PERSONAL LIABILITY – KNOWINGLY CONCERNED WITH BREACHES

PERSONAL LIABILITY – KNOWINGLY CONCERNED WITH BREACHES

The Fair Work Commission (“FWC”) continue to crackdown on principal management staff, including directors, HR professionals and accountants, for their involvement in contraventions of the Fair Work Act 2009 Cth (“FW Act”). 

In the recent decision of Fair Work Ombudsman v Priority Matters Pty Ltd & Anor and Fair Work Ombudsman v Superlattice Solar Pty Ltd & Anor and Fair Work Ombudsman v Geneasys Pty Ltd (in liq) & Anor and Fair Work Ombudsman v Silverbrook & Anor and Fair Work Ombudsman v Mpowa Pty Ltd & Anor (No 4)[1], the Federal Circuit Court of Australia (“FCCA”) offered no leniency to two (2) company directors who were found to be accessorily liable in the underpayment of employees. The Fair Work Ombudsman (“FWO”) brought proceedings against five (5) corporations and two (2) directors for failure to pay wages and entitlements of more than $1 million to 43 employees. On Appeal, Judge Driver was “comfortably satisfied” of the directors’ knowing involvement in contraventions of section 550(1) of the FW ActAlthough the Directors relied on other staff members to manage the day-to-day operations of the business, Judge Driver found that the directors were aware that “wages and entitlements were payable to employees”.  Judge Driver applied the reasoning in FWO v Grouped Property Services[2], that where an alleged accessory “is aware of a system producing certain outcomes, and those outcomes constitute contraventions of the Act, it is unnecessary to show that they knew the details of each instance”.  In defence of the allegations, the Directors argued they had paid their staff above-award prior to the contravention period and had since rectified the underpayments. While Judge Driver found the Directors to be “hardworking and apparently honest people”, he noted that “this was not a case of mistake as to payment or entitlement” and concluded that the Directors “made conscious choices which led to the contraventions by the companies and they were knowingly concerned in those contraventions”.

In the landmark case EZY Accounting 123 Pty Ltd v Fair Work Ombudsman[3], the Full Court of the Federal Court of Australia extended personal liability to an accounting firm for contraventions of a modern award by its client.  Following an audit by the FWO, the employer admitted to multiple breaches of the FW Act and outsourced payroll operations to a third-party accounting firm.  Despite engaging a third-party firm, further contraventions occurred and the FWO commenced proceedings against both the employer and accounting firm. The Court was satisfied that the accounting firm was aware of the applicable rates of pay and other employee entitlements under the award and it knew that the employer’s pay rates failed to meet the minimum requirements set by the FW Act. The Court accepted that the accounting firm “had at their fingertips all the necessary information that confirmed the failure to meet Award obligations” but remained “wilfully blind” to the contraventions.

The FWO was again successful in an action for accessorial liability in Fair Work Ombudsman v NSH North Pty Ltd trading as New Shanghai Charlestown[4]. The Federal Court of Australia held a Human Resources Manager was to be personally liable for her role in the underpayment of staff and falsification of employee records.  In her role, the HR Manager was instructed to process staff wages in cash at hourly rates that were below the award level. The HR Manager was aware of the minimum employee entitlements under the applicable award and advised the company director of the underpayments. The managers complaints were rebuffed, and she was instructed to continue paying staff at below award pay rates.  Despite the fact that she approached her employer about the contraventions, the HR Manager was found to be accessorily liable in the contraventions of the FW Act and fined $21,760.00.  The Court affirmed their decision stating “there is nothing wrong with sending the message that an employee should indeed resign if that is the only alternative to continuing to participate knowingly in illegal activity, ideally coupled with reporting the conduct, in a case such as this, to the FWO”.

These decisions highlight the potential personal liability for directors, HR professionals, consultants, legal advisors and other similar parties, for contraventions of the FW Act by a business or company.

How can you avoid liability?

.         Conduct regular workplace “health-checks” – Stay up to date with the minimum legislative requirements under the FW Act and applicable modern award or enterprise agreement to ensure you are meeting your obligations.

.         Keep Records – Keep accurate and reliable records of employee payments and entitlements.

.         Seek Advice & Act – If you become aware of a potential contravention immediately advise your direct supervisor or manager. If no appropriate action is taken to rectify the breach, seek external advice on how to discharge your statutory duty.

 

The content of this article is intended to provide a general guide to the subject matter.  Specialist advice should be sought about your specific circumstances.

[1] [2019] FCCA 56

[2] [2016] FCA 1034

[3] [2018] FCAFC 134

[4] [2017] FCA 1301

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