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September 2020

Litigation progresses against employer in insolvency

Litigation progresses against employer in insolvency

Case

Fair Work Ombudsman v Blue Sky Kids Land Pty Ltd (in liquidation) (2020)

The Fair Work Ombudsman (FWO) commenced proceedings against Blue Sky Kids Land (BSKL) for alleged contraventions of the Fair Work Act 2009 (Cth) (FW Act) and the General Retail Industry Award (the Award).

The allegations involved:

  • underpayment;
  • failing to keep accurate employee records;
  • obstructing FWO inspectors; and
  • threatening to dismiss an employee who exercised her workplace right to participate in an interview with the FWO.

While these proceedings were on foot, BSKL went into voluntary liquidation. Under the Corporations Act 2001 (Cth), you can only continue proceedings against a company in voluntary liquidation with the leave of the Federal Court. As such, the FWO sought leave from the Federal Court to continue proceedings against BSKL.

Verdict

In granting leave to the FWO to continue proceedings against BSKL, the Federal Court indicated that:

  • as the FWO was a regulator enforcing statutory duties, the matter was one of public interest;
  • the underpayment of wages and other entitlements claims had priority over claims of other unsecured creditors; and
  • BSKL’s liquidator and creditors had no objection to the FWO’s application.

Lessons

This decision indicates that an act of liquidation may not inhibit prosecution by the FWO, and the importance of ensuring your organisation is complying with its contractual and statutory obligations.

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