Can individuals and third-party advisers be found liable for breaches of the Fair Work Act 2009 (Cth) (FWA)?
In 2017, the FWO was successfully achieved penalties of $51,330 against third party accounting firm Ezy Accounting for facilitating the underpayments made by an employer, Blue Impressions. The court upheld on appeal that Ezy Accounting was liable under the accessorial liability provisions of the Fair Work Act.
In recent years, the following have successfully been found to be accessories to breaches of the FWA:
- a third-party accounting firm;
- human resource managers and staff;
- administrative and day to day managers;
- staff engaged to assist with recruitment and supervision; and
- companies and individuals involved in a supply chain or franchise network
As employment lawyers, we are frequently advising HR companies, in house counsel, and directors. We often see examples of unintended non-compliance and are left trying to balance:
We understand the difficulties many advisers have with following the more robust instructions of clients, when in the current legal climate, it is becoming increasingly risky to do so.
What does accessorial liability mean?
The accessorial liability provisions of the FWA mean that individuals, companies, and third-party advisers who are aware, or ought to be aware, that an employer is a breaching the FWA, can be liable for that contravention as an accessory.
In order for an individual to be found to be an accessory, the court must be satisfied that:
- the person had knowledge of essential facts or essential matters constituting the contravention, and
- in their knowledge, the person positively acted (through act or omission) in a manner that established they were linked in purpose with the primary offender.
Under s550 of the FWA:
- 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.
Why you should care
If you, or your company is found to be an accessory to a contravention of the FWA, you could face a combination of the following orders:
- penalties of $63,000 per contravention for a corporation and $12,600 per contravention for an individual (for serious contraventions, this was recently increased to $630,000 for corporations, and $63,000 for individuals),
- that a portion of an individual’s wage be redirected to pay a penalty,
- compensation to employees against whom contraventions have been committed,
- injunctions against future breaches of the FWA,
- freezing orders to prevent businesses and accessories from transferring assets,
- correct action orders requiring employers/advisers and individuals to commission, at their own expense, audits of their entire payroll, and undertake workplace obligations training, and
- costs orders against respondents.
Risky behaviour you should steer clear of!
Risky behaviours for third party advisers, include, but are definitely not limited to:
- being aware that an employee has breached, is breaching, or will breach the FWA, and it has not been rectified,
- involvement in that breach (for example by conducting payroll audits, issuing, or having access to payslips etc.),
- facilitating an employee’s breach (for example by providing them with a contract is specifically designed to allow them to enter into sham contracting arrangements),
- advising an employee of ways to avoid their obligations under the FWA or how to avoid detection for a breach of the FWA,
- recommending that employees should not cooperate with the FWO.
What can I do about it?
Individuals, employers, and third-party advisers MUST understand their obligations and how to mitigate risk under the FWA. The following is a checklist of best practice recommendations for both employers and third-party advisers. The steps outlined below are not exhaustive lists for avoiding liability, but general guidelines which can help you mitigate risks.
Advice for employers
- Ensure that your employees are aware that they can be found personally liable for breaches of the FWA,
- Be very clear in communications with employees about the professional responsibilities that exist for advisors, and the exposure to accessorial liability. Perhaps include in your company policies that the failure to comply with advice on rectification of compliance matters is grounds for the termination.
- Ensure that before you engage in any conduct that may breach the FWA you seek advice before going ahead.
- Schedule semi-regular compliance check-ins with employees to get them to re-affirm their position on knowledge of their obligations and the status of their compliance with those obligations.
Advice for third-party advisers
- Conduct client screening for all new and even existing clients, inform them of your obligation to ensure compliance, and ask for their confirmation on the basic matters, such as:
- Modern Award knowledge of coverage and compliance with applicable terms,
- their record keeping processes, especially in relation to time keeping and wage records,
- that they are not engaging in sham contracting arrangements.
Unless you want to do it for free, it is a good idea to get some budget for cross checking responses to the answers above.
- Be very clear in communications with clients about the professional responsibilities that exist for advisors, and the exposure to accessorial liability in circumstances where we are aware of, and facilitate, breaches of the law. Perhaps include in your cost agreement that the failure to comply with advice on rectification of compliance matters is grounds for the termination of the engagement and be up-front about such matters in the beginning of a relationship to avoid any awkwardness if you ever need to rely on that clause.
- Regularly review the information provided by clients during the course of a relationship for any indicators that their compliance may be slipping, or even misrepresented to you, earlier in the engagement.
- Schedule semi-regular compliance check-ins with clients to get them to re-affirm their position on knowledge of their obligations and the status of their compliance with those obligations.
- Where you do provide advice to a client that concerns their compliance with the FWA, take the time to follow-up and ask whether they have implemented that advice. If they haven’t and are misleading you, at least you have taken that positive step to attempt to ensure that they are compliant.
- Where you are asked to do something that is borderline, very seriously consider whether the risk is too great to get involved, and if you should decline the engagement or clarify your advice on the appropriate use of such materials (even if such additional clarification is done “off the clock”). For example, the preparation of a template contractor agreement is a legitimate engagement, however if you know it will be used for sham contracting purposes, then provide separate advice to the client on the relevant law, and uses of the document that are not lawful or endorsed by you.
- Wherever you have influence with clients at the time the FWO commences any process of enquiry or investigation, encourage your client to truthfully disclose relevant matters, and seriously consider all preliminary enforcement options short of litigation.
In general, you should always be very careful when engaging with employees or clients who you suspect may not be fulfilling their obligations under the FWA. It is essential to find the balance between meeting the demands of your business/clients, and mitigating your own risks.
If you have a specific issue that is keeping you awake at night, and would like to talk to us in confidence, please get in touch at Danny King Legal.
 Fair Work Ombudsman v Blue Impression Pty Ltd & Ors (No.2)  FCCA 2797 (16 November 2017).
 EZY Accounting 123 Pty Ltd v Fair Work Ombudsman  FCAFC 134 (20 August 2018).