Employees in Australia should be aware that breaching laws designed to protect competition and consumers in the Competition and Consumer Act (2010) (CCA) can not only result in penalties and damages claims for their employer, but also for themselves.
An individual can be prosecuted for their personal involvement in a breach of the CCA. Claims can be brought against individuals by the Australian Competition and Consumer Commission (ACCC) and by persons who have suffered loss and damage because of the breach.
The potential implications for individuals are serious; financial penalties (potentially in the hundreds of thousands of dollars which cannot be paid by their employer on their behalf), disqualification from managing corporations, mandatory training and, although yet to be awarded by Australian courts, the ever present threat of jail time for the most serious of offenders engaged in cartel conduct.
What level of involvement does an employee need to have?
An individual can be held liable for breaching the CCA if the Court is satisfied the person:
• has engaged in the conduct which is a breach of the CCA; • has attempted to engage in the conduct which is a breach of the CCA; • has aided, abetted, counselled or procured someone else to breach the CCA; • has induced, or attempted to induce someone else, whether by threats or promises or otherwise, to breach the CCA; • has been in any way, directly or indirectly, knowingly concerned in, or party to, a breach by someone else of the CCA; or • has conspired with others to breach the CCA.
This means the nature and level of involvement that an individual needs to have in a breach can encompass a broad range of conduct – from simply knowing all of the facts that make up the breach to being the person who carries out the breach or who incites others to do so. Merely attempting to do these things can be enough to get an individual in trouble. It is no defence that your attempts were unsuccessful! You don't have to be the ringleader, as the law captures those who are involved.
The ACCC does not necessarily focus only on directors or the CEO of the company either – while each case is different and dependant on its facts, the ACCC is likely to look more broadly than just at management and can also look at all those employees who may have had some involvement in the potential breach to determine who to prosecute.
What is an individual's liability?
There are different levels of penalties which can be awarded, depending on the nature of the provision which is breached.
For breaches of the consumer protection provisions (such as making a false or misleading representation) individuals can be liable to penalties of up to $220,000 per offence.
For breaches of the competition provisions (including price fixing, market sharing, and bid rigging):
• Criminal Cartel Offences: the Court is able to award a term of imprisonment not exceeding 10 years, and/or a fine not exceeding 2000 penalty units (currently $360,000) or both. While this penalty has yet to be awarded by an Australian court to an individual for cartel conduct, it is only a matter of time until this occurs;
• Civil Cartel Offences: Each act or omission brings with it a potential penalty of $500,000. This penalty is significant given the individual must pay this penalty and cannot be indemnified by their employer.
In addition to these penalties any breach of the CCA can expose an individual to:
• Damages claims: An individual employee of a corporation could be liable for damages that flow from their involvement in a breach of the CCA.
• Injunctions: A Court can order an individual be prevented from further engaging in any conduct the Court deems appropriate. This will be enacted by the Court to ensure that a person who has already engaged in unlawful conduct will not engage in that conduct again.
• Other orders are also available to the Court to make, including disqualification from management orders and/or orders that the individual attend trade practices awareness training.
What should you do if you think you may have been involved in a breach of the CCA?
Any individual who thinks he or she may have breached the CCA should raise the matter with their supervisor or compliance officer (if the employer has one). It is important never to sweep potential breaches under the carpet because the consequences for both employers and employees can be severe.
Timing is particularly critical when it comes to cartel conduct, as the ACCC and the Commonwealth Director of Public Prosecutions can provide immunity from prosecution for companies and their employees in some circumstances for those willing to co-operate. Immunity is generally only available in circumstances where no other party has applied for immunity beforehand. For other breaches, the ACCC has a co-operation policy which can result in lesser penalties being awarded where the employer and employee involved co-operate with the ACCC.
So … a head in the sand is not really an option. The potential penalties are severe, especially in light of the fact that individuals cannot be indemnified by their employers, so, if in doubt, come clean and seek legal advice.