September 2018

Liability under the Fair Work Act: a very personal concern

It is becoming too common for plaintiffs and their legal representatives to bring claims personally against managers (and others) they feel were involved in an alleged contravention of the Fair Work Act 2009.

Such an approach by plaintiff employees is, in part, tactical; a step designed to place pressure on the corporate employer to settle for the wellbeing of its manager and staff.  Perhaps, suing the manager is designed to make the manager feel the wrath of the disgruntled employee.  Legitimately, it is to hold a manager to account for their conduct.

In this bulletin we examine how the Fair Work Act holds managers and others to personal account.  We review the recent Full Federal Court decision in EZY Accounting 123 Pty Ltd v Fair Work Ombudsman [2018] FCAFC 134 (20 August 2018), where an accountant was found personally liable for the client’s underpayment of wages.  We conclude with some tips for managers.

Accessorial liability:  section 550

There are many provisions in the Fair Work Act defined as civil remedy provisions meaning that a breach of such a provision exposes an employer to a penalty of up to $63,000 per contravention.  Such civil remedy provisions in the Fair Work Act include:

  • obligations to comply with the NES, modern awards and enterprise agreements;

  • the general protection, or adverse action, provisions; and

  • the sham contracting provision.

One of the hottest sections in the Fair Work Act, s 550, provides “a person who is involved in a contravention of a civil remedy provision is taken to have contravened that provision”. 

Accordingly, if a corporate employer is found to have breached a relevant provision of the FW Act, then a manager involved in the contravention is taken to have also contravened the provision.  As a result, that manager is then personally liable to a civil penalty of up to $12,600 per contravention.

How is a manager “involved in” a contravention?

Section 550(2) of the Fair Work Act provides:

A person is involved in a contravention of a civil remedy provision if, and only if, the person:

(a) has aided, abetted, counselled or procured the contravention; or

(b) has induced the contravention, whether by threats or promises or otherwise; or

(c) has been in any way, by act or omission, directly or indirectly, knowingly concerned in or party to the contravention; or

(d) has conspired with others to effect the contravention.

The two limbs commonly relied on are subparagraphs (a) and (c).

The concept of aid and abet requires the person to intentionally participate in the contravention with the requisite intention to achieve a contravention.  That does not mean the person must know their actions are a contravention; rather have knowledge of the matters or things constituting the contravention.

Actual knowledge may also be inferred from “a combination of suspicious circumstances and a failure to make an inquiry”.

The concept of being knowingly concerned has a different emphasis.  To be knowingly concerned in a contravention, the person must have engaged in some act or conduct which “implicates or involves him or her” in the contravention so that there be a “practical connection between” the person and the contravention:  Fair Work Ombudsman v Devine Marine Group Pty Ltd [2014] FCA 1365 at [178].

EZY Accounting 123 Pty Ltd v Fair Work Ombudsman [2018] FCAFC 134

EZY Accounting was found to be involved in its client’s underpayment of wages.  EZY Accounting disputed liability on the basis its role was simply to enter data into a payroll system; EZY Accounting said it had no authority under its retainer with the client to review hours worked or rates paid to employees.

The Full Federal Court rejected EZY Accounting’s arguments.  The sole director, Mr Lau, was previously aware of an earlier Fair Work Ombudsman audit that identified underpayments by the client.  Despite that knowledge, EZY Accounting continued to process payroll for the client at the same rate of pay that resulted in underpayments.

The Full Court held “the act of facilitating the underpayments knowing them to be underpayments”, meant EZY Accounting was involved in the contravention.  “There was a “practical connection” the Full Court said between Mr Lau’s involvement and the client’s contravention.

It’s not confetti

The outcome in EZY Accounting could be said to be obvious.  There was actual knowledge of the contravention but no action taken other than to continue to facilitate the ongoing contraventions.  Hiding behind client instructions was not an adequate excuse.

Corporate employers only act through its officers, and in particular managers.  But is every manager personally liable for every contravention of the corporate employer?  There are limitations:

  • A person cannot be “involved in” conduct for the purposes of s 550merely by reason of [their] knowledge of the conduct being pursued”: Fair Work Ombudsman v Priority Matters Pty Ltd [2017] FCA 833.

  • To be “involved in” conduct there has to be some conduct which “implicates” a person in the offending conduct such that they become “involved in” or “associated with” that conduct: Construction, Forestry, Mining and Energy Union v Clarke [2007] FCAFC 87.  Simply being a manager in the business is not enough.

  • The person must have been an intentional participant with knowledge at the time of the contravention of the essential elements constituting the contravention.

  • A person cannot be involved in an adverse action claim if they have no knowledge of the protected attribute or workplace right: Milardovic v Vemco Services [2016] FCA 19; Fair Work Ombudsman v Oz Staff Career Services Pty Ltd [2016] FCCA 105.

Tips for managers

Managers can take steps to protect themselves or minimise exposure by:

  1. Gaining an understanding of the law and keeping up to date.

  2. Acting on employee complaints and concerns including about compliance with the Fair Work Act.

  3. Making genuine and well-considered decisions in good faith.

  4. Not being afraid to raise concerns over decisions that do not seem right. Simply implementing an instruction of a manager that you know is wrong will leave you exposed.  Seek to fix the problem, if you can.

Invariably being a manager means you will be involved in many employment related decisions.  Taking the above steps helps you to make good decisions and minimise your exposure.

Author: James Mattson