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Employer Insights: Accessorial Liability for Business Advisors

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Accounting Firm & HR Manager Fined for Involvement in Contraventions of the Fair Work Act 2009(Cth)*

NOVEMBER 2017

  • Accounting firm fined $53,880 and Human Resource Manager fined $21,760 for contraventions of the Fair Work Act 2009 (Cth) (FW Act).
  • In both cases, the Court effectively held that as payroll advisors "involved in" the employer's contraventions, the advisors became accessorially liable for those contraventions.
  • The Fair Work Ombudsman will be pursuing individuals and advisors who are involved in contraventions by employers.
  • It is more important than ever for advisors to obtain appropriate employment law advice.

In an important update to our previous employment alerts, in Fair Work Ombudsman v Blue Impression Pty Ltd & Ors (No. 2) [2017] FCCA 2797 a Court has imposed a fine on an accountancy firm that was involved in underpayments made by their employer client.

The Court had earlier held that as a business advisor to the employer, the accounting firm had a responsibility to ensure there was compliance with the FW Act, as they were sufficiently 'involved in' the contraventions in question.

In a decision that should serve as a stark warning to advisors to employers, the Court imposed penalties of $53,880 on the accountants. This penalty amounted to only 15% of the maximum the court could have imposed for the contraventions. It is therefore clear that the potential exposure to advisors, held accessorially liable for breaches of the FW Act, is significant.

This decision comes literally weeks after the Court's earlier, and directly relevant, decision in Fair Work Ombudsman v NSH North Pty Ltd trading as New Shanghai Charlestown [2017] FCA 1301.

In this decision, a HR manager was ordered to pay penalties of $21,760 for her role in processing underpayments and helping to falsify records for an employer who failed to pay minimum rates and entitlements to employees.

Importantly, the penalties in these cases were imposed in respect of contraventions that occurred prior to the recent amendments made by the Fair Work Amendment (Protecting Vulnerable Workers) Act 2017 (Cth) (see our related article), which significantly increased the maximum penalties for employers (and accessorially liable advisors) found to be deliberately exploiting vulnerable workers or making false records.

The Fair Work Ombudsman will continue to pursue individuals and advisors who are involved in contraventions by employers. Similarly, employees are increasingly naming individual managers in claims.

The accessorial liability provisions can extend to anyone involved in a contravention - not just accountants or human resource professionals. However, given the frequency with which accountants and human resource professionals provide advice on matters such as payroll and general compliance under the FW Act, it is more important than ever that those tasked with this responsibility are aware of the obligations provided for in the FW Act.

Do these developments mean that all advisors are required to become experts in employment law to avoid a potential prosecution? No. To be caught by the accessorial liability provisions, it is necessary for an individual to be 'involved in' a contravention. This is a legally complex phrase defined in section 550 of the FW Act. The scope and practical application of this provision will continue to be debated before the Courts. In the interim, what is clear is that the FW Act does require that individuals tasked with ensuring FW Act compliance, are required to take effective and reasonable steps to ensure compliance with the FW Act.

If you would like further information, advice, or are interested in either a FW Act compliance audit and/or being provided with our tailored seminar entitled Practical Tips and Traps – Avoiding Accessorial Liability for Managers and Professional Advisors, please contact us to discuss further.

*These developments are not applicable to our readers in State and Local Government in South Australia.

Disclaimer

The content of this newsletter is for general information purposes only and should in no way be treated as formal legal advice.