A private member's bill proposing to make redundancy payments a preferential claim when a company goes into liquidation should be deferred because of a wider insolvency law review, a select committee heard yesterday.
Labour backbencher Mark Peck put forward the Status of Redundancy Payments Bill, which would elevateredundancy payments to the same preferential status as wages and holiday pay when a company goes under.
It would also remove the $6000 limit on unpaid wages, salaries and holiday pay that an employee can receive when a company goes into liquidation or receivership.
But Peck's bill revisits a topic covered just 18 months ago by the Government's wider insolvency law review - and that was used several times by opponents yesterday as a reason it should not proceed.
A joint submission from the Law Society and the Institute of Chartered Accountants argued that the bill should be deferred and included as part of the wider law review.
It also criticised the bill's lack of a limit on how much redundancy could be claimed, or who could claim it.
That could open up the possibility that a person who was both an employee and a shareholder or director could set up a contract with very large redundancy provisions, Law Society spokesman Michael Webb told the committee.
The bill was opposed by the Business Roundtable, Federated Farmers and Business New Zealand, who argued that it would increase the danger of other businesses failing if they were suppliers to a company that went under.
The suppliers, possibly small businesses, would struggle to get anything out of a failed company if workers got all of the leftover cash.
But Council of Trade Unions president Ross Wilson argued that workers should get most of what was left over, because they were reliant solely on their employer for income - whereas suppliers had income from several sources.
The CTU and National Distribution Union backed the bill and urged that it proceed without delay.
The select committee must report back to Parliament by September 4.
