IS an employee entitled to payment of leave entitlements immediately upon a receiver’s appointment?
Section 558 of the Corporations Act provides that where a contract of employment with a company being wound up was subsisting immediately before the relevant date, the employee is entitled to payment under section 556 as if he or she had been terminated by the company on the relevant date.
Although section 558 specifically refers to a company being "wound up", section 558 has been held to apply to companies in recievership.
In the case of Office Furniture Pty Ltd this was found to be so because section 558 did not operate independently of the priority provision section 556 and priority was afforded pursuant to section 443(3)(c).
However, in the Federal Court decision in August of McEvoy v Incat Tasmania Pty Ltd, Justice Raymond Finkelstein refused to follow the Office Furniture ruling.
He held that given the history of the provision, although his interpretation may be inconsistent with the overall statutory scheme, he could not discern any intention that the benefit of section 558 should be given to employees whose employer is subject to an appointment of a receiver.
Given the conflicting decisions, the law is still somewhat uncertain.
Although the more recent decision in McEvoy is arguably correct, it might be prudent in some circumstances for a receiver to seek directions from the courts.
Doug Eagleton, solicitor
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