Adams Paul: Status of Redundancy Payments Bill — Second Reading 
Adams Paul: Status of Redundancy Payments Bill — Second Reading 
[Volume:614;Page:10432] 
PAUL ADAMS (United Future) 
: 
 I rise on behalf of United Future to oppose this bill. When this sort of legislation comes through it absolutely amazes me. It shows us that very few politicians have actually been small-business people. I see that Mark Peck the supporter of this bill has spent all of his life on a salary. Many people talk about the worker but they seem to forget that the small-business people in this nation are workers and they probably work longer and harder and for less than many others do. 
 We have had a good look at the select committee report on the bill and see little to dissuade us from the view that giving redundancy payments preferential status could mean that the hardship of insolvency is simply transferred from one group of workers to another group of workers as other creditors’ livelihood may also be at stake. The argument contained in the select committee report that the financial dependence of employees on their employers is greater than that of other creditors simply ignores this fact. Is it any coincidence that that is a carbon copy of the Council of Trade Unions’ own press statement on this bill? It states: “The effect of the bill will be to transfer a greater proportion of the risk of company collapses onto employees in downstream industries.” 
I find it interesting that the committee rejected the idea of extending the priority for wages and salaries beyond the point of commencement of liquidation or bankruptcy for the reason that this would have a negative effect on other unsecured creditors and would discourage financing and investment yet the committee was happy to increase the cap of employee priority from $6000 to $15000 without any mention whatsoever of what implications that might have on the ability of other creditors to get their money back or the willingness of those people to provide credit to business in the first place. I note again that this increase to $15000 was also at the suggestion of the Council of Trade Unions. 
If this bill makes banks and other providers of business credit more reluctant to lend money it will drive up the cost of available credit. Banks will demand more information on potential redundancy payments which adds to compliance costs. The hardest-hit creditors will be small firms with few assets such as retailers and those that have a small number of significant debtors such as firms reliant on freezing works for their business. 
The bill may give companies an incentive to reduce their exposure to redundancy payments in the first place through greater investment in capital rather than labour. Having said that I am happy to see that the committee decided to exclude company directors from the employee priority in light of the possibility that such people who are in the best position to know beforehand whether the company is going down the gurgler could use this law to award themselves large redundancy payments. As I noted in my first reading speech the public are sickened when they see executives who oversaw a company’s poor performance being rewarded with large golden handshakes while workers are laid off. Thankfully the amendment made to the bill by the committee should ensure that directors cannot elevate their claim from last place to second place in a carve-up of assets which would allow them to clean out their company to the detriment of creditors. 
But the fundamental problem with this bill remains. By further shutting out the possibility that unsecured creditors will get their money the bill could create a domino effect as those businesses then fail to recoup their losses themselves and collapse into insolvency where a lot of their business is tied up with one or two debtors. The bill would adversely affect unsecured creditors much more than banks as there are already lots of preferences in front of them eroding their claims. 
The additional preferential claim that the bill creates may also be the difference between a receiver being able to trade a company out of trouble thereby protecting the job of workers and the business being wound up as happened with the South Island retailers Smiths City which collapsed in the early 1990s. That is an example of a company that would not have survived under the proposed law. If workers would receive large redundancy payments there would be little incentive for them to stay with the firm while it attempted to trade its way out of receivership. It is just shocking for the workers if we have a law that can create such a burden of redundancy payments that they make getting a firm back on track almost impossible whereas otherwise somebody might well be able to go into that firm see its potential put different expertise into it and resurrect it. 
 In the case of  
Aoraki Corporation 
 v  
McGavin 
 when redundancy payments were referred to they were described as compensation for the loss of the benefit of continued employment. Redundancy is not payment for work done; it is compensation to remove some immediate financial worry associated with job loss. In some cases workers receive a windfall if they quickly find other jobs after being made redundant. What will happen to the poor old creditor who has already done his or her work and has already had to pay his or her workers? The employees will get their big redundancy payouts and may go straight into a job the next day but this legislation does not worry about the poor fellow who has done all his work—he gets nothing at all. 
Given the nature of a company collapse it is inevitable that some creditors will miss out. Sometimes the whole issue can be academic if there are not enough funds to pay creditors beyond the debenture holder as in the case of the collapse of Hartner Construction. Qantas New Zealand had enough to pay for workers’ wages and holiday pay but there was nothing left for its consortium of investors. So the pay to which workers are normally entitled is at least given priority under the current law. 
We have to ask ourselves whether compensation that is designed to remove some immediate financial worry associated with the loss of a job should take precedence over payment for work already done by contractors and suppliers who as we know all too well also have staff and families of their own to look after. United Future says that no it should not. Therefore we will not be supporting this bill. We strongly believe that work already done and due for payment must be ranked ahead of redundancy payments. [ 
Interruption 
] I hear an interjection from a member of the Green Party commenting on our family ability. I say to that member that most small-business people are family people. They put their heart and soul into their businesses. They do not need this sort of legislation to challenge them on payment for work they have already done just because some parties believe that if enough money is thrown at anything all the problems go away. We believe that work done deserves to be paid for before anything else such as this sort of legislation promotes.