'Inconsistent' laws threaten workers' fund

PUBLISHED : Tuesday, 26 January, 1993, 12:00am
UPDATED : Tuesday, 26 January, 1993, 12:00am

UNIONISTS have warned that an emergency fund to protect workers from insolvent employers could itself go into bankruptcy because of inconsistent laws on fund payments.

The Protection of Wages on Insolvency Fund, which has been established to pay advance cash to victims of company bankruptcies, will have to cover discrepancies resulting from two different regulations, they claim.

The first rule, the Protection of Wages on Insolvency Fund Ordinance, will be amended by the Legislative Council next month to allow maximum compensation of $32,000 for wages in arrears, severance and payment in lieu of notice for a worker.

The second, the Bankruptcy Ordinance, requires the receiver of a bankrupted company to pay maximum compensation of $18,000 to each worker directly or through the fund.

The insolvency fund, which is funded by an annual levy of $250 on each business registration, now stands at more than $200 million, with payments of $46.5 million made last year.

Most workers would have applied for advance cash from the fund before the receiver could liquidate assets to repay the fund, fund board member Ms Li Fung-ying said.

The current laws would prevent the fund from fully recovering payments from company receivers.

She expressed concern that the legal inconsistencies could push the fund into the red in a time of economic slowdown, when more companies went into bankruptcy and fewer companies sought registration.

Ms Li and fellow employee representatives on the Labour Advisory Board are lobbying the Labour Department, the Treasury and the Official Receiver's Office to amend the bankruptcy laws.

They propose that a receiver be required to pay maximum compensation of $60,000 through the fund to a worker.

The new ceiling is meant to be above the level of maximum compensation stipulated in the fund law, allowing further upward adjustments in the latter.

The Official Receiver's Office has opposed the proposed amendment, claiming potential bias towards higher income groups, but an office spokesman refused to elaborate on the issue.

The Law Reform Commission is conducting an 18-month review of the Bankruptcy Ordinance, and is expected to release the first of three interim reports for consultation in March.

The secretary of the commission's insolvency and bankruptcy sub-committee, senior Crown counsel Mr Jeremy Glen, said the draft report on individual-basis bankruptcy would include a side reference on the insolvency fund bill but said it would not be controversial.

Sub-committee chairman, Judge Tyler, has acknowledged requests from committee members to give priority to issues relating to the fund bill during the review.

But Judge Tyler said the fund bill and similar issues, including preferential payment to creditors, would only be discussed in the third interim report, scheduled for consultation next year.