Proctor : October 2016
33 PROCTOR | October 2016 FWO pursues individuals in accessory liability claims Fair game The Fair Work Ombudsman is pursuing a growing number of individuals, including external advisors, involved in alleged breaches of the Fair Work Act. Report by Sara McRostie. The number of proceedings brought by the Fair Work Ombudsman (FWO) under the accessorial liability provision of the Fair Work Act 2009 (Cth) (the Act) is on the rise. Where a corporation is alleged to have contravened the Act, the message is clear that the FWO will look very closely at anyone within the business who is ‘knowingly involved in’ the alleged contravention, as well as its external advisors. In the past year, 46 of the 50 matters prosecuted by the FWO sought orders against accessories.1 This prosecutorial ramp-up has seen the FWO ‘widen the net’ of those it considers should be held responsible for a contravention. What is the law? Section 550 of the Act extends liability stemming from an employer’s breach of certain provisions (known as civil remedy provisions) to individuals who were involved in the contravention. Section 550(2) of the Act provides that a person is involved in the contravention if they: • aided, abetted, counselled or procured the contravention • induced the contravention, whether by threats, promises or otherwise • were 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. The FWO commonly uses s550 to prosecute directors and company officers who are involved in running the employing entity that committed the alleged contravention. More recently, the FWO has extended the target pool to include others such as HR advisors, managers, recruiters and external professional advisors. The Ombudsman has justified this ‘long-arm’ approach by arguing that these advisors may be personally facilitating breaches by failing to caution clients or employers to fulfil obligations. 2 External professional advisors Earlier this year, the FWO commenced proceedings against an external professional advisor in respect of its alleged involvement in the underpayment of two employees of its client. The FWO is prosecuting accounting firm EZY Accounting 123 Pty Ltd and its operations manager under s550 for involvement in an alleged contravention of the Act by its client. It is alleged the accounting firm’s client underpaid two foreign workers at its Melbourne CBD Japanese restaurant by $9549. EZY Accounting provides payroll services to the restaurant operator. This is the first time the FWO has commenced proceedings against an external professional advisor for assessorial liability under the Act. Head contractors and franchisors Accessories can also be other businesses in a position of power within the same supply chain as the employing entity, such as a head contractor or franchisor. The FWO will look up the supply chain where businesses use multi-tiered sub-contracting arrangements. The matters of FWO v Al Hilfi and FWO v Al Basry3 concerned a trolley supply chain, at the top of which sat a large supermarket. The employer of the underpaid employees sat at the bottom of the chain and the trolley- collecting company sat in the middle of the chain as the intermediary. Penalties of $94,050 were ordered against the former owner and general manager of the trolley collecting company. The supermarket entered into an enforceable undertaking with the FWO on the basis it had an “ethical and moral responsibility” for all persons involved in its business. 4 Claims by employees Affected employees may also use s550 to commence proceedings against alleged accessories to a contravention. In Cerin v ACI Operations & Ors,5 an applicant employee was successful in arguing that both his employer and HR manager were involved in breaches of the Act, by failing to provide him with the correct notice of termination of employment. In this case, the employer was ordered to pay the employee a penalty of $20,400 and the employer’s HR manager was ordered to pay the applicant a penalty of $1020. A high bar The FWO and courts will look to the degree of knowledge the individual had at the time of the contravention to establish if there was a sufficient connection and involvement in the breach. Mere knowledge of general non- compliance or suspicions about compliance will not be sufficient to meet the threshold in s550. To prove accessorial liability, the alleged accessory must have been “knowingly concerned in, or a party to” a contravention. In FWO v Oz Staff Career Services Pty Ltd & Ors,6 an HR manager was held to be accessorily liable for altering the employment records of cleaning staff in an effort to conceal illegal wage deductions. Importantly, Burchardt J held that the HR manager was “intimately connected” with the fraud and conscious that the altered records were both misleading and unlawful. Sara McRostie is a partner at Sparke Helmore Lawyers. The assistance of Edwina Sully and Mason Fettell in preparing this article is gratefully acknowledged. Workplace law Notes 1 Natalie James, address to the AHRI Employee Relations/Industrial Relations Network NSW forum, ‘An adviser’s responsibility: the Fair Work Ombudsman’s approach to accessorial liability’, 27 July 2016, from fairwork.gov.au/about-us/ news-and-media-releases/speeches. 2 Ibid. 3 See joint penalty decision Fair Work Ombudsman v Al Hilfi  FCA 193. 4 See ‘Who’s trolley now?’, Proctor May 2015, p16. 5  FCCA 2762. 6  FCCA 105.