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Risk of Personal Fines: Fair Work Act 2009

The Fair Work Ombudsman is now targeting key advisors, such as HR managers, accountants and bookkeepers, who may be liable as an accessory if their employer breaches the Fair Work Act 2009.

In fact, 92% of all litigations commenced by the Fair Work Ombudsman last financial year sought orders against accessories. This is up from 72% the year before.

Are you compliant - Managers liable for HR breaches

Are you at risk of personal fines?

  • Are you responsible for human resources or payroll?
  • Are you responsible for administration or day to day management?
  • Are you responsible for recruitment or supervision?
  • Are you responsible for labour hire through a supply chain or franchise network?

If yes,

  • Do you have good HR systems in place to ensure compliance?
  • Do you try and obtain accurate HR advice?
  • Do you alert clients to possible HR breaches?
  • Do you actively question instructions if you have doubts regarding HR legality?

If not, you may be at risk of personal fines under Section 550 of the Fair Work Act 2009.

The Fair Work Act 2009 does not require that the person knew that they were contravening a provision of the legislation. It is sufficient that they knowingly participated in the activity that constituted the contravention.

This means that proceedings can be instituted not only against the employer who actually contravened the Fair Work Act 2009, but against anyone else who was involved in the contravention.

To date, liability under section 550 has been limited to orders to pay penalties for breaching the Fair Work Act 2009. However, there is a possibility that a person liable under section 550 could be ordered to pay compensation.

It is important that HR professionals and others involved in decisions concerning the workplace are aware of the full extent of obligations for employers and principals under the Fair Work Act 2009.

"The Director is the person who leads, manages and controls the employing entity. And is intimitely involved in, and ultimately responsible for, the decisions of that entity - including decisions to comply (or not to comply) with workplace laws. Over time we have extended our use of accessorial liability to other persons involved in the contraventions. Accessories have included human resources staff, administration or day to day managers, staff engaged with recruitment and supervision; and other companies or individuals involved through the supply chain or franchise network." - The Fair Work Ombudsman

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Recent prosecutions:

Yogurberry chain hit with $146,000 in penalties and an order for a national audit.

The master franchisor of the Yogurberry frozen yoghurt chain in Australia has been hit with $146,000 in penalties and an order for a national audit of the Yogurberry chain. The first time the Fair Work Ombudsman has secured penalties against a master franchisor for being an accessory to the exploitative practices of one its associated companies.

Read more

Directors personnally fined $20,000 each for breaching employment laws

An Adelaide transport company has been penalised a total of $93,000 and been ordered to back-pay 10 truck drivers more than $374,000.

Read more

Record penalties and landmark Order making businessman personally liable for back-payments

A federal judge has imposed record penalties of over $300,000 and a precedent-setting Court Order for a businessman to personally back-pay employees following a case involving the underpayment of workers on the Gold Coast.

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Accounting firm prosecuted for role in underpaying workers

The Fair Work Ombudsman has commenced legal action against a Victorian accounting firm for providing false advice to a client which resulted in the underpayment of workers. Under Section 550 of the Fair Work Act 2009, advisors such as accountants and HR professionals may be liable as an accessory if an employer breaches Australian employment laws.

Read more

Record penalties and landmark Order making businessman personally liable for back-payments

A federal judge has imposed record penalties of over $300,000 and a precedent-setting Court Order for a businessman to personally back-pay employees following a case involving the underpayment of workers on the Gold Coast.

Read more

A manager responsible for payroll and administrative functions at a chain of Sydney Car Wash outlets was personally fined $10,000.

In August 2014, in the Federal Court, Justice Robert Buchanan found Crystal Carwash Cafe Pty Ltd short-changed more than 350 employees. Fining the company, which operates outlets at Bondi, Brookvale, Chatswood, Coogee, Gladesville, Merrylands, Mosman, Northbridge, Rose Bay, Rushcutters Bay and Strathfield, a total of $70,000.

The company's director and part-owner Anthony Sahade was penalised a further $10,000.

Justice Buchanan also imposed a $10,000 fine against Peter Khouri, who was responsible for the company's payroll and administrative functions.

Read more: Article in Sydney Morning Herald 7 August 2014

HR manager found liable as an accessory to his employer's breach of workplace legislation and fined $3750

The Federal Magistrate's Court has recently found a director and a HR manager individually liable for their involvement in sham contracting arrangements. Despite acting on the directions of his employer and being unaware that the actions he was taking were unlawful, the Sydney HR manager has been prosecuted by the Fair Work Ombudsman and faces financial penalties. Sham contracting is where an employer classifies a person as an independent contractor instead of an employee in order to avoid paying entitlements. The director devised the scheme without input from the HR manager but instructed him to type up a consultancy agreement and dictated additional clauses. Despite the court finding that the HR manager, "just copied what he was told and had no reason to question anything" he was found to be personally liable, along with the director, as accessories to the company's misconduct. Fair Work Ombudsman v Centennial Financial services Pty Ltd & Ors [2010] FMCA 863 This decision highlights the importance of any individual with people management responsibilities maintaining up to date knowledge of compliance obligations and legislative changes.

Two HR Managers fined $3,500 each they engaged in adverse action against an employee who had exercised his right to freedom of association

In Director of the Fair Work Building Industry Inspectorate v Baulderstone Pty Ltd & Ors [2014] FCCA 721, the Court held that an employee relations manager and human resources manager had knowledge that the reason why the employee's employment was altered was because the employee had resigned his membership from the CFMEU. The Court found them liable under section 550 for the employer's adverse action against the employee. Although the ER and HR managers did not make the decision to vary the employee's employment they knew the CFMEU delegate had complained about the employee resigning his membership from the union, advised the operations manager about the variation and made arrangements for the employee's employment to be varied.

Child care franchisee liable under Section 550 for adverse action

The Federal Court found that a franchisor who was intimately involved in the dismissal of an employee from a franchisee child care centre was liable under section 550 for the employer's adverse action. The Court held that, while the directors of the particular child care centre made the decision to dismiss the employee, they sought counsel and were advised by the franchisor, who drafted the termination letter and conducted the termination meeting. Case: United Voice v MDBR123 Pty Ltd [2014] FCA 1344

Other Fines

Employers also risk fines under other laws for underpaying workers.

$516,000 fine for underpaying workers

Hallmark Computers has been slapped with a $516,000 fine by the Department of Immigration and Border Protection for underpaying workers.

Read more: 516k fine for underpaying workers

Discover more

Learn more about: Fines and penalties for breaching Australian workplace laws

Read the full stories and keep up to date: Workforce Guardian HR Blog

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