An accountancy firm and a principal advisor from the firm have been fined almost $70,000 for contraventions of the Fair Work Act 2009 (Cth) (FW Act). The firm was the accountant for a number of entities being investigated by the Fair Work Ombudsman (the FWO) for failure to keep employee records in contravention of the Act. The firm and its principal advisor were fined for failure to comply with written "notices to produce" served upon them by the FWO, which was found to have constituted "involvement in a contravention".
The case of Fair Work Ombudsman v J.D. Chapel Nominees Pty Ltd (in liq) [2024] FedCFamC2G 85 (FWO v JD) provides a timely reminder that accountants, HR employees and other professionals can be held personally liable for certain breaches of the FW Act by their clients.
In this case, the FWO sought penalties against persons variously involved in the management of a group of eight related entities for their roles in various FW Act breaches.
Case against the employers
The case concerned the failure of a group of eight hospitality businesses (La La Group) to make and/or keep employee records in breach of the FW Act (s 535(1)).
The La La Group did not make and/or keep employee records setting out the hours worked by casual or irregular part-time employees or the loadings, allowances and penalty rates that employees were entitled to be paid. They also failed to comply with several notices to produce in breach of the FW Act (s 712(3)).
Ultimately, no penalties were sought against the La La Group entities because they entered liquidation, and so the FWO pursued others involved in the contraventions.
The part-owner and director of six of the La La Group entities, Mr Taiaroa, and the General Manager of the same six entities, Mr Sanger, both admitted they were "involved" in the contraventions within the meaning of the Act.
What does "involvement" mean under the Fair Work Act?
Section 550 of the FW Act
- A person who is involved in a contravention of a civil remedy provision is taken to have contravened that provision.
- A person is involved in a contravention of a civil remedy
provision if, and only if, the person:
- has aided, abetted, counselled or procured the contravention; or
- has induced the contravention, whether by threats or promises or otherwise; or
- has been in any way, by act or omission, directly or indirectly, knowingly concerned in or party to the contravention; or
- has conspired with others to effect the contravention
Case against the employers' accountants
The case also considered penalties for La La Group's contracted accounting provider, Nicholas Accounting Management Services Pty Ltd (NAMS) and NAMS' principal, Mr Nicolaou.
This part of the proceedings concerned the roles NAMS and the individual principal (Nicolaou) played in the various entities and failing to comply with several notices to produce. NAMS and Mr Nicolaou both admitted they were "involved" (see definition above) in contraventions within the meaning of the FW Act.
The Federal Court decision
Whilst the Court found "grounds for suspicion" of underpayment, the FWO was unable to ascertain the extent of the underpayments at the eight entities known as the La La entities and was unable to take appropriate enforcement action due to the absence of employee records and other evidence.
Penalties for the Director and General Manager of La La Group
Her Honour found in relation to the contraventions by Mr Taiaroa (the Director of the La La Group) as follows:
- His record-keeping failures were deliberate because he was aware that the required records were not kept, and he was responsible for ensuring that they were kept.
- Whilst he admitted to his contraventions, his "expression of regret was minimalistic... He described the record-keeping as insufficient, when it was grossly inadequate... Mr Taiaroa did not apologise to the people most affected by the contraventions [the employees]... All in all, Mr Taiaroa's attempt at contrition does not appear to be genuine, but reflects a desire to minimise the penalty he will receive."
- The appropriate total penalty was $41,368 for 12 contraventions.
In relation to Mr Sanger (the General Manager), her Honour found:
- It was his job to ensure compliance with workplace laws.
- The General Manager knew of the system by which the required records were not made or kept.
- His breaches were deliberate.
- His apology was "formulaic, and designed to minimise the penalty he might receive rather than a genuine expression of remorse."
- The appropriate total penalty was $26,893 for 12 contraventions.
Penalties for the accounting firm and principal, Mr Nicolaou
Her Honour found, in determining the award of penalties against NAMS and Mr Nicolaou:
- NAMS had ample authority to comply with the notices to produce, and its reasons for noncompliance were rejected.
- NAMS conduct was deliberate and involved senior management.
- NAMS failure to comply with the notices to produce undermined the FWO's ability to investigate contraventions of the FW Act leading to a loss for the public of the extra resources required to establish those contraventions. These included the site visit involving multiple FWO and Australian Taxation Office staff, which was required to establish the contraventions.
- Neither NAMS nor Mr Nicolaou expressed any contrition or took corrective action by providing the requested documents at a later date.
- NAMS is still in business, necessitating a "significant measure of specific deterrence".
- NAMS "is an accounting practice, and should have had the basic professional competence to comply with legal requirements of the FWO".
- Mr Nicolaou's contraventions were not part of a single course of conduct.
- Whilst NAMS and Mr Nicolaou cooperated with the FWO by making admissions a few days before the liability hearing, those admissions were made late in the piece and when significant effort had already gone into trial preparation. This meant that they were not entitled to the maximum discount for admissions.
Her Honour ordered:
- NAMS to pay a $34,020 penalty for its single contravention of failing to comply with a notice to produce.
- Mr Nicolaou to pay a total penalty of $35,154 for his nine breaches of the FW Act in advising the La La entities and failing to produce the requested documents pursuant to each of the nine notices to produce.
Total penalties for NAMS and the principal: $69,174.
Providers of professional services to employers also have Fair Work Act obligations
This case demonstrates the willingness of the FWO to pursue those who facilitate and/or attempt to conceal the misconduct of employers through their provision of professional services. In doing so, it serves as a stark reminder to businesses, particularly those in professional services like accounting, of the importance of meticulous record-keeping and adherence to regulatory requirements.
Failure to do so can result in not only reputational damage but significant financial penalties. Under the FW Act (s 550), someone who is "involved" in a contravention is subject to the same penalties as if they had contravened the provision themselves. Understanding the concept of "involvement" is thus critical for such persons.
The case is also a reminder to employee applicants who have been underpaid. Where an employee has a claim for a breach of the FW Act by their employer, further penalties can be sought against all companies and individuals involved in the contraventions. The Court also has the power to order that those penalties be paid to an applicant employee (see s.546(3) of the FW Act).
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.
