A recent decision Fair Work Ombudsman v NSH North Pty Ltd trading as New Shanghai Charlestown [2017] FCA 1301 (10 November 2017)  of the Federal Court of Australia has seen a significant change in direction where responsible managers are personally fined and held accountable in addition to the actual company for underpayments to employee.

In a further recent decision Fair Work Ombudsman v Blue Impression Pty Ltd & Ors (No.2) [2017] FCCA 2797 (16 November 2017)  the accessorial liability has extended to advisers such as accountants.

AREEA Principal Consultant Bill FitzGerald based in Hobart examines this trend and the implications it has for AREEA members and Managers in those companies.

Decision

In May 2016, Fair Work Ombudsman (FWO) Natalie James spoke about the increasing focus on accessorial liability: “We are increasingly pursuing a broader range of accessories, including accountants and human resources managers.”

The decision  Fair Work Ombudsman v NSH North Pty Ltd trading as New Shanghai Charlestown [2017] FCA 1301 (10 November 2017) confirmed the approach taken by FWO to lift the corporate veil and hold officers personally accountable.

The facts were clearly established in this case where the HR Manager deliberately falsified records in an attempt to prevent the FWO uncovering substantial underpayments made to employees over a 16-month period.

The HR Manager was personally fined $21,760.00.

Justice Robert Bromwich of Federal Court gave minimal weight to the fact that the manager did not have formal qualifications or training in human resources and that she had a family connection with the company.

He observed that, in the first instance, it was “plain” that, despite claims the HR manager had no qualifications or formal training in HR management, “she had sufficient training or capacity to carry out the directions given to her in her role, including the creation of false records”.

He noted, before then, she had not taken any steps to ensure that the restaurant paid correct hourly rates, casual loading, weekend penalty rates, public holiday penalty rates or overtime, contributing to staff being short-changed a total of $583,688.

Justice Bromwich rejected the defence of the Company that they were from a non-English background and culturally the HR Manager was not in a position to defy the instructions of the restaurant manager and he quoted “A distinction must be drawn between vulnerability to being exploited, which is a position of victimhood, and supposed vulnerability by way of reduced ability to resist participation in illegal activity, which is a position of participation.”

In other words the defence of ignorance of the law will not be valid particularly if the company has embarked on a course of illegal activity.

Implications

Bill FitzGerald advises that industrial regulation in Australia has become increasingly complex with the interaction between modern awards, enterprise agreements, contracts of employment and other elements of the Fair Work Act including the National Employment Standards.

Bill recommends that it is prudent to conduct regular audits to ensure compliance in order to avoid potential liabilities of both Companies and Company officers.

AREEA Consultants have sound knowledge and experience and can carry out these audits with precision and can report back expeditiously.

In order to arrange an audit of your employment arrangements contact Bill FitzGerald, AREEA Principal Employee Relations Consultant: 03 6270 2256| [email protected] |