It's not just Directors who can be held personally liable
when something goes wrong. Managers who are directly involved in an
infringement can also experience the same fate.
In the case of Cerin v ACI Operations Pty Ltd, Mr Cerin brought
a claim against his employer ACI Operations and the Human Resources
Manager, Ms Nicola Powell. Mr Cerin alleged that the notice
provisions in the National Employment Standards (NES) and the Fair
Work Act had been breached upon termination of his employment, when
he was provided 28 days' payment in lieu of notice, instead of
the five weeks which he was entitled to under the NES.
Mr Cerin had been injured at work and had received workers
compensation payments for some time. The company decided that there
were no suitable alternative positions for him and that his
employment could not continue. Under the relevant South Australian
workers compensation rules the company had to give Mr Cerin 28 days
notice, which it did.
The workers compensation rules didn't displace the greater
entitlement under the NES. The loss Mr Cerin suffered in not being
paid the extra week's notice was $181.66 - the difference
between an extra week's wages, and the weekly workers
compensation payment that he was receiving.
Mr Cerin submitted that Ms Powell was aware of the NES
provisions and made a "deliberate and conscious decision"
that he wouldn't be given five weeks notice. Ms Powell on the
other hand, submitted that the payment of 28 days notice was a
matter of procedure, complied with the relevant compensation laws,
and was not a deliberate failure to apply the extra week's
notice as provided under the NES.
The Court held that Ms Powell knew about the NES, and, in
failing to provide the correct notice to Mr Cerin, was personally
liable for a contravention of the NES provisions. The maximum
penalty for the company was $51,000 and the maximum penalty for Ms
Powell as an individual was $10,200. The judge fined the company
$20,400 and fined Ms Powell $1,020.
The Court noted that ACI Operations was a large international
company. This was not a situation where the company was lacking in
human resources experience, so as to excuse such an error. It had
persisted in refusing to pay the extra notice once the breach of
the NES (a statutory obligation, not a matter for negotiation) was
brought to its attention.
As the NES provides a guaranteed safety net of minimum
entitlements for employees, and as Mr Cerin was an injured and
vulnerable employee, the Court held that a penalty should be set
that would deter other employers from infringing the NES.
This is not the first time an HR Manager has been penalised.
Penalties have also been imposed on an HR Manager involved in sham
contracting of vulnerable and exploited workers: the manager's
argument that he was just following orders cut no ice.
In the 2010 case of Fair Work Ombudsman v Centennial Financial
Services Pty Ltd & Ors, the Fair Work Ombudsman brought
proceedings against Centennial Financial Services, the
company's sole director and shareholder, and Mr Chorazy, the
company's HR Manager. The company was found to have failed to
pay nine employees their minimum employment entitlements, including
accrued annual leave, over 13 months, as well as engaging in sham
contracting by converting employees to contractors. The director
was liable for nine contraventions was ordered to pay a total of
$13,400 in penalties. Mr Chorazy was liable for 11 contraventions
and was ordered to pay a total of $3,750.
Defending his actions, Mr Chorazy said that he had no knowledge
of the difference between employees and contractors prior to
working at Centennial Financial Services. He went on to say that
when he was told to type out a new contractor agreement for
existing employees, he didn't notice that the duties and key
performance indicators were identical to the employment agreements
that he had initially issued to the employees - the only change
being that the employees would receive a commission rather than
The court did not excuse Mr Chorazy from liability. Just doing
as he was told was not a defence - as a responsible executive, he
was expected to apply some independent judgment, and the sham
nature of the new arrangements should have been obvious to him. The
Court found that Mr Chorazy was materially involved in almost all
aspects of the contraventions and that he was liable as an
accessory to those contraventions.
These cases demonstrate that HR Managers can be directly
penalised for being involved in company actions in breach of the
Fair Work Act. While penalties against managers aren't
frequent, they do highlight the responsibilities of HR
professionals to uphold the law and to take responsibility.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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An employee that refused a reasonable offer of settlement was ordered by the FWC to pay his ex-employer's legal costs.
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