Unions to sue director of failed company over unpaid entitlements

The Australian Workers Union and the Australian Manufacturing Workers Union are set to launch legal action against the director of a collapsed manufacturing company under never-before-used provisions of the Fair Work Act.

The unions have engaged law firm Slater & Gordon to launch a claim against Ian Beynon, the sole director of Forgecast and another company called Ideal Pty Ltd, following the collapse of Victorian company Forgecast Australia in November 2009.

The legal claim covers 57 former employees of the company, who say they are owed more than $2 million in entitlements under the company’s enterprise agreement. As some of the employees had worked with the company for more than 35 years, the largest claims are worth up to $98,000.

Slater and Gordon industrial relations lawyer Marcus Clayton said in a statement that the claim is believed to be the first under the provisions in the Fair Work Act that allow workers to sue company directors personally.

“The union’s case is that Mr Beynon was involved in Forgecast’s contraventions of the AWU and AMWU agreements, and the Fair Work Act provides that a person involved in such a contravention is equally as liable as a company,” Clayton said.

“If successful, this legal action will set a precedent for future litigation where workers have been left without their entitlements after a company has gone broke.”

AWU Victorian Secretary Cesar Melhem said unions were determined to pursue company directors where they believed workers had not been paid their due entitlements.

“We are tired of seeing workers short-changed when companies go under. If ASIC and other regulators will not do the job, we will take action, present the evidence and let the courts decide.”

AMWU National Secretary Dave Oliver said the case underlined problems with the Government-sponsored GEERS scheme, which only pays workers some entitlements in the event of a company collapse.

“Employers need to be held accountable so they meet their obligations to workers instead of shifting the burden to the taxpayer. We’re taking this landmark legal action because our members at Forgecast Australia and dozens of other companies have been victims of a system that allows bosses to use corporate law to avoid paying workers what they are legally owed.”

IR expert Peter Vitale from CCI Lawyers says the claim is likely to centre around section 550 of the Fair Work Act, which says the involvement of a person in the contravention of a provision of the Act will be “treated in same way as actual contravention”.

The Act states that any person who was knowingly concerned, aided and abetted, or procured a contravention can face action.

Vitale says there are similar provisions in the Work Choices regime and under the Trade Practices Act, which allow the Australian Competition and Consumer Commission to pursue company directors as well as companies.

“The whole concept is not something that is foreign to Australian courts. It will be a matter of determining what the director’s state of knowledge as to what the company’s circumstances was,” Vitale says.