The Fair Work Ombudsman has successfully prosecuted an accounting firm for its role in a client’s breach of workplace laws

It is well known that Australia’s workplace watchdog, the Fair Work Ombudsman (FWO), prosecutes employers who contravene the primary piece of workplace legislation, the Fair Work Act 2009 (Cth) (FW Act). However, the FWO is increasingly looking to prosecute third party companies and individuals for breaches of workplace laws. As the FWO noted in a presentation at the Law Institute of Victoria Workplace Relations Conference in October 2016, an advisor that facilitates or involves themselves in breaches of the law “may become liable for the sins of [their] clients”.

This is achieved pursuant to section 550 of the FW Act, which provides that a person who is involved in the employer’s contravention can also be held responsible and face significant financial penalties. A person is involved in a contravention if the person has aided, abetted, counselled or procured the contravention, induced the contravention, been knowingly concerned in the contravention or conspired with others to effect the contravention. In other words, for a person to have accessorial liability, they must be a “knowing participant”.

Individuals such as company directors and senior managers, human resources personnel, payroll officers and accountants can, therefore, be personally liable for contraventions such as underpayment of wages. Similarly, companies who aid or have been knowingly concerned in a contravention of the laws, for instance by affecting supply or procurement processes or facilitating or involving themselves in a breach, can also be held accountable.

Accountant “must have known” that its client was in breach and did nothing about it

Just last week, the Federal Circuit Court of Australia found tax and accounting business Ezy Accounting 123 Pty Ltd (Ezy) accessorily liable for various workplace contraventions relating to the underpayment of an employee of its Japanese fast food client, Blue Impression Pty Ltd (Blue Impression).

These findings were despite the evidence of Ezy’s principal that:

  1. he had never met or spoken to the underpaid employee of Blue Impression, never saw him work, had no part in setting his terms and conditions, and did not set his rate of pay or the hours he worked;
  2. Ezy was a service provider to Blue Impression and its role was limited to certain book keeping work, data entry work and the uploading of MYOB files to Blue Impression’s bank;
  3. Ezy had no authority to make any adjustment to the data (relevantly the pay rates) provided to it by Blue Impression;
  4. he had never read the relevant award and did not know the minimum rates under the award, nor that it required the payment of an evening loading, a special clothing allowance or public holiday rates; and
  5. he did not have any legal, human resources or industrial relations expertise and was not retained to advise Blue Impression as to its obligations.

However, the Court held that Ezy’s principal had the requisite knowledge to hold Ezy liable for the FW Act contraventions on the basis that:

  • he had previously received pay rate information from an industrial relations advisor engaged by Blue Impression and had assisted Blue Impression in an audit conducted by the FWO;
  • knowing the pay rates used were incorrect, he did not alter the flat hourly rates in Ezy’s MYOB system – over which he had control;
  • he had told his client to act in accordance with an audit finding letter sent by the FWO, yet did not follow-up his client to check that the pay rates provided to him for use in the MYOB system had been updated; and
  • Ezy had at its fingertips all the information required to confirm that Blue Impression failed to meet its award obligations, but nonetheless persisted with the maintenance of its payroll system with the inevitable result that award breaches occurred.

On the basis that the principal refrained from making enquiries, which amounted to a deliberate shutting of the eyes or calculated ignorance of the situation, the Court found he was wilfully blind. As a result, it was determined that Ezy was aware of the essential facts constituting the contraventions of Blue Impression as required for a finding of accessorial liability.

A hearing on the penalty to be imposed on Ezy is yet to occur. The maximum penalty is $54,000 per contravention. There were 7 in this case.

A cautionary tale

This decision should serve as a reminder to accountants and other business advisors that they can be held liable as an accessory under the FW Act. Despite the scope of the client retainer, actual or constructive knowledge of a client’s contravention of the FW Act may render the accountant or advisor a knowing participant in the breach depending on the circumstances.

As an advisor, you must consider the instructions provided to you and determine whether or not the work you do for your client could facilitate a breach of the FW Act rendering both you and your client at risk of prosecution.

A limited retainer is not a suitable defence and turning a blind eye to questionable conduct is foolhardy. You should always discuss any concerns with your client, or contact us for further assistance.