With the impact of COVID-19 affecting thousands of businesses across Australia, Virgin Australia has been forced into voluntary administration noting the shutdown of the airline industry to help prevent the spread of the disease.
With the company on the brink of collapse, and now placed under voluntary administration, over 15,000 employees are now left wondering what happens to their jobs, entitlements and their future.
What happens under a voluntary administration?
Companies elect to go into voluntary administration as a means to help manage their debt and liabilities. It is different from liquidation, and does not mean the company has gone bankrupt.
Under voluntary administration, the main focus is to move the company back into the black, and organise any debt owing to creditors.
However, one of the biggest debts, and ongoing commitments, a business owes is to their employees. What happens to them?
Employee entitlements under a voluntary administration
When a business enters voluntary administration, it must continue to pay ongoing wages for work provided by employees.
If you are an employee who is owed money for unpaid wages, superannuation, annual leave, sick leave, long service leave, retrenchment pay or other benefits you are classified as a creditor of the company.
If the business continues to trade, employees are still entitled to and will receive ongoing wages for services provided. However, noting Virgin Australia stood down most of its employees prior to entering into voluntary administration they would not be entitled to any remuneration.
How and when these employees get paid is the big question, and depends on the administrator’s meeting with major creditors, such as banks or companies with mortgages over the business.
What happens if the company goes bankrupt (into liquidation)?
If this happens, employees may be required to complete an employee entitlement form, which will be submitted to the liquidator of the business.
Then an employee becomes a creditor of the business, and submits to have a claim for outstanding wages, employment entitlements or other monies owing.
What should you do?
Voluntary administration is a complex process, and it is even harder for employees whom are caught in the cross fire. Often, employees are confused and unsure as to how to proceed and what to do when their employer enters into a voluntary administration.
If you are an employee who is worried about the actions of your employer, speak to Aaran Johnson on ajohnson@marsdens.net.au or Simon Kumar on skumar@marsdens.net.au or by phoning 02 4626 5077 to have a discussion about what we can do for you.
Image by Bradley Everied
The contents of this publication are for reference purposes only. This publication does not constitute legal advice and should not be relied upon as legal advice. Specific legal advice should always be sought separately before taking any action based on this publication.
