MDC Legal Director Mark Cox and Senior Associate Renae Harg discuss the concept of accessorial liability, and how people in certain roles in any organisation can be held liable for breaches of the Fair Work Act if they were aware of such contraventions, with reference to recent case law.
Company directors, human resource managers or other managers and accountants can be held accountable for contraventions of the Fair Work Act 2009 (FW Act). You need to be aware of the requirements under the Act and not turn a blind eye to breaches of the Act. According to the Fair Work Ombudsman, ‘Accessorial liability provisions allow us to hold anyone involved in a contravention accountable, even if the business has gone into liquidation.’
Recent cases show who can be liable
There have been some interesting Court decisions on accessorial liability in recent years that show just how wide the accessorial liability net can be cast:
- An external accountant who advised a business on its employee arrangements was held liable under the accessorial liability Fair Work Act provisions. The accountant and the employer had both received advice from the Fair Work Ombudsman regarding underpayments, yet continued to underpay workers: Fair Work Ombudsman v Blue Impression Pty Ltd & Ors  FCCA 810
- A restaurant HR manager was held to be liable under the accessorial provisions of the FW Act. The Federal Court rejected the HR manager’s defence that she was just following her bosses’ orders: Fair Work Ombudsman v NSH North Pty Ltd T/A New Shanghai Charlestown  FCA 1301
- A director was held liable for her comments to a worker that his employment would be terminated after the director had spoken to a Fair Work Inspector, even though she was not the guiding mind of the company: Fair Work Ombudsman v NSW Motel Management Services Pty Ltd & Ors (No 2)  FCCA 1935
This year, in a further recent prosecution by the Fair Work Ombudsman, two directors were held to be “involved in” contraventions when they knew employees were not being paid and that the companies had run out of money. Even though the directors had engaged others to undertake the day to day running of the companies, the directors remained the controlling minds of the companies and so held accessorial liability.
The Court also held the directors intentionally participated in the contraventions. For example, the directors offered inducements or bonuses to employees if they remained employed, told employees that payment of their wages was imminent, and they allocated funding monies they received to contractors rather than to their employees.
Judge Driver said in circumstances where the directors continued to operate the companies and employ staff, rather than ending their employment (presumably via redundancies), the directors ‘were exercising control over the situation, demonstrating knowing involvement and thus, intentional participation in the contraventions found by the court.’
What does ‘involved in’ look like?
Judge Driver provided a useful summary of previous case authorities demonstrating when a person is involved in a contravention. To be ‘involved in’ the contravention a person must have intentionally participated in the contravention, which requires actual knowledge of the essential matters of the contravention at the time of the contravention. It may be possible to infer actual knowledge through wilful blindness; however, it is unnecessary to prove the person knew their participation was a breach of the FW Act and to prove actual knowledge of each instance of non-compliance, where the person had actual knowledge of the ‘system’ of non-compliance. It is not sufficient to establish liability where the person only acquired that awareness after the fact.
Of particular note is that ‘intention may be proved by showing an intention by some act or conduct which contributes to the commission of the offence, or by proving “wilful blindness” or a “deliberate shutting of one’s eyes to what is going on’. This can include deliberately abstaining from asking questions or making enquiries when you believe there is a potential breach of the Act.
Judge Driver said ‘actual knowledge can be inferred from the combination of a respondent’s knowledge of suspicious circumstances and the decision by the respondent not to make enquiries to remove those suspicions, but not every deliberate failure to make enquiries will support the inference of actual knowledge. Where a person does not know because he does not want to know, where “the substance of the thing is borne in upon his mind with a conviction that full details or precise proofs may be dangerous, because they may embarrass his denials or compromise his protests” he has that knowledge, but deliberately refrains from asking questions or seeking further information in order to maintain a state of apparent ignorance. That is wilful blindness.’
Read the decision here.
Ensure you get the right advice
Anyone involved in a contravention may be held liable. If you are a company director, an external advisor (e.g. an accountant), or an internal human resources manager/officer, it is essential that you:
- are aware of obligations arising under the FW Act, including under the relevant modern award or enterprise agreement. Ignorance of these obligations does not provide a defence.
- make inquiries to confirm compliance with the FW Act
- do not turn a blind eye to possible breaches of the FW Act, the Court may be able to infer actual knowledge from wilful blindness
- consider escalating the matter where relevant, either with your client or internally.
If the matter becomes complex, it is important to seek independent legal advice from a lawyer who can provide information and advice surrounding the FW Act and the National Employment Standards with which you must comply.
Disclaimer: This document should not be relied on as legal advice. If you require legal advice about any specific employment law issues that arise, contact MDC Legal or a lawyer in your state.
Mark Cox (BA LLB Hons, University of Melbourne) leads the specialist employment law team at MDC Legal. He has over 19 years in practice, mainly in industrial, workplace and employment law. In previous lives he was Associate to Chief Justice David Malcolm, worked in a commercial litigation firm, then as a senior associate of a national firm, and as Principal Solicitor of the Employment Law Centre. Mark is a well-regarded practitioner in workplace relations law, named as a “leading lawyer” in Doyle’s Guide 2014, 2015, 2016, and “market leader” in 2017, 2018. In addition to providing strategic and front end advice and implementing employment contracts, policies and procedures, Mark has conducted litigation and acted as counsel in several jurisdictions on “both sides of the fence” in a wide variety of matters, including injunctions and restraint of trade matters, protected industrial action, contractual claims, general protections and unfair dismissal claims, and bullying and discrimination claims. Contact Mark at [email protected] or connect via LinkedIn
Renae Harg (BA LLB, University of Western Australia) is a Senior Associate at MDC Legal. Renae has practiced in employment law since 2013. Prior to commencing with MDC Legal, Renae worked at a global law firm and boutique WA employment law firm. Renae has a broad range of experience in providing employment and workplace relations advice and has acted for individuals as well as small, medium and global employers. Renae provides advice and assistance in all employment law matters, including termination of employment, unfair dismissals, adverse action, discrimination, drafting of employment contracts and policies, enterprise bargaining, post-employment restraints and workplace investigations. Contact Renae at [email protected]