Personal liability for breaches of employment laws

This article – the ninth in our series on the legal and practical matters small businesses ought to consider in relation to the employment life cycle of an employee, from the recruitment stage to the employee ceasing to be employed – looks at the extent to which individuals can be personally liable for breaches of employment laws.

The accessorial liability provisions contained in the Fair Work Act 2009 (FW Act) are derived from the law relating to the liability of an accessory under the criminal law. In short, a person who is involved in a contravention of a civil remedy provision under the FW Act is taken to have also contravened that provision. A court must find there has been a primary breach of the FW Act by the employer before the accessorial liability provisions can be applied to others.

Any person or organisation could potentially be personally liable under the accessorial liability provisions. As a list of examples, owners, investors, directors, other company officers, HR managers, other managers, payroll officers and external accounts can all be personally liable for breaches of Australian employment laws.

In Fair Work Ombudsman v Blue Impression Pty Ltd & Ors [2017] FCCA 810 an accountancy practice was found to have been involved in a contravention of the FW Act for failing to take action to ensure its client’s employees were properly paid in accordance with the minimum requirements as specified in the relevant award.

Ensuring that those involved in, or overseeing, compliance with employment laws are responsible for compliance with those laws is a very effective tool being used by the Fair Work Ombudsman.

In the Blue Impression case, it was apparent that the accountancy practice had knowledge of earlier breaches of the award and consequently the FW Act. However, it argued that it should not be liable as an accessory for breaches of the FW Act because it only provided book keeping services, that it had no advisory role as to minimum obligations under the award and that its key director did, “not have any legal or human resources or industrial relations expertise, which would equip [him] to advise Blue Impression as to its obligations under any award or under the [FW Act]” (at para 35).

The accountancy practice also argued that it hadn’t been asked to provide advice on pay rates and, therefore, should not be liable.

The Court found that the accountancy practice was liable as an accessory for being involved in Blue Impression’s contravention of the FW Act. The Court was satisfied on the evidence that the accountancy practice must have known that the employer was underpaying its employees because it knew the rates in the payroll system were not sufficient to allow the employer to comply with its obligations in the award.

The Judge said, “I am satisfied the evidence demonstrates [the accountancy practice through its key director] deliberately shut its eyes to what was going on in a manner that amounted to connivance in the contraventions by [the employer]” (at para 102) and that, “I accept…that [the accountancy practice and its key director] had at their fingertips all the necessary information that confirmed the failure to meet the Award obligations by [the employer] and nonetheless persisted with the maintenance of its (payroll) system with the inevitable result that the Award breaches occurred” (at para 108).

The decision provides a useful reminder about shared obligations to ensure an employer’s compliance with the FW Act.  Those persons aware of information (or who should be aware of it) which could potentially give rise to a breach of the legislation should pay careful attention to compliance with employment laws and ensure that an employer takes prompt corrective action where non-compliance is discovered.

Jeremy Cousins, Principal, Whitehall Workplace Law