Growing risk of accessorial liability
Back in January in my post on 3 reasons to prioritise HR compliance in 2017 , I mentioned the FWO’s growing scope to prosecute for accessorial liability.
At the time, I said that the reach of the provisions may be expanded to include the supply chain. The premise being you could be penalised for a knowing failure to take responsibility for compliance violations across your supply chain.
Fair Work Ombudsman v Blue Impression Pty Ltd
Fast forward to April 28 2017, and the case of Fair Work Ombudsman v Blue Impression Pty Ltd, the operator of a fast food outlet in Melbourne’s CBD.
Blue Impression’s payroll provider, Victoria-based Ezy Accounting 123 Pty Ltd, was found to be accessorily liable for their client’s underpayment of wages. The court determined that Ezy Accounting failed to maintain current award rates of pay in the MYOB payroll system.
As a service provider, the accounting firm argued that they were not liable for the underpayments. They “had no authority to make any adjustment to the data”. Instead, their role “was limited to certain bookkeeping work: data entry work and the uploading of MYOB files to Blue Impression’s bank”.
However, the evidence presented to the Court showed this wasn’t entirely true. The firm’s principal was all too aware that Blue Impression was not paying their employees in accordance with award rates.
In fact, in one email the principal compared the “MYOB rate” of pay with the “Fair Work rate”. He referred to the award rate and the “actual rate”.
Failure to act
Not surprisingly, the Fair Work Ombudsman argued that Ezy Accounting “must have known” that Blue Impression was underpaying their workers. The accountants knew the rates in its MYOB payroll system were less than those stipulated in the award.
The Court determined that Ezy Accounting had all the necessary information confirming Blue Impression’s failure to meet the award obligations. Yet persisted with maintaining its payroll system even though award breaches occurred.
As such, Ezy Accounting was found to be accessorially liable for Blue Impressions’ breaches of the Fair Work Act. And is now facing possible penalties of up to $54,000 per contravention.
The court will make its determination on the penalties in the coming weeks.
Minimise the risk of accessorial liability
As a professional advisor, if you are aware of a client who is breaching award conditions, or any aspect of the Fair Work Act, act now, and help them remedy the situation.
Failure to do so, may land you in all sort of trouble.
As Fair Work Ombudsman Natalie James says, “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.”
So, what are the risk areas?
To ensure your firm isn’t at risk of accessorial liability, make sure you don’t turn a blind eye to:
- Clients paying below award rates
- Clients engaging people as “contractors” when they are in fact employees
- Clients keeping inadequate payroll records
- Clients who on face value comply with award rates but demand employees to payback a portion of their pay
If you think your clients are at risk of making any of these breaches, it’s important that you advise them to take corrective action immediately. As a start, share our Essential Guide to HR Compliance with them and ensure they seek professional help in this area.