In her address to the Australian Human Resources Institute in 2016, the Fair Work Ombudsman, Natalie James, said “there must be clear consequences for those in trusted positions, those whose advice is relied upon and those with the responsibility to know better who play a part in undermining workplace laws”. Consistent with this warning, the Fair Work Ombudsman has used the accessorial liability provisions of the Fair Work Act to proceed against directors, managers, human resources advisers and franchisors. Last month, the Fair Work Ombudsman tested the limits of those provisions even further and successfully obtained a declaration that an accounting firm was liable for award contraventions by its client.
The Fair Work Ombudsman investigated the client, Blue Impression Pty Ltd, for award contraventions and ultimately commenced proceeding against Blue Impression, one of its managers and notably, Ezy Accounting 123 Pty Ltd, a tax and accounting business that provided advice to Blue Impression. The Ombudsman alleged that Ezy was involved in Blue Impression’s contraventions and should face penalties for that involvement.
The Fair Work Act provides that a person who is involved in a contravention of the Act is also taken to have contravened the Act. A person will be involved in a contravention of the Act if the person:
- has aided, abetted, counselled or procured the contravention; or
- has induced the contravention, whether by threats or promises or otherwise; or
- has been in any way, by act or omission, directly or indirectly, knowingly concerned in or party to the contravention; or
- has conspired with others to effect the contravention.
The cases show that to be involved in a contravention, a person:
- must have knowledge of the essential facts constituting the contravention;
- must be knowingly concerned in the contravention;
- must be an intentional participant in the contravention based on actual knowledge of the facts constituting the contravention, although constructive knowledge may be sufficient in cases of wilful blindness; and
- need not know that the matters in question constituted a contravention.
Ezy argued that it merely processed Blue Impression’s payroll in accordance with instructions and had no knowledge of the facts that made up the contraventions. The Court rejected these arguments noting that Ezy had advised Blue Impression about award contraventions during a previous FWO audit and knew that Blue Impression paid a flat hourly rate that was inconsistent with the award. The Court was satisfied that Ezy, through its director, Mr Lau, “deliberately shut its eyes to what was going on in a manner that amounted to connivance in the contraventions”. The court found that “Ezy (and Mr Lau) had at their fingertips all the necessary information that confirmed the failure to meet the Award obligations … and nonetheless persisted with the maintenance of its (payroll) system with the inevitable result that the Award breaches occurred”. Ezy now faces penalties for those award breaches along with Blue Impression and its manager.
In the address to AHRI referred to above, the Fair Work Ombudsman said:
“We have been adventurously testing the limits of accessorial liability provisions to ensure someone is held responsible for breaches of the Fair Work Act”
It is clear that this adventurous testing will continue. Employers, managers and their advisers would do well to heed the Ombudsman’s warning and take steps to protect themselves. At a minimum, managers and advisers should take steps to:
- educate employees and clients about workplace laws;
- proactively identify contraventions;
- offer advice about risks and rectification; and
- keep records of the above.
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