February 2017

Personal liability for employment law breaches: a broader approach means more of us are in the firing line

The Fair Work Ombudsman, Natalie James, has said that the Fair Work Ombudsman is “adventurously testing the limits of accessorial liability provisions”.  Last financial year the FWO sought orders against accessories in 46 out of 50 matters she filed in court. 

The adventure (and development of the law) will continue this year.  Ms James tweeted in January 2017 that a payroll manager has “now paid a price” after being fined $7,000 for being involved in the underpayment of workers.

Not only is the FWO pursuing individuals facilitating breaches, the trend is for individual applicants and their lawyers to also include managers and work colleagues in claims for breaches of employment laws under the accessorial liability provisions in the Fair Work Act 2009. 

If you are involved in facilitating a breach of workplace laws, you can be personally liable to a penalty and to pay compensation.  An accessory can be human resources staff (including payroll officers), advisors, managers and even recruiters.  An accessory could even extend to those higher up in supply chains and franchise arrangements. 

In this bulletin, we take a look at the accessory provisions in the FW Act.  In subsequent bulletins, we will analyse the issue in more detail, and critically.  Certainly, some businesses complain that the reach of the accessory provisions goes too far.

What does the legislation say?

Under the FW Act someone who is ‘involved in a contravention’, can be considered an accessory to a contravention of workplace laws by the business.  Currently, the maximum penalty for an individual involved in a contravention is $10,800 per contravention.

The definition of being ‘involved in a contravention’ is broad.  If a person:

  • aids, abets, counsels or procures the contravention, or
  • induces the contravention, by threats, promises or otherwise, or
  • is in any way, by act or omission, directly or indirectly, knowingly concerned in or a party to the contravention, or
  • conspires with others to bring about the contravention,

then that person is involved in a contravention.  That is, that person is taken to have committed the contravention along with the business.

As we discuss below, not knowing that the actual conduct amounts to an offence and is unlawful is not a defence. 

Recent cases

Recent cases are demonstrating that the courts will impose significant penalties against both individuals and businesses that contravene workplace laws. 

It is not uncommon that directors and owners of business are sued for breaching workplace laws.  Recently, a sole director of a security company was ordered to pay penalties for his involvement in the employer’s contraventions of $51,400, and compensation of $22,779 in respect of the underpayments: Fair Work Ombudsman v Step Ahead Security Services Pty Ltd & Anor [2016] FCCA 1482. 

Recent media focus has extended attention to individuals and companies that make up part of a group of companies, such as supply chains and franchises.

This happened in the very recent case of Fair Work Ombudsman v Yoguberry World Square Pty Ltd [2016] FCA 1290, where fines totalling $146,000 were imposed.  Yoguberry is a frozen yoghurt chain that sells take away frozen yoghurt and drinks.

In this case, the parties joined to the proceedings were part of a group of family companies and included the director/owner of the business.  Whilst they all admitted to being involved in the underpayments and other contraventions of the employing corporate entities, what is notable is that the payroll or service company and the owner were also prosecuted and fined under accessorial liability provisions. 

And in another case, two individuals who were part of a supply chain and involved in the underpayment of trolley collectors, were ordered to pay penalties of $44,550 each: Fair Work Ombudsman v Al Hilfi [2016] FCA 193.   

These cases illustrates that accessorial liability can occur in a broad range of circumstances beyond just the traditional boundaries of employer and employee.

It is also wrong to assume that just owners of the employing entity are liable.  There have been other cases where penalties have been imposed against non-director non-owner accessories including human resources staff, administration or day to day managers, staff engaged to assist with recruitment and supervision.

As we said above, the FWO recently on 23 January 2017 secured $143,000 in penalties against a Brisbane business for underpaying two workers $18,000.  Notably, the former payroll and account manager was fined $7,000 for their involvement in the contraventions (despite not being primarily responsible for operating the business).

Are you at risk of a claim against you?

Are you in a position to influence the decisions of the employer? What does it mean to be ‘knowingly involved in a contravention’?

The concept of accessorial liability is not new and has its origins in the then Trade Practices Act 1974 (Cth). Under that legislation, similar worded accessorial liability provisions were used. 

The High Court of Australia in Yorke v Lucas [1985] HCA 65 considered whether under the TP Act for an individual to be ‘involved in a contravention’ that person needed to have actual knowledge that the conduct was in breach of the law.  The High Court said

“There can be no question that a person cannot be knowingly concerned in a contravention unless he has knowledge of the essential facts constituting the contravention ... In the context of the paragraph, a person could only properly be said to be “part to” a “contravention” if his participation was in the context of knowledge of the essential facts constituting the particular contravention in question…..

In our view ... [in order to be knowingly concerned] ...requires a party to a contravention to be an intentional participant, the necessary intent being based upon knowledge of the essential elements of the contravention.

As we said above, ignorance is no defence.

What can the business and you do to reduce risk?

It seems imperative that businesses conduct a compliance audit of the workplace routinely.  This should be done by someone who has knowledge of the relevant legal obligations, work related entitlements, and workplace laws.

Training of staff, directors and persons who are able to influence decisions of the employer is pretty obvious but an essential step to achieve compliance.  

And, of course, if an employee complains about compliance of workplace laws, act on it.  Make sure complaints are handled appropriately.

Author: Deanna Oberdan