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  1. #1
    Join Date
    Jul 2013
    Posts
    1

    Default Paying out leave entitlements to family members when they quit

    My husband is an employee in his parents' business. He has no ownership and is not a director - he is genuinely "just" an employee.

    The business is struggling financially and is (in my opinion but I'm 100% certain I'm right!) trading insolvent. His parents are ignoring the warning signs, and I think they genuinely believe that the company's Pty Ltd status will protect them from the financial consequences of their poor judgment. I am an accountant by qualification (but not practising) and I have been trying to get their financial records in order, but I just keep finding problem after problem and I just can't see any way to solve their problems.

    My husband is working endless unpaid hours at nights and on weekends, to try to keep things afloat. But things are very tense at work, and often outright hostile, with no appreciation for how hard he works. He just gets blamed all the time.

    He really wants to leave, and he has about $50k of accrued annual and long service leave entitlements (he hit 10 years last April). I have told him he is better off jumping ship and taking a payout of his entitlements now, because if (when) the company goes under, he will not get anything from the government under their scheme to protect employee entitlements when a business goes belly-up - because he is an immediate family member. At least if he leaves now, he can claim his entitlements before the family thing becomes an issue.

    What I want to know is, if they refuse to pay (which they may - the company doesn't just have $50k lying around!) would he actually be successful in taking them to court - being a family member? Are his entitlements protected just like anybody else's when the business is still operating? I know it would be an extremely unpleasant thing to have this all dragged through a court, but my view is that if they have no qualms about blatantly ripping their own son off $50k, then he should have no qualms in utilising his legal options to claim what is rightfully his.

    He has actually raised the issue, including the figures showing their cash position, of trading insolvent with them, in emails, so he could certainly put forward a claim that they breached their duty as directors for allowing the company to trade insolvent. That probably also raises a case for him to sue them personally if the company can't come up with the money.....

  2. #2

    Default

    Janice, I think this issue goes above a HR forum. In terms of entitlements upon exiting the business he is entitled to be paid all accrued entitlements. But once trading insolvent etc comes into play I would highly suggest seeking legal advice.

  3. #3
    Join Date
    Aug 2007
    Location
    Melbourne, Australia
    Posts
    456

    Default

    Quote Originally Posted by Qld IR Consultant View Post
    Janice, I think this issue goes above a HR forum. In terms of entitlements upon exiting the business he is entitled to be paid all accrued entitlements. But once trading insolvent etc comes into play I would highly suggest seeking legal advice.
    Let's say for arguments sake that they are not trading insolvently, does the fact that he is an ordinary employee affect his legal rights under the FWA?

    Surely the FWA doesn't discriminate against people who are ordinary employees when the employer happens to be a company run by members of their own family ?

  4. #4
    Join Date
    Aug 2007
    Location
    Melbourne, Australia
    Posts
    456

    Default

    Janice,

    If you haven't done so already, you should read this http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/Insolvency_guide_for_directors.pdf/$file/Insolvency_guide_for_directors.pdf

  5. #5

    Default

    No not at all. family connection has nothing to do with it. He's an employee and is entitled to payment. My point is that if it is insolvency then he might have a claim, but no chance of getting it paid. Administrators would need to sort that out when the time came.

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