Workplace law breaches: Third party business advisors beware
Coutts Solicitors and Conveyancers | June 15, 2017
HR ADVISORS, ACCOUNTANTS AND PAYROLL PROVIDERS TAKE NOTE – YOU MAY BE PERSONALLY LIABLE FOR BREACHES OF THE FAIR WORK ACT.
It is extremely common nowadays for small businesses with limited resources to rely heavily on their trusted advisors to keep their business running. A tricky situation arises when breaches of the Fair Work Act occur. Who is liable if the trusted advisors give incorrect or bad advice, or deliberately assist with a contravention of the Fair Work Act? Fair Work Ombudsman Natalie James has stated that in the circumstances where third party advisors assist in contravention of the Fair Work Act, the Fair Work Ombudsman believes the third party advisors should be held accountable, and a recent decision handed down against EZY Accounting 123 Pty Ltd demonstrates this.
WHAT YOU NEED TO KNOW
- The decision recently handed down demonstrates that the Fair Work Ombudsman has found third party business advisors liable for their clients’ breaches.
- On 28 April 2017, the Court delivered its decision in Fair Work Ombudsman v Blue Impressions Pty Ltd & Ors, marking the first time that the Fair Work Ombudsman has prosecuted a third party business advisor for breaches by a client’s business.
- The third party business advisor, Ezy Accounting 123 Pty Ltd, was the accountancy firm for Blue Impressions Pty Ltd, and also provided payroll services a part of its engagement with Blue Impressions Pty Ltd.
- This case now sets the bar that, any actual or constructive knowledge of a client’s contravention of the Fair Work Act, renders the third party business advisor a knowing participant in the breach of the Fair Work Act.
- Therefore, those in third party advisory positions such as human resources advisor, accountants, and payroll providers, must actively consider if the work they are providing and undertaking may potentially facilitate a breach of the Fair Work Act.
- A breach of Section 550 of the Fair Work Act attracts significant penalties – with the maximum penalty for an individual being $10,200, and $51,000.00 for a corporation.
SUMMARY OF FACTS
- Blue Impressions Pty Ltd ran a Japanese fast food outlet in Melbourne. They were taken to court in 2016 by the Fair Work Ombudsman for underpaying two Taiwanese backpackers (totalling nearly $10,000.00).
- Ezy Accounting 123 Pty Ltd was also taken to Court by the Fair Work Ombudsman for its involvement in the underpayment claim.
- Ezy Accounting 123 Pty Ltd processed the wage payments for the two workers, knowing the rates they were being paid were well below the lawful minimum (the workers were allegedly paid a flat rate of $16.50 per hour).
- The Court found that Ezy Accounting 123 Pty Ltd had breached the Fair Work Act by being ‘involved in’ their client’s breaches and as such were accessorially liable (pursuant to section 550 of the Fair Work Act). Accessorial liability is, in plain terms, being an accessory to a wrongdoing or breach of the Fair Work Act (and as such sharing the responsibility of the wrongdoing or breach). Section 550 of the Fair Work Act provides that a person is accessorially liable if that person:
- Has conspired with others to effect the contravention;
- Has been in any way, by act or omission, directly or indirectly, knowingly concerned in or party to the contravention;
- Has induced the contravention, whether by threats or promises or otherwise;
- Has aided, abetted, counselled or procured the contravention.
WHAT DOES THIS MEAN FOR YOU?
- As a result of this decision, third party business advisors that are knowingly concerned in or involved in their client’s breaches of the Fair Work Act can also be found to have breached the Fair Work Act by way of accessorial liability (section 550 of the Fair Work Act).
- Third party advisors have previously used the defence that it is not their responsibility to ensure their client is not breaching the legislation, and further, that whilst they had the knowledge of the essential facts of the breach, they didn’t realise it was in fact a breach.
- Case law now provides that third party advisors may still be in breach when:
- The advisor has knowledge of the essential facts of the contravention;
- The advisor is knowingly concerned in or involved in the breach;
- The person is an intentional participant in the breach – wilful blindness is not an excuse.
- It is therefore not sufficient for you, as a third party advisor, to simply say that you are just taking instructions.
LESSONS TO LEARN AND MOVING FORWARD
- Here are some steps to incorporate into your everyday business in order to avoid becoming liable under section 550 of the Fair Work Act:
- Know your obligations under the Fair Work Act and the relevant award in which you are advising on, and provide advice within these boundaries.
- Review your contracts/agreements to include the following:
- Clauses that require clients to adhere to the requirements of the Fair Work Act, and further, a disclaimer from the client acknowledging that they comply with all relevant laws; and
- “Release and indemnity” clauses which release and indemnify you as a third party advisor for any breaches of workplace or employment law legislation and regulations.
- If you are ever in doubt regarding whether or not your client is complying with their legal obligations – seek early legal advice yourself, and, refer your client to an employment lawyer.
If you're having doubts as to whether you are now vulnerable to a claim under the Fair Work Act, contact Coutts Solicitors and Conveyancers to discuss today.
