This case1 confirmed that advisors can be legally liable when their clients breach the Fair Work Act.
In April 2017, the Federal Circuit Court handed down a decision2 declaring that a restaurant had underpaid its workers in relation to the applicable award. The Court also declared that the restaurant’s accountant, Ezy Accounting 123 Pty Ltd (EZY), was an accessory to the restaurant’s contraventions of the award. EZY was ordered to pay a penalty of $53,8803.
EZY appealed the decision and in August this year, the Federal Court handed down its decision, upholding the decision of the Federal Circuit Court that EZY was an accessory to its client’s breaches of the award.
In the first instance case brought by the Fair Work Ombudsman (FWO), the restaurant admitted underpaying its employees. The FWO also alleged that EZY, which had provided payroll services to the restaurant, was involved in the underpayments as an accessory. EZY did not admit its part in the underpayments and defended the case.
Under the Fair Work Act4, a person (including a company) that is found to be an accessory to another party’s breach of an award (and other breaches of the Fair Work Act), can be penalised as if they had themselves committed the breach.
In the appeal, EZY claimed it was not an accessory because it didn’t have the requisite knowledge of the contraventions to make it liable submitting it was just following its client’s instructions.
The Federal Court disagreed, finding that EZY did have the relevant knowledge because EZY, through its director:
- knew that the employees were covered by the modern award that provided for a base rate of pay for ordinary hours of work and for penalty rates and allowances
- knew that the restaurant was underpaying its employees because it knew the rates in the payroll system – that EZY ran for the restaurant – were not sufficient to meet the requirements of the award and therefore
- knew the employees were being underpaid.
As well as EZY’s knowledge of the contravention there was a practical connection between EZY and the conduct of the restaurant because EZY had facilitated the underpayments by processing the restaurant’s payroll.
As with previous cases, (including one where an HR manager was found liable for her employer’s award breach), this case reinforces that the FWO will take a broad view of whom is responsible for ensuring employees receive their minimum entitlements.
Those who advise employers, including HR professionals, accountants and legal advisors should keep their potential personal exposure in mind and act accordingly when advising about minimum legal obligations.