The Fair Work
Ombudsman (FWO) is looking well beyond the traditional
defendants in cases dealing with underpayments or sham contracting.
This is a quite conscious policy (
see speech by the FWO, Natalie James, 4 November 2016), aiming
to get beyond the employer in the strict legal sense, to the people
in the employer's organisation who are responsible, and to
external parties who are knowingly involved in infringements.
The basis for liability of individuals, and organisations other
than the direct employer comes from s550 of the Fair Work Act,
which makes a person knowingly involved in a contravention liable
for that contravention. The FWO has been increasingly bold in the
way that it prosecutes accessorial liability. The first people in
line are, of course, the directors of the employer. But beyond that
the FWO has taken proceedings against HR managers and parties in
the employer's supply chain, and has given clear indication
that external advisers – lawyers, accountants, IR
specialists, could be prosecuted.
In the case of FWO v Centennial Financial Services 
FMCA 459, an HR Manager was found liable for his company's
sham contracting (by converting employees into contractors and then
evading entitlements) and penalised $3,750. His argument that he
just did what he was told by the director of the company didn't
succeed: he did have a lower level of responsibility (reflected in
the penalty), but he had an independent obligation not to be
involved in the sham contracting, which he knew, or should have
known, was illegal.
More recently, a labour hire company supplying workers to Crown
Casino in Melbourne made deductions from wages paid to employees
for administration charges and meals, and when the FWO made
enquiries, produced falsified records to hide the deductions. The
OH&S and HR Coordinator was penalised $9,920 (about two-thirds
of the director's penalty). The deliberate nature of the
conduct (the deductions, and especially the false records), and the
fact that the HR Coordinator should have known the deductions
weren't legitimate, undermined the HR Coordinator's case
And it is not only penalties that the FWO is after. In a recent
case (FWO v Step Ahead Security Services  FCCA
1482), a director of the company (with form for non-compliance
with workplace laws) liquidated the company when the FWO started
proceedings about unpaid entitlements. The FWO sought, and
obtained, orders that the director not only pay $51,400 in
penalties, but also that he himself pay the unpaid entitlements of
In the supply chain, there have been well-publicised cases
involving Coles and Woolworths taking responsibility for the terms
on which their trolley collecting contractors pay their employees,
and the franchisee of Yogurberry chain has been held to account for
underpayments by one of its franchisees, and required to undertake
audits across its network to identify any other infringements. In
recent weeks, it has also
been reported that Caltex is being investigated in connection
with wages paid by its service station operators. The pace of this
approach to enforcement seems likely to increase.
So what should you do if you find an underpayment situation or
other compliance problem in your business?
From an individual point of view, you should be raising the
issue and putting your concerns on record, and seeking to fix the
problem. You should dissociate yourself from the conduct in
question, and if resolution is not possible, you may need to
reconsider your position with the organisation. From the
organisation's point of view, if the problem can be readily
fixed, it should be. If it can't, consider contacting the FWO
to apprise them of the problem and what you are doing about it, and
get their support and cooperation in resolving the issue.
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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