Earlier in the year we reported that the Fair Work Ombudsman had successfully prosecuted an accounting firm for its role in a client’s breach of workplace laws. The accounting firm’s penalty has now been determined. It is the first time that the Fair Work Ombudsman has secured a penalty against an accounting firm.

As we reported in May this year, the Federal Circuit Court of Australia found tax and accounting business Ezy Accounting 123 Pty Ltd (Ezy) accessorily liable for various contraventions of the Fair Work Act 2009 (Cth) (FW Act) relating to the underpayment of an employee of its Japanese fast food client. You can read the original article about the accounting firm’s liability here.

Last week, the Federal Circuit Court handed down its decision as to the accounting firm’s penalty. Ezy was ordered to pay a pecuniary penalty of $53,880 to the Commonwealth. This was 15% of the maximum penalty of $357,000 faced by Ezy on the basis that there were 7 separate contraventions, which could each attract a $51,000 penalty. Ezy’s client was ordered to pay a penalty of $115,706 for underpaying 2 of its workers a total of $9,549.

Judge O’Sullivan noted that Ezy was not subject to direction by its client as an employee, but was involved in a relationship with its client to provide payroll services. That, said Judge O’Sullivan, required Ezy to “put compliance with the law ahead of business interests. Ezy had a responsibility to ensure there was compliance with, inter alia, the FW Act.”

The factors considered most relevant to the determination of the appropriate penalty for Ezy were:

  1. The nature of the conduct, which included failure to comply with minimum conditions and basic obligations central to the enforcement of employee rights under the FW Act;
  2. The amount of the underpayments – it was determined that Ezy’s contraventions resulted in an underpayment of $750 over 2 fortnights between September and December 2014;
  3. The level of Ezy’s co-operation – unlike its client, Ezy did not admit liability and spare the community the cost of a contested trial; and
  4. The need for specific and general deterrence.

Following the penalty decision, Acting Fair Work Ombudsman Kristen Hannah reminded business advisors that being knowingly involved in the exploitation of workers can result in significant penalties. Ms Hannah said that “These types of trusted advisers must explain the rules to their clients, make it clear when they are in danger of breaking them and not become involved in breaches of the law themselves.”

Could your advice (or lack of it) facilitate a breach by your client?

As we highlighted in our earlier article, despite the scope of a client retainer, actual or constructive knowledge or a client’s contraventions of the FW Act may cause an accountant or business advisor to be a knowing participant in a client’s breach of workplace laws.

As the penalty ordered in this case highlights, the Courts are willing to impose significant penalties against advisors that facilitate or involve themselves in such a breach.

To minimise the risk of accessory liability, you should ensure the following:

  • Consider whether the work you do for your client could facilitate a breach of the FW Act.
  • Don’t turn a blind eye if you receive instructions that disclose a potential breach by a client.
  • Seek advice regarding your concerns, or refer your client to an employment lawyer.