Cause for Vigilance!
A string of recent employment cases involving the Fair Work Ombudsman have clearly illustrated the risk posed by the ‘accessorial liability’ provisions within the Fair Work Act.
- accessorial liability is a legal doctrine used to extend legal responsibility for an unlawful act to those involved in or associated with the act
- in employment claims, accessorial liability can also render a director and/or manager liable for an employer’s contravention of the Fair Work Act
Accessorial Liability under the Fair Work Act
Under the Fair Work Act a person who is ‘involved’ in a contravention of the Fair Work Act is taken to have contravened that provision, where the person:
- has aided, abetted, counselled or procured the contravention; or
- has induced the contravention, whether by threats or promises or otherwise; or
- has been in any way, by act or omission, directly or indirectly, knowingly concerned in or party to the contravention; or
- has conspired with others to effect the contravention.
Founding Employment Decision
The foundation for such claims brought under the Fair Work Act was the decision of Guirguis v Ten Twelve Pty Ltd & Anor where the court held that in order for a person to be liable under the accessorial liability provisions of the Fair Work Act the person must:
- have knowledge of the essential facts constituting the contravention;
- be an intentional participant in the contravention based on actual knowledge and not constructive – although constructive knowledge may be sufficient in cases of wilful blindness; and
- need not know that the matters in question constituted a contravention.
Director Employment Law Liability Court Case One
The accessorial liability provisions of the Fair Work Act were recently applied to find a director accessorily liable for the underpayment of employee wages in FWO v Step Ahead Security Services Pty Ltd & Anor where:
- the Fair Work Ombudsman sought to recover approximately $22,700 in underpayments from a security business operated by a sole director
- due to concerns that the security business would be wound up before the underpayments were recovered, the Fair Work Ombudsman commenced proceedings against both the company and the sole director, relying on the accessorial liability provisions of the Fair Work Act
- the court held that the director was knowingly involved in the contraventions by setting the employee’s pay rates, and despite being subject to 13 separate employee complaints about underpayments, had taken no steps to investigate or remedy the underpayments
- the court held that the sole director and the employer company were jointly and severally liable for the unpaid wages, meaning that the director would be personally liable for the unpaid wages if the company was unable to pay them
- in addition to the unpaid wages, the director was ordered to pay penalties amounting to $51,400 and the employing company was ordered to pay penalties amounting to $257,000
Director Employment Law Liability Court Case Two
In the case of FWO v Sona Peaks Pty Ltd & Anor (No.3) the accessorial liability provisions of the Fair Work Act were relied upon to impose penalties upon a director even after his involvement with the employer company ceased and in that case:
- the individual in question was the sole director and secretary of an employer company which had operated a restaurant business
- whilst trading, the employer company had underpaid its employees over $11,000 in wages
- the restaurant ceased trading and the business was sold prior to the proceedings being commenced
- in the initial underpayment proceedings in July 2015, the court ordered the employer company to repay $11,000 in unpaid wages and the director to pay a penalty of $23,715
- as at March 2016, the penalty remained unpaid
- subsequently, the court made an ‘attachment of earnings’ (garnishee) order which required the director’s new employer to make regular deductions from his wages until the penalty was paid in full
HR Manager Employment Law Liability Court Case
Finally, the decision in FWO v Oz Staff Career Services Pty Ltd & Ors (No.2) resulted in the accessorial liability provisions of the Fair Work Act being applied to a HR Manager who was aware of, and involved in, various contraventions of the Fair Work Act and in that case:
- the employer had made unlawful deductions from the wages of its employers, including administration fees, and deductions for meal allowances
- the HR Manager disputed liability for the contraventions, claiming that he did not know that the deductions contravened the Fair Work Act
- the court held that the HR Manager knew that deductions were being made, and knew from his previous dealings with Fair Work inspectors that deductions from wages were prohibited except in certain circumstances
- in addition, the employer had created and submitted to the Fair Work Ombudsman false and misleading wage records which did not show the deductions made to staff wages
- the court held that the HR Manager knew that the wage records did not accurately reflect the true nature of the employees’ wages and thus were false and misleading
- the HR Manager was ordered to pay a penalty of $9,920 for his involvement in the contraventions
These employment law decisions illustrate that the Fair Work Ombudsman is becoming increasingly proactive in pursuing significant compensation and penalties against directors and other decision-makers involved in contraventions of the Fair Work Act.
Please call the leading employment lawyers in Parramatta, the Matthews Folbigg Workplace Solutions employment law team on 9635-7966 to speak with one of our employment lawyers.