A select committee has endorsed a law change that would see redundancy payments become a preferential claim when a company goes into liquidation - despite opposition from business groups.
In May, the Commerce Committee heard submissions on the Status of Redundancy Payments Bill, a private member's bill putforward by Labour backbencher Mark Peck.
The bill seeks to amend the Companies Act to elevate redundancy payments to the same preferential status as wages and holiday pay when a company goes under, and to remove a $6000 limit on unpaid wages, salaries and holiday pay that an employee could receive.
Unions supported the bill, but it was heavily criticised by employer and business groups who claimed it would result in a scenario where workers' payments were too heavily favoured at the expense of other unsecured creditors such as suppliers.
That risked a domino effect of further business closures.
Business and legal groups also argued that the bill should not go any further because it revisited a topic already canvassed by the Insolvency Law Review in 2001.
But in its report back to Parliament, the Commerce Committee recommends that the bill be passed with some amendments.
The most substantial change is to put a cap of $15,000 on the unpaid wages, salaries and holiday pay an employee can receive.
Mr Peck said yesterday that the cap provision had been put into his bill in response to business groups' concerns.
It was important that the cap be lifted from $6000 because it had not been touched for a decade, he said.
The cap is to be reviewed every three years to keep it in line with the cost of living.
In its report, the select committee states that it heard submissions arguing that other secured creditors could be hurt if redundancy payments were given preferential status.
But on reflection the committee "felt that the financial dependence of employees on their employer is greater than that of other creditors who are likely to have many sources of income".
Business New Zealand executive director Anne Knowles said yesterday that that decision was disappointing.
"It simply does not recognise the huge number of small businesses who are dependent on an organisation. If that goes out of business they should be able to get payment for what they've actually supplied."
The bill could have its next reading as early as next Wednesday and is expected to attract the numbers to pass.
