Employment legislation is being challenged by business owners and lawyers concerned that the rights of employees could supersede obligations to secured creditors, especially in the case of a company winding up.

Currently Bermuda?s law calls for employees who are due wages to be paid ahead of all other creditors, but the legislation could be challenged with critics saying its enforcement could make it difficult for businesses to secure loans and mortgages.

Critics of this particular law say that, unless secured creditors ? for example a bank holding a mortgage or loan ? are given priority at being paid over all other debt holders, businesses could find financial institutions unwilling to provide funding.

Labour Permanent Secretary Robert Horton told Government is consulting with the business sector on the matter after it expressed concerns over Section 33 of the Employment Act 2000 ? an Act put in place to provide minimum employment standards for Bermuda workers.

The current legislation states that ?the claim of an employee to wages and other payments due under his contract or under this Act shall have priority over all other creditors, including the Crown?.

But yesterday Mr. Horton said the priority given to creditors is likely to be debated. He said the matter could either come before the Labour Tribunal ? which was put in place to hear employment related disputes ? or, alternatively, be ruled on by Government resulting in an amendment to the Act.

?Loyal employees who have been displaced through no fault of their own are entitled to severance pay prior to all other creditors,? Mr. Horton said.

?However, business practice has always prioritised secured creditors. Employers and receivers have indicated that they understand that there may be a priority over all general creditors but are concerned about possible priority over secured creditors.

?In past consultation with the Ministry, the business sector has indicated some understanding (if not advocacy) of the principle of protecting the little employee. The Ministry also understands their concerns with potentially onerous severance obligations that might be due under employment contracts for high-end employees. (S.33 prioritised obligations both under the Act itself and under employment contracts.),? Mr. Horton said.

Although the matter has not yet been raised with the Labour Tribunal, four former employees of Bermuda Glass stand at the ready to have the matter heard.

That will only happen if the labour relations office is unable to resolve the dispute, which stems from when the workers were laid off without warning last June.

The disgruntled ex-staff have reportedly been unsuccessful in securing redundancy pay or pay in lieu of notice, despite repeated consultation with the lawyer in the case, Kim White, of Cox Hallett Wilkinson.