Australia: HR manager accountable for breaches of employment laws

Last Updated: 4 August 2011
Article by Joe Catanzariti

In a recent Federal Magistrates Court decision, a Human Resources manager was found liable for breaches of employment laws regarding non-payment of wages and engaging in a "sham contract" arrangement. In Fair Work Ombudsman v Centennial Financial Services Pty Ltd (2010) 245 FLR 242, even though the HR manager was simply "following instructions", and had limited control over the employer, it was found that he had a responsibility to ensure that the company complied with workplace relations laws.

It is evident that HR managers may not be able to rely on their lack of authority or influence over the actions of the company in order to avoid liability over breaches of employment laws. HR managers should at least ensure that they attempt to advise the employer on their legal obligations.

It should also be noted that under the Fair Work Act 2009 (Cth), an individual may be fined up to $6,600 for each contravention.


Rolf Mertes was the sole director and shareholder of Centennial Financial Services Pty Ltd and was responsible for the day-to-day management and operation of the business. Christopher Chorazy was employed as Centennial's HR manager. In 2007, Centennial employed a number of "Corporate Associates" to perform sales duties while being paid a salary at the federal minimum wage level.

After a period of financial difficulty, the Corporate Associates were asked to become contractors by signing a "Sales Consultancy Agreement". The agreement provided commission-only remuneration, and stripped the Corporate Associates of other employment benefits.

The Fair Work Ombudsman (FWO) commenced proceedings against Centennial, the director, and the HR manager alleging that the parties breached the Workplace Relations Act 1996 (Cth) by:

  • underpaying the Corporate Associates, and failing to recognise other statutory employment entitlements;
  • misrepresenting to the individuals that the agreement was a contract for services, when in fact it was a contract of employment; and
  • dismissing employees for the purpose of engaging them as independent contractors to perform substantially the same work they had previously performed as employees.

The last two claims are known as "sham contracting" or "sham arrangements", and while the prosecutions were brought under the Workplace Relations Act 1996, similar prohibitions are contained in the Fair Work Act 2009 (Cth), namely Part 3-1, Division 6.

Liability proceedings

In Centennial, the FWO argued that the employer directly breached the employment laws relating to underpayment and sham contracts, and that the director and the HR manager were liable as accessories to the employer's breach.

The claims against the company and the director were less controversial. The court found that the Corporate Associates were constructively dismissed by virtue of the employer's conduct and that the dismissal was for the purpose of engaging the Corporate Associates as independent contractors. As the company was evidently in breach of various provisions of the Act, the director, as the maker or producer of the relevant representation, was taken to be involved in aiding and abetting Centennial in committing the contraventions.

However, the claims against the HR manager were somewhat novel and surprising. Mr Chorazy argued that he did not understand the legal effect of the changes and did not have control over the actions of the company or Mr Mertes.

Federal Magistrate Cameron, although accepting the argument, confirmed that ignorance of the legal effect of one's conduct was not a valid defence.

Mr Chorazy also argued that he was not consulted by Mr Mertes, nor was his opinion sought in relation to the proposed changes to the contracts; rather, he was simply told what was going to happen. He argued that he had no reason to consider the legality, or otherwise, of the plans.

Federal Magistrate Cameron found that being reckless as to the true nature of the contracts may be a defence to the allegations against Centennial, but was not available to Mr Chorazy for accessorial liability.

The court held that the HR manager's involvement in the contraventions was sufficient for him to be liable as an accessory as he was knowingly concerned in Centennial's contraventions. Federal Magistrate Cameron found that the HR manager:

  • was aware before the meeting that Mr Mertes proposed putting the Corporate Associates on contracts;
  • took part in a meeting where the Corporate Associates were told about the changes to their contract;
  • actively participated in getting the Corporate Associates to sign up to the agreement;
  • explained the terms of the new agreement to the Corporate Associates; and
  • was aware that under the terms of the agreement, the Corporate Associates' roles were essentially unchanged.

Penalty proceedings

In Fair Work Ombudsman v Centennial Financial Services Pty Ltd [2011] FMCA 459, with Centennial having gone into liquidation, Federal Magistrate Cameron determined the appropriate penalties which should be imposed on Mr Mertes and Mr Chorazy.

In relations to Mr Mertes' contravention, he determined that a fine of $13,200 was appropriate give the fact that he was the sole shareholder and director and he was the principal beneficiary of any advantage which Centennial gained from its failure to pay its employees their full wages and entitlements.

Mr Chorazy contended that his position was a "mere title", he was simply "following instructions" and that he had no authority beyond what was approved by Mr Mertes, and hence should not be fined for the contraventions. While the court agreed that Mr Chorazy did not exercise any independent judgment in the actions which led to the contraventions, Federal Magistrate Cameron found that as an HR manager, Mr Chorazy should have been aware of, and at least attempted to give Centennial advice on its obligations under the relevant employment laws. Mr Chorazy was fined $3,750 for his involvement in the contraventions.

You might also be interested in ...


Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.