employer is based upon medical considerations, it should be shown that relevant medical evidence such as an expert report has been considered.[6] If the employee unreasonably refuses to provide evidence or attend medical examinations, this may be grounds for discipline or termination.[7]
The final consideration before issuing a direction or implementing a policy is employee consultation. Before making any direction or implementing policy, it is vital to properly consult with the employees.[8] A failure to consult may result in an employer becoming liable to various remedies including compensation. Employers should discuss potential alternative arrangements with employees before imposing any new conditions.
Case Law
There have been two decisions in relation to mandatory vaccine policies. Both cases involved workers challenging the policies implemented by their employers. Both cases were unsuccessful.
The first case, Barber v Goodstart Early Learning [2021] FWC 2156 concerned an educator at an early learning centre. Goodstart introduced an immunisation policy, requiring that all staff must receive the influenza vaccination unless they have a medical condition which makes it unsafe for them to do so. The employee claimed that she had a sensitive immune system and objected to the policy, providing a medical certificate in support of her claim. Goodstart determined that the medical certificate was not sufficient to support the objection and the employee was terminated for failing to be vaccinated and meet the inherent requirements of her role.
Deputy President Lake upheld the dismissal considering that Goodstart had given a lawful and reasonable direction to its employees. The basis for this finding was that: health bodies recommended flu vaccinations for people working with children, flu symptoms could be severe especially in children, flu vaccinations are effective at reducing the risk of infection to children and staff, alternative methods of managing risk, like social distancing, are not always available to childcare workers, and unions were supportive of Goodstart implementing the policy.
The Deputy President rejected the employee’s medical exemption argument. In assessing the medical evidence provided, the Deputy President considered that there was not evidence that the vaccine would pose significant health risk to the employee, the only evidence was vague statements relating to the employee having a sensitive gut that could be aggravated by the vaccination.
The second case, Kimber v Sapphire Coast Community Aged Care Ltd [2021] FWC 1818 concerned a receptionist in a residential aged care facility. The employer (Sapphire) introduced a compulsory flu vaccination for all employees in response to a New South Wales Public Health Order which prevented persons from entering aged care facilities without an up-to-date flu vaccination. The employee argued against receiving the vaccine claiming that she had previously had a severe reaction to the vaccine some years earlier. In support of her claim, she produced a letter from a Chinese medical practitioner stating she "would prefer not to have the flu vaccination" and had been prescribed antiviral and immune boosting herbs.
The employee was dismissed with Sapphire acting on government approved advice that the only absolute contraindication to flu vaccination was a history of post-vaccination anaphylaxis, Guillain-Barr syndrome, or use of certain cancer treatment drugs.
Commissioner McKenna upheld the dismissal again finding the employer had issued a legal and reasonable direction against the context of the NSW Health Order. The Commissioner held that the employee was not able to produce evidence that here severe symptoms were a direct result of the vaccine or that the symptoms would be repeated if she received the vaccine. The Commissioner concluded that Sapphire had acted in an "objectively prudent and reasonable way" and that by refusing to receive the vaccine, the employee could not perform the inherent requirements of her job.
Both decisions were noted to be highly specific to the individual facts. Deputy President Lake also noted that his decision should not even be taken to apply to all employees of Goodstart as “… the role each employee performs in fulfilling [the business’s] undertaking may differ.”
Against this context employers should be cautious in implementing mandatory vaccine policies or dismissing employees for failing to obtain any vaccine.
Discrimination
As noted, a direction will only be lawful to the extent that it does not violate or require a violation of a law. In this respect the primary point of concern is whether the direction would be discriminatory. Discrimination can arise both directly and indirectly.
The Fair Work Act 2009 prohibits discrimination by employers, on 13 different attributes, against employees and potential employees. These are referred to as the ‘protected groups’. Section 351 provides that, subject to exceptions:
- An employer must not take adverse action against a person who is an employee, or prospective employee, of the employer because of the person's race, colour, sex, sexual preference, age, physical or mental disability, marital status, family or carer's responsibilities, pregnancy, religion, political opinion, national extraction or social origin.
This protection is supplemented by the various anti-discrimination legislation at the State/Territory or Commonwealth level.
Some exemptions apply to anti-discrimination law, namely ‘reasonableness’, ‘genuine occupational qualification’ and ‘inherent requirement’. These exceptions do not apply to all anti-discrimination legislation and do not apply in all circumstances.
Summary and Practical Considerations
In summary, at this time there is not any specific law at the State or Federal level that makes vaccination mandatory. Employers may be able to give their employees a direction to be vaccinated, however this will be highly dependent upon a number of factors weighed against each other. These factors will include:
- The operative needs of the business;
- What infection control measures can and can’t be put in place;
- Vulnerability of workers and/or visitors/customers;
- Practicality of alternative arrangements;
- Specific medial needs of employees;
- Overall safety of the workplace and workers;
- Compliance with relevant laws.
In the case of requiring a vaccine, it will need to be demonstrated that a mandatory vaccine policy/direction is reasonable to protecting the interests of all stakeholders. It will therefore be necessary to show that the vaccine is a necessary control for the purpose of complying with WHS obligations and protecting members of the workplace.
For employees disputing receipt of the vaccine, you must at least be able to produce medical evidence demonstrating that the vaccine will have an appreciable negative impact on your own health. It is not sufficient that the vaccine may cause discomfort or non-detrimental health complications.
[1] https://www.attorneygeneral.gov.au/media/media-releases/guidance-released-vaccine-rollout-australian-workplaces-19-february-2021
[2] https://coronavirus.fairwork.gov.au/coronavirus-and-australian-workplace-laws/health-and-safety-in-the-workplace-during-coronavirus/covid-19-vaccinations-and-the-workplace
[3] https://www.safeworkaustralia.gov.au/covid-19-information-workplaces/industry-information/general-industry-information/vaccination
[4] Woolworths Ltd v Brown (2005) 145 IR 285 at 293–297; Horan v North Coast Tavern Pty Ltd t/as North Shore Tavern [2011] FWA 3035 at [43]
[5] Jeremy Lee v Superior Wood Pty Ltd [2019] FWCFB 2946.
[6] CSL Ltd (t/as CSL Behring) v Papaioannou [2018] FWCFB 1005; Lion Dairy & Drinks Milk Ltd v Norman [2016] FWCFB 4218 at [34].
[7] Hudson v RMIT University [2020] FWC 4289; Burns v Sacred Heart Mission Inc [2014] FWC 3188.
[8] Michelle Sposito v Maori Chief Hotel [2021] FWC 700.
BMW loses Ferrari after invalid PPSR Registration
A recent ruling in the Federal Court of Australia in Rohrt, in the matter of Rose Guerin and Partners Pty Ltd (in liq) v Princes Square W24NY Pty Ltd [2021] FCA 483, reminds us just how important correctly perfecting a security interest can be in the event of liquidation.
Facts
In June 2018, BMW Finance (BMW) entered into an arrangement with a company as trustee for a trust.
The arrangement was a chattel mortgage for a luxury vehicle. This mortgage was to be repaid monthly over a 5 year period. BMW registered this vehicle under the Personal Properties Securities Register (the PPSR), which protects registered interests in goods should a customer become insolvent and can give you priority among other creditors.
In November 2019, the Company was struggling to keep up with the repayments, therefore BMW agreed to vary the agreement to reduce the monthly repayment and extend the agreement by three months. However, on 19 December 2019, the Company was placed into administration and administrators were appointed with the Company subsequently going into liquidation.
On 11 February 2020, BMW received a notice of disclaimer of onerous property from the Liquidators which declared that they disclaimed the vehicle.
The amount owing on the vehicle was over $450 000 and according to the Liquidator’s affidavit, the finance associated with the vehicle was significantly in excess of its value. BMW was instructed by the Liquidators to liaise with the Company directly to repossess the Ferrari.
In May 2020, the Liquidators applied to the Court under section 530C of the Corporations Act to seize all property of the Company and a warrant was granted and the vehicle was seized by the Liquidators despite the Notice. When BMW’s solicitors queried why this occurred, the Liquidators stated that their actions were valid due to BMW’s ineffective PPSR registration.
Was BMW’s PPSR Registration defective?
Under section 164 of the Personal Properties and Securities Act (the PPSA), a security interest is ineffective if there is a seriously misleading defect in the registration and it is not necessary to prove that someone was mislead by it.
Even though the original chattel mortgage agreement with BMW provided that the Company purchased the vehicle as trustee for a trust, there was an issue with registration of the security, as the security was not registered under the ABN for the trust.
The Liquidators relied on the case of in the matter of OneSteel Manufacturing Pty Limited (administrators appointed) [2017] 93 NSWLR 61, where a financing statement should have been registered under the ACN, but the secured party used the ABN instead. This was found to be a defective registration under s 164 of the PPSA.
Was the Notice valid?
BMW by its own submissions conceded that their interest in the vehicle was defective and that they were unsecured creditors but BMW argued that the Liquidator’s notice of disclaimer affected their ability to seize the car.
The Court found that due to BMW’s unperfected security interest, when the Company went into administration, the vehicle automatically vested with the Company under section 267 of the PPSA, and this meant that the Company held the vehicle free from BMW’s security interest.
As the Notice was sent subsequent to the automatic vesting of the vehicle, the power of the liquidators to disclaim under section 568 of the Corporations Act was not enlivened because the Court disagreed with BMW’s submission that the vehicle was an onerous obligation due to its high value and lack of onerous obligations tied to the vehicle.
The Court therefore concluded that the Notice was null and void and this left BMW with a ‘personal claim’ against the Company but no proprietary interest in the vehicle.
Conclusion
This case serves as a timely reminder of the importance of correctly registering a security interest and always being prepared in the event of insolvency. Even large organisations like BMW are not immune from PPSR mishaps, which can be costly.
Deliveroo driver ruled to be an employee by the Fair Work Commission
Yesterday, the Fair Work Commission handed down a decision in the matter of Diego Franco v Deliveroo Australia Pty Ltd [2021] FWC 2818, that could have significant ramifications across the Australian gig economy landscape.
Currently, online food delivery giants like Deliveroo and UberEats rely on their drivers being independent contractors, so they can have flexible work arrangements and work for multiple delivery platforms. This therefore means they lack the general protections that employees are entitled to under the Fair Work Act such as unfair dismissal.
Mr Franco launched an unfair dismissal challenge after being dismissed with seven days’ notice for late deliveries. The first determination for the Fair Work Commission was whether he was an employee and therefore prima facie entitled to unfair dismissal protections. Secondly, if he was an employee, they had to determine whether his dismissal was harsh, unjust or unreasonable under section 385 of the Fair Work Act.
Mr Franco submitted that the main factor contributing to him being an employee was that he was not running his own business, rather he was working for Deliveroo and obtaining renumeration from them directly rather than pursuing his own personal profit.
Other factors included the remuneration being non-negotiable, wearing Deliveroo clothing, and that Deliveroo exercised control over Mr Franco through the supplier agreement he signed.
While Deliveroo asserted it had no control over when or where Mr Franco worked which would point to an independent contractor relationship, this was not quite the reality when the working arrangements were examined closer.
Deliveroo utilised a SSB system that required riders to book sessions in advance and preference was given to riders with good performance metrics. This meant that Mr Franco was directed by the SSB system to work particular times, make himself readily available and not to cancel booked engagements. So while superficially it appeared there was an absence of control, Commissioner Cambridge noted that this was camouflaged into a significant capacity for control.
Mr Franco's submission that his termination was harsh, unjust or unreasonable was based on the fact that failing to deliver in a reasonable time was not a valid reason as Mr Franco had never been notified about expected delivery times for drivers.
Deliveroo submitted that Mr Franco was an independent contractor due to him not being required to perform services for the Deliveroo business personally, his ability to accept and refuse work, work whenever he wanted, being able to work for multiple entities at the same time, him signing a supplier contract, supplying his own delivery equipment and being paid on invoices.
However, Commissioner Cambridge said that with “consideration of all the relevant indicia, has, like the colours from the artist’s palette, emerged to form a complete picture… the relationship between Mr Franco and Deliveroo is that of employee and employer”.
Commissioner Cambridge emphasised the fact that Mr Franco was not carrying on a trade or business of his own, but rather working as part of Deliveroo and also took into account how much control Deliveroo exerted over Mr Franco with the SSB system.
When considering how Mr Franco could and did work for other competitors, Commissioner Cambridge contended that this must be assessed in the context of a modern, changing workplace impacted by a digital world and therefore will not always be a determining factor of an independent contractor relationship.
It was then found that there was no valid reason for Mr Franco’s dismissal relating to his capacity or conduct and the substantive reasons were not sound. He was therefore reinstated and will be awarded back pay for lost wages.
Shifting Attitudes
In previous gig work decisions, the Fair Work Commission has typically gone against the workers, finding that their working relationship is more indicative of a contractor relationship. An example from last year was Amita Gupta v Portier Pacific Pty Ltd; Uber Australia Pty Ltd t/a Uber Eats [2020] FWCFB 1698, where the full bench found that Gupta was an independent contractor by focusing on the flexibility of work arrangements and the ability to work for multiple corporations.
However, this is not always the case. A Foodora rider was awarded $15 000 in 2018 for unfair dismissal. In this decision, Commissioner Cambridge focused on the applicant being “integrated into the respondent’s business and not an independent operation”. You can read our article about this case from 2018 here.
This decision also comes after a recent UK Supreme Court decision of Uber BV v Aslam [2021] UKSC 5, where Uber’s appeal was dismissed and Aslam, an Uber driver, was determined to be a worker and entitled to the minimum standards under UK labour law.
The Courts did not determine whether Aslam was an employee however. As the UK labour law framework is quite distinct from the Australian framework the decisions cannot be directly followed, but as Commissioner Cambridge acknowledged in his reasoning, decisions like Aslam confirm the extent to which services on digital platforms are challenging traditional employment concepts.
In a statement to the media, Deliveroo said it planned to appeal the decision.
Morrison Government pursuing more insolvency reform
Ahead of next week’s federal budget, the Morrison Government has decided to pursue further measures to improve Australia’s insolvency framework for businesses.
Most notably, the threshold for which a creditor can issue a statutory demand on a company will increase from $2 000 to $4 000, this change is scheduled to take effect on 1 July 2021.
Other reforms being considered are:
- Changing how trusts are treated under insolvency law;
- a review of whether Safe-Harbour provisions, introduced in 2017, should remain; and
- introducing moratoriums on creditor enforcement while insolvency schemes are being negotiated
The changes being considered will build on the reforms which came into effect on 1 January of this year that streamlined the insolvency process and provided directors with greater control to restructure or wind down their operations. These changes were subject of a prior post which you can access here.
A copy of the Treasurer’s media release issued on 3 May 2021 can be accessed here.
With insolvency becoming an evolving space, professional legal advice is key for all businesses.
James Conomos featured for IR Global Member Spotlight Interview
Our Managing Partner James Conomos was recently featured for a Member Spotlight interview with IR Global. IR Global is a multi-disciplinary professional services network with membership of the highest quality boutique and mid-sized firms who service the mid-market. James is currently the exclusive Australian member for insolvency within IR Global.
Through this network, James has established professional relationships with a number of Australian and international lawyers. He has also acquired unique experience and knowledge that has culminated in the referral of further work.
In this interview they cover a number of topics including his pathway to law, his experiences as a young lawyer and how this lead to the establishment of JCL in 1992. He then looks at how work has changed as a result of the Covid-19 Pandemic and his hopes for the future of technology within legal services.
Have a read of the full interview here.
New illegal phoenixing laws to take effect this week
On 18 February 2021, the Treasury Laws Amendment (Combating Illegal Phoenixing) Act 2020 will come into effect seeking to curb illegal phoenix activity by introducing new offences and granting additional powers to ASIC and liquidators.
The Act, which was passed by Parliament in February 2020, introduces new measures designed to:
- hold directors accountable;
- prevent directors from improperly backdating their resignation; and
- prevent directors from leaving their company with no directors.
Illegal phoenixing commonly occurs when company directors transfer the assets of an existing company to a new company without paying true or market value and leaving debts with the old company. Once the assets have been transferred, the old company is placed into liquidation and the directors continue to operate the business under the new company. When the liquidator is appointed to the old company, the creditors cannot be paid as there are no assets to sell.
From 18 February 2021, companies will no longer be able to remove the last remaining director on ASIC records. To enforce this, ASIC will reject lodgements submitted using a Form 484 - Change to company details or Form 370 - Notification by officeholder of resignation or retirement to cease the last appointed director without replacing that appointment.
Further, if ASIC is notified of a director’s cessation date more than 28 days after the effective date, then the effective date will be overridden and replaced with the lodgement date.
The introduction of this new legislation renders it vital that anyone who has resigned as a company director ensures that their resignation has been correctly lodged with ASIC.
Increase to personal bankruptcy threshold
As part of its response to the Coronavirus pandemic, the Australian Government implemented a number of temporary changes to the bankruptcy and insolvency laws. This insolvency moratorium was the subject of a prior post here, but in summary included:
- an increase of the minimum debt required to issue a bankruptcy notice from $5,000 to $20,000;
- an increase of the minimum debt required to issue a creditor’s statutory demand from $2,000 to $20,000;
- an extension of the timeframe for debtors to take action to resolve a bankruptcy notice or creditor’s statutory demand from 21 days to 6 months;
- the suspension of directors' personal liability for insolvent trading.
Whilst these measures were previously extended from 30 September 2020 to 31 December 2020, there was no further extension and they have now expired.
In late 2020, the Bankruptcy Amendment (Bankruptcy Threshold) Regulations 2020 (Cth) was passed to permanently increase the minimum required debt to issue a bankruptcy notice from $5,000 to $10,000. This change took effect on 1 January 2021.
A copy of the Attorney-General’s Media Release issued on 18 December 2020 can be accessed here.
There has been no corresponding increase to the minimum required debt to issue a creditor’s statutory demand.
