Australia: Professional service providers, risk management and accessorial liability under the Fair Work Act - 10 May 2017

Last Updated: 14 May 2017
Article by Damon King

On 28 April 2017, the Federal Circuit Court of Australia ruled for the first time that a professional services provider (an accountancy firm) should be held liable as an accessory for the unpaid award wages contraventions of its employer client.

The decision in Fair Work Ombudsman v Blue Impression Pty Ltd & Ors 1 has since attracted prominent media attention and raised concerns that professionals will now be more frequently and unreasonably held responsible by the regulator, the Fair Work Ombudsman, for the labour practices (and sins) of their clients under the accessorial liability provisions in the Fair Work Act 2009 (Cth) (Act).

Senior Associate, Damon King discusses the reasons for the decision, and, particularly, whether it poses greater risk management consequences for professional advisory and other services providers to national system employers under the Act.

Regulatory background

Under section 550 (1) of the Act, persons involved in a contravention of a civil remedy provision of the Act can be held liable as an accessory. Importantly, a person will be involved in a contravention if they have been, in any way, by act or omission, directly or indirectly, knowingly concerned in or party to the contravention. 2

The Fair Work Ombudsman, Natalie James, said on the commencement of the court proceedings culminating in the decision:

"We have been concerned about the role of key advisers, such as accountants and HR professionals, in some serious and deliberate contraventions... Small business relies heavily on trusted advisers and if they give incorrect or bad advice, or deliberately assist with the contravention, should they not be held accountable? In situations where we believe accountants or other professionals knowingly facilitate contraventions of workplace laws, we are prepared to hold them to account." 3

Decision

In Fair Work Ombudsman v Blue Impression Pty Ltd & Ors, the Court ultimately found that the accountancy firm, Ezy Accounting 123 Pty Ltd (Ezy Accounting), was wilfully blind to, and therefore involved in, the unlawful labour practices of its client, Blue Impression Pty Ltd (Blue Impression), which resulted in the Japanese fast food chain not paying two employees the minimum amounts to which they were entitled under the Fast Food Industry Award 2010.

Proceedings

The employer, Blue Impression did not contest the proceedings and made full admissions that it unlawfully paid its employees a flat hourly rate of pay of only $16.50, without regard to the various loadings, penalties and allowances prescribed by the award. As a result, Blue Impression underpaid its employees' award entitlements totalling nearly $10,000.

Ezy Accounting, a husband and wife accountancy practice, defended the proceedings essentially on the basis that it maintained that it was only retained by Blue Impression to provide book keeping and data entry services for the client's payroll system and, further, its officers and employees had no knowledge of the employment arrangements and award contraventions.

Findings

The Court found that:

  • the sole director and shareholder of Ezy Accounting, Mr Lau, was the controlling mind of the accountancy practice.
  • Blue Impression had been a long term corporate client of the accountancy practice.
  • Mr Lau was aware from an earlier workplace audit by the Fair Work Ombudsman, in the previous year, that:
    • Blue Impression's employment arrangements were regulated by the award (and information about the applicable minimum rates of pay which applied under the award was readily available to him);
    • the audit found there had been systematic award underpayment contraventions by Blue Impression; and
    • a HR consultancy firm, Employsure, was retained by Blue Impression to provide advice about its payroll obligations and to respond to the audit findings.
  • notwithstanding the above, Mr Lau did not afterwards:
    • make enquiries about whether Blue Impression's rates of pay had been changed to make sure they complied with the award; or
    • inform the bookkeeper/data entry officer, who was employed by Ezy Accounting and provided the payroll services to Blue Impression, of any of the above matters.

Reasoning

In light of the above findings of fact, the Court made the following adverse inferences against Ezy Accounting:

  • it deliberately shut its eyes to what was going on in a manner that amounted to connivance in the contraventions of Blue Impression; and
  • it had at its fingertips all the necessary information that confirmed the failure by Blue Impression to meet its award obligations and nonetheless persisted with the maintenance of its client's payroll system with the inevitable result that the award breaches occurred.

Ezy was therefore declared to have been liable as an accessory for its client's breaches of the award and to have contravened the Act.

Final Thoughts

In our view, there is nothing particularly startling about the decision, having regard to the relevant factual findings, nor does it represent a watershed moment for the Fair Work Ombudsman in seeking to take enforcement action against professionals providing advisory and other services to employer clients in respect of their labour practices and payroll obligations.

However, the decision does serve as a useful reminder that the accessorial liability provisions exist and that professionals, whilst servicing the needs of their clients, need to be mindful of their obligations under the Act.

In the absence of prior knowledge of "red flags" placing a professional on notice of their client's potential contraventions of the Act, a professional who competently discharges the services they are retained to provide can take comfort in the following judicial statement (relating to a failed case involving an accessorial liability claim made against a lawyer):

"It is difficult to see how a lawyer, acting in accordance with her or his professional obligations, could be said to be "involved" in a contravention of the general protections provisions of the Fair Work Act. It is likely that there would need to be some conduct outside the lawyer's professional role, of which constituted a breach of the lawyer's ethical or professional obligations in giving advice and acting on behalf of a client, before such a finding could be made. For example, I do not consider s550 is intended to apply where a lawyer gives advice in good faith to an employer about the lawfulness of the termination of employment, having diligently undertaken the necessary legal and factual inquiries, even if a Court subsequently finds, contrary to the lawyer's advice, that the termination was adverse action taken for a prohibited reason." 4

Once again, this decision reiterates that national system employers, the senior level individuals through whom they act and, in certain cases their professional advisers, need to be proactive and take reasonable steps from a due diligence perspective, to ensure that their/their client's workforce is being paid correctly and it is meeting its obligations under any applicable industrial instruments, such as modern awards or enterprise agreements.

Footnotes

1 [2017] FCCA 810

2 Section 550(2) of the Act

3"Accountancy firm faces Court over alleged involvement in underpayment of workers", media release issued by the Fair Work Ombudsman on 19 February 2016

4Mortimer J in Ryan v Primesafe [2015] FCA 8 at [81]

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

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

Authors
Damon King
Similar Articles
Relevancy Powered by MondaqAI
 
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”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
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
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions