The Federal Circuit Court has used the Fair Work Act 2009(Act) to hold company directors personally liable to pay compensation for Award underpayments to an employee in Roberts v A1Scaffold Group Pty Ltd & Ors [2015] FCCA 422.

The case highlights the potential for a company’s current and former officers and employees to be held liable to pay compensation to an employee or former employee where a company fails to comply with an Award, including where a company is in liquidation.

The case of Roberts v A1 Scaffold Group Pty Ltd

Mr Roberts brought, amongst others, a claim that he had been underpaid by his employer in the years prior to his dismissal.

Mr Roberts not only named A1 Scaffolding Group Pty Ltd and its current director as a respondent, but also the former directors of related liquidated or deregistered companies that had previously undertaken similar businesses to that now conducted by A1 Scaffolding Group Pty Ltd.  Those companies were “A1 Scaffolding Pty Ltd”, “A1 Scaffolding (NSW) Pty Ltd” and “A1 Scaffold Pty Ltd” (collectively, the A1 Companies, each of which had conducted a similar business using largely the same assets and core personnel).

Applying the provisions of section 550 of the Act, the Court found that, in each instance, the employer acted through the “personal” respondents (ie the directors and former directors),  who were found to have had requisite knowledge of the contraventions and to have failed to remedy them.  It accordingly found that they had each breached a civil remedy provision.

The relevant provisions of the Act

Section 550 of the Act provides that a person “involved in” a contravention of certain provisions of the Act will be taken to have contravened the provision themselves. Once such a finding is made, the individual, and not just the corporate entity, may be ordered to pay a penalty under the Act.  Proceedings may be brought against an individual under the section without having to bring similar proceedings against the corporate entity.

The  explanatory memorandum to the Act, when referring to what is now section 550,  states that an individual found to have been “involved in” a contravention pursuant to section 550 is not personally liable for any underpayment: 

However, while a penalty may be imposed on a person involved in a contravention, the clause does not result in a person involved in a contravention being personally liable to remedy the effects of the  contravention.  For example, where a company has failed to pay, or has underpaid, an employee wages under a fair work instrument, the  director is not personally liable to pay that amount to the employee. [Explanatory Memorandum, Fair Work Bill 2009 (Cth) para 2177]

Section 550 does not, by itself, create  personal liability for any underpayment.  However, under section 545(2)(b) of the Act, a Court finding that a “person” has contravened a civil penalty provision, including by operation of section 550 of the Act, may order that person, in addition to imposing any penalty, to pay compensation for loss that an employee has suffered because of that contravention.  The award of compensation is usually made against the employer entity, rather than an individual. However, as seen in Roberts, a personal respondent may be ordered to pay compensation, and a failure to pay may see the individual pursued for breaching a Court order.

In Roberts, the various directors and A1 Scaffolding Group Pty Ltd were ordered to pay compensation to cover the underpayments made to Mr Roberts.

While Robert’s involved directors and ex-directors, section 550 of the Act makes a broad reference to  “a person involved in a contravention”.  Accordingly, accessorial liability will not necessarily be restricted to a director of an employer company but could include other employees, for example, a human resources manager.

It is worth noting that in addition to liability for any compensation awarded, an individual found to have been involved in a contravention may also be ordered to pay a civil penalty, up to a maximum of $10,200.

Lesson learned

While findings against directors under section 550 of the Act are still a relatively new occurrence, Roberts v A1Scaffold Group serves as a timely reminder that directors and senior personnel can be named, and ultimately found liable, under the Act. This may be the case even if the company itself is in liquidation or deregistered.