A recent decision of the Federal Circuit Court has confirmed that accountants can now be held liable for the underpayment of their client’s employees. This follows other recent decisions in which an HR advisor and a payroll manager have been found personally liable for similar underpayments.

Businesses that play an advisory role in employment matters should take extra care to ensure they provide appropriate advice to their clients. The Fair Work Ombudsman has demonstrated that businesses who turn a blind eye to underpayments and other non-compliance by their clients are placing themselves at risk.

The Decision

After investigating allegations that two fast food employees were being paid below the legal minimum, the Fair Work Ombudsman commenced proceedings against both the Employer and an accountancy firm, EZY Accounting 123 Pty Ltd (EZY Accounting).

The Employer admitted underpaying the two employees nearly $10,000, but EZY Accounting denied any wrongdoing. The Ombudsman alleged the accountancy firm was “involved” in the underpayment and was, therefore, equally liable.

The Ombudsman relied on section 550(2)(c) of the Fair Work Act 2009, which provides that a person is involved in a contravention if the person “has been in any way, by act or omission, directly or indirectly, knowingly concerned in or party to” the contravention.

While EZY Accounting claimed it had no knowledge of the applicable Modern Award or the relevant minimum rates of pay, the Ombudsman was able to show the accountancy firm had assisted the employer with an underpayment issue following an audit in 2014. Further, EZY Accounting was found to have received an email from the Employer outlining Award provisions for “ordinary hours, hours on Saturdays and Sundays, along with allowances including for uniform.”

Judge John O’Sullivan commented that the underpayment would have been revealed to EZY Accounting after “even the most basic query”, and found it was wilfully blind to the unlawful practices of the Employer. He found that EZY Accounting 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”.

The court will now determine the penalties against EZY Accounting, which could be up to $54,000 for each of the seven breaches of the Fair Work Act 2009.

Risks for Businesses

These recent decisions show that the Ombudsman is now focussing on who is responsible for non-compliance with workplace legislation, Awards and workplace instruments. It is now pursuing businesses and individuals, including other employees, who provide advice to employers. This may include accountants, lawyers, HR personnel, payroll managers, franchisors, and consultants.

However, if an advisor provides the correct advice, in good faith, to an employer and the employer continues with the non-compliance, the Ombudsman has stated that the advisor is unlikely to be pursued.

Ticli Blaxland Lawyers regularly provides advice about compliance with federal and state workplace legislation, Awards, and other workplace instruments, including advice about employment conditions, rates of pay and dismissals. If you would like any advice about your business, or any business you advise, please contact James Blaxland on (02) 66 487 487 or email at james.blaxland@ticliblaxland.com.au

 

This article is intended to be for information and educational purposes only and cannot be relied upon as legal advice. The information may not apply to your circumstances or to your particular situation. If you need specific advice or you have any questions, we welcome you to contact us directly.