An analysis of the mechanism in New Zealand Law to protect employee entitlements in the event of employer insolvency and their effectiveness

In New Zealand, scarcely a week goes by without news of workers who, due to the insolvency of their employer, have lost their jobs and are owed sometimes thousands of dollars for unpaid wages, holiday pay, redundancy payments or other bonuses. The focus of this article is the mechanisms that exist in New Zealand law to ensure that such workers receive these unpaid entitlements and the effectiveness of such mechanisms. The principal mechanisms discussed are the treatment of unpaid employee entitlements as a preferential claim in the liquidation of an insolvent company and the general powers in the Companies Act 1993 (NZ), which are generally exercised by liquidators, to bring personal actions against directors and others for misconduct on behalf of the creditors generally. The article concludes that New Zealand workers are less protected than their counterparts in comparative jurisdictions, but argues that any solution is unlikely to be found in insolvency law.