03 Nov PERSONAL LIABILITY UNDER THE FAIR WORK ACT: COULD A RECENT HIGH COURT DECISION WIDEN THE SCOPE OF LIABILITY?

The scope of persons who may be held personally liable under the Fair Work Act 2009 (Cth) (“FW Act”) for contraventions by their employer, may be wider than first thought as a result of a High Court decision which has held that “influence” and not position title, is a key consideration in determining whether a person meets the definition of an “officer” of a corporation under the Corporations Act 2001 (Cth) (“Corporations Act”).

The High Court Decision

The High Court in Australian Securities and Investments Commission v King [2020] HCA 4 considered the definition of an “officer” under section 9 of the Corporations Act.

Specifically, it considered whether a group CEO, who was involved in the management of a subsidiary but who did not hold a named “officer” role within the subsidiary, fell within the definition of “officer” for that subsidiary.

Under section 9 of the Corporations Act, “Officer” of a corporation means:

“(a)    a director or secretary of the corporation; or

(b)   a person:

(i)      who makes, or participates in making, decisions that affect the whole, or a substantial part, of the business of the corporation; or

(ii)    who has the capacity to affect significantly the corporation’s financial standing; or

(iii)   in accordance with whose instructions or wishes the directors of the corporation are accustomed to act (excluding advice given by the person in the proper performance of functions attaching to the person’s professional capacity or their business relationship with the directors or the corporation)…”.

The High Court unanimously held that there is no requirement that a person be a named “officer” of a corporation to fall within the scope of section 9(b)(ii) of the Corporations Act. The relevant test will be whether the person has the requisite capacity to significantly affect the financial standing of the company.

Personal liability under the FW Act?

There have been numerous decisions about personal liability under the FW Act of:

1.   directors;

2.   HR managers (or other managers);

3.   payroll officer’s; and

4.   accountants, including third party accountants.

They have been liable for their involvement in contraventions of the FW Act (for example for their involvement in their employer’s underpayment of wages and entitlements, breach of the general protections provisions of the FW Act and/or unfair dismissal).

Section 550 of the FW Act provides that a “person” is taken to be involved in a contravention of the FW Act where they have done any of the following:

1.    aided, abetted, counselled or procured the contravention;

2.   induced the contravention, whether by threats, promises or otherwise; or

3.   been in any way, by act or omission, directly or indirectly, knowingly concerned in or party to the contravention; or

4.   conspired with others to effect the contravention.”

When a person is found to be involved, then they are treated the same way as the employer responsible for the contravention.  They can be ordered by a Court to pay for example, penalties for their involvement in the contravention.

What does the High Court decision mean for liability under the FW Act?

The High Court decision sets a precedence for the way personal liability of “officers” part of a corporation can be assessed which similarly may have implications for corporate employer entities who are liable for contraventions of the FW Act and the persons who may be considered to be “involved” in such contraventions.

Considering the broad definition of “officer” confirmed by the High Court decision, the potential for personal liability may extend to persons not previously at risk, i.e. to anyone with influence.

Although technically “anyone” can be captured by the provisions of the FW Act as it broadly refers to “persons” who may be involved and not persons in a particular position, decisions have generally found those with particular job titles in a company to be held liable for a company’s contraventions.  Although, titles do prove a strong indicator of involvement and influence, the High Court decision confirms that titles should not be the only consideration in determining these matters. Therefore Courts may be more willing to look outside of an individual’s position title to other individuals who may not have previously been considered (e.g. because of their lower position status in a corporation) and look at their “influence” on the employer entity in light of this decision.

Reminder for persons to ensure compliance

The above acts as an important reminder that persons are not protected by the “corporate veil” and even if they do not hold a position title (such as Director) which attracts accountability, they can still face personal liability.

To avoid the risk of personal liability for involvement in a contravention under the FW Act, you need to:

1.   ensure that you are aware of the obligations under the FW Act, including under the relevant Modern Awards or enterprise agreements and comply with those obligations;

2.   do not ignore or turn a blind eye to possible breaches of the FW Act, as the Court may be able to infer actual knowledge from wilful blindness; and

3.   consider escalating the matter where you can. This may shift some of the liability but may not act as an absolute bar to avoid all liability. It would be of benefit to have this documented as evidence in case this ever needs to be considered in Court.

If you require advice to ensure you are meeting your legal obligations and avoid the risk of personal liability, please contact the team at HR Law for assistance.

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.