Federal Court’s fine Accountancy Firm and HR Manager in two recent underpayment prosecutions

The Fair Work Ombudsman has been successful in its recent push for penalties against an accountancy firm and a human resources manager, who were found to be accessorily liable for their client/employer’s contraventions.

Earlier in November, the Federal Court fined a HR Manager $21,760, after it found that she was accessorily liable for the breaches committed by her employer and its Director, who owned and operated a Chinese restaurant.  The Court noted that the HR Manager processed underpayments of nearly $600,000, and deliberately falsified employment records at the direction of her employer, and supplied those records to the FWO.  The Court noted she had failed to take any steps to ensure that the restaurant was complying with its payroll obligations.

In the more recent decision, the Federal Circuit Court handed down the penalty decision following a well-publicised case from earlier this year, where the FWO was successful in establishing the accessorial liability of an accountancy firm.  The firm was found to have shut its eyes to the contraventions of a client, and had actively participated in the contraventions by inputting the incorrect pay rates in the MYOB system that it used to process the client’s payroll.  This was despite the firm having previously participated in a FWO audit, where the client was found to be underpaying its employees.

Judge O’Sullivan handed down a penalty of $53,880 for the accountancy firm.

Lessons for Employers

These decisions should be a warning to advisers and suppliers of services for payroll, and employment law generally.  If you knowingly participate in the underpayment of employees, or are otherwise an accessory to contraventions of an award or the Fair Work Act 2009, then you will put yourself at risk of prosecution.  From these decisions, it is clear that it is not enough to claim ignorance, or say that you acted under instructions – if you knowingly participate in the contravention, then you will be at risk of prosecution.

To mitigate this risk, employers and advisers should ensure they are getting appropriate advice regarding their obligations under the awards and the Act.  There may also need to be consideration of refusing to supply services (such as processing payroll), where the adviser/supplier becomes aware of a deliberate breach.