Silence is not an option; accountancy and payroll firms on the hook for their client’s breaches of workplace laws

A recent decision of the Federal Circuit Court of Australia has highlighted potential liability for payroll and accountancy firms for employer’s underpayments to an employee. The decision of Fair Work Ombudsman v Blue Impression Pty Ltd & Ors [2017] FCCA 810 highlights the importance of advisers complying with the Fair Work Act 2009 (Cth) (Act). The Court ultimately found a payroll and accountancy services firm accessorily liable for an employer’s underpayments to an employee.

In 2014 the Fair Work Ombudsman identified contraventions of the Act by Blue Impression Pty Ltd, a restaurant employer that had significantly underpaid its employees. The restaurant was audited following these contraventions and engaged Ezy Accounting 123 Pty Ltd (Ezy) to ensure compliance with the relevant award and the Act.

Further contraventions of the Act came to the attention of the Ombudsman when a Taiwanese employee sought assistance from Fair Work. It was established that Blue Impression had underpaid the Taiwanese employee. The Ombudsman alleged that because Ezy was involved in the contraventions by the restaurant, the Court should impose a penalty against Ezy. The Ombudsman alleged that Ezy was accessorily liable for these contraventions of the Act because the accountancy firm had intentionally participated in the contraventions and was wilfully blind in the circumstances.

The Act specifically prohibits contraventions of any modern award and provides that involvement in such a contravention will be treated no differently than the actual contravention itself. Ezy defended the claim against it.

In its defence, Ezy denied that it provided payroll services to the employer and claimed it was merely providing a bookkeeping service that primarily entered data. Ezy also denied it was aware of the obligations under the relevant modern award, the hours worked by the employee or that it had knowledge about the modern award coverage of employees.

The Court was satisfied that Ezy was in fact aware of the modern award, the existence of the Taiwanese employee and the hours he worked.

The Court made reference to the general rule which was that more than mere knowledge needs to be established for a finding of accessory liability under the Act. The Court was satisfied in this case that Ezy had actual knowledge and was actively involved in Blue Impressions’ contraventions of the Act. The Court said Mr Lau, the director of Ezy was wilfully blind to the contravention. The take-away for payroll and advisory-type services is that where they have actual knowledge of contraventions of the Act by their clients, and they fail to take appropriate steps to redress those contraventions i.e. advise the client to rectify them or cease to act where such recommendations are not taken onboard, such failures may result in accessory liability for the adviser. The penalties could be significant.

If you are uncertain about your rights and obligations, please seek prompt advice from the Commercial Law or Litigation Law teams at your Gold Coast Lawyers, McLaughlins Lawyers.

Author: Matt Kollrepp

Director: Ian Kennedy

Date: 18/07/2017