In brief
The scope for being found accessorily liable for certain breaches of the Fair Work Act 2009 (Cth) (Act) is broad and can extend to company directors, human resources personnel, payroll officers and managers/supervisors. External advisors and companies (including payroll providers, accountants, franchisors and franchisees) can also be captured as accessories under the Act.
In view of the above, it is important for all persons who can be held to be ‘involved in’ a contravention of the Act to be aware of how to best mitigate the risk of having civil penalty orders made against them.
What you need to know
- Company directors, human resources personnel, payroll officers, managers and supervisors, third party advisors (such as accountants and payroll providers) and franchisors/franchisees can be held accessorily liable for certain breaches of the Act.
- Civil penalty orders can be made against individuals and companies found to be accessorily liable.
- The risks of being found accessorily liable can be mitigated by taking steps such as recording, in writing, any recommendation that you make regarding noncompliance by the employer and obtaining individual legal advice.
What is accessorial liability under the Act?
Pursuant to section 550 of the Act, any person who is ‘involved’ in a contravention of a civil remedy provision of the Act is taken to have contravened that provision. The civil remedy provisions of the Act relate to, among other things, underpayments, adverse action and discrimination, sham contracting and breaches of the National Employment Standards.
What does it mean to be ‘involved’ in a contravention?
A person is taken to have been ‘involved’ in a contravention of a civil remedy provision if they have:
- aided, abetted, counselled or procured the contravention;
- induced the contravention, whether by threats or promises or otherwise;
- been in any way, by act or omission, directly or indirectly, knowingly concerned in or party to the contravention; or
- conspired with others to effect the contravention.
Who can be held accessorily liable?
Section 550 of the Act can extend to anyone ‘involved’ in a contravention including:
- company directors, human resources personnel, payroll officers, managers and supervisors; and
- external persons and/or companies (such as HR consultants, accountants, payroll providers and franchisors/franchisees).
A recent decision of the Federal Circuit Court in Fair Work Ombudsman v Blue Impression Pty Ltd & Ors [2017] FCCA 810 makes it clear that third party advisors can be held accessorily liable for an employer’s contraventions.
In this case, EZY Accounting 123 Pty Ltd (EZY) (an external accountancy firm that provided bookkeeping and data entry services to the employer) was found accessorily liable in relation to underpayments made by the employer. EZY had actual knowledge of the underpayments and had failed to take action to rectify the underpayments or cease acting as an advisor to the employer.
What civil penalties are associated with accessorial liability?
There are hefty penalties associated with accessorial liability which are increasing post 1 July 2017 to a maximum of $12,600 per breach (for individuals) or a maximum of $63,000 per breach (for corporate entities).
Multiple breaches can result in multiple civil penalties being imposed.
How do you mitigate the risk of being found accessorily liable?
Aside from not participating in any contravention, a person will also need to take proactive steps to prevent (or at least recommend against) contraventions of the Act in order to mitigate the risk of being found to be an accessory.
Doing nothing will not protect a person from accessorial liability. In the case of Australian Building and Construction Commissioner v Moses & Ors [2017] FCCA 738a union delegate was found to be an accessory for his actions in failing to speak up and/or correct the record (despite being given several opportunities to do so) when a union organiser made misrepresentations to employees and threatened adverse action in order to entice them to join the union.
The below steps may assist in mitigating your risk of being found accessorily liable:
- be equipped with the knowledge of the Act and other relevant laws in order to ensure that your actions and practices are compliant;
- take steps to advise and/or recommend (in writing) against a particular action or practice if it will contravene the Act;
- if the employer or person continues to engage in the particular action or practice that contravenes the Act, obtain external legal advice as to your options and potential liability in the circumstances;
- for external providers, consider severing the contractual relationship with the employer altogether; and
- for franchisors, consider assisting a franchisee with employment policies and process from the outset to ensure that all franchisees are adequately set up and aware of their obligations as an employer and conduct regular audits of franchisees.
Conclusion
Section 550 has broad reaching implications on a range of persons and companies. If you require assistance in understanding your obligations, it is important to seek advice in order to place yourself in a good defensible position in relation to any potential liability.
We would be happy to assist you in understanding your obligations and managing your risks, in this regard.
