What Makes You An Accessory “Involved” In A Contravention Of The Fair Work Act?

By Georgie Cape, Law Clerk, and Alicia Hill, Principal, MST Lawyers

A recent case demonstrates the Fair Work Ombudsman’s (Ombudsman) commitment and willingness to protect vulnerable, exploited employees by holding not only businesses accountable for contraventions of the Fair Work Act 2009 (the Act) but also external advisors who are involved in the contravention. If an advisor is found to be involved in a contravention of the Act, they will be found to have accessorial liability, and significant penalties can be imposed on them.

Background

Blue Impression Pty Ltd (Blue Impression) operates a Japanese fast food chain. Following an audit in 2014, the Ombudsman discovered that Blue Impression had contravened the Act and put them on notice of their obligations under the Act.

Blue Impression engaged an accounting firm, EZY Accounting 123 Pty Ltd (EZY Accounting), to provide payroll services and process wage payments. They were engaged to rectify the above contraventions, however further contraventions transpired.

The Ombudsman claimed the contraventions were breaches of the Fast Food Services Award (Award). The breaches included underpaying staff, not paying public holiday penalty rates, weekend rates or night rates, neglecting to pay casual loading rates and failing to provide its staff with a clothing allowance.

At First Instance

The Ombudsman commenced proceedings against both Blue Impression and EZY Accounting. Blue Impression admitted liability to the contraventions whereas EZY Accounting did not. The Federal Circuit Court heard initial proceedings against EZY Accounting.

The Ombudsman submitted that EZY Accounting had contravened section 45 of the Act and that section 550 of the Act applied. Section 45 was claimed to have been breached because Blue impressions contravened the Award. Under section 550, a person is said to have contravened a provision of the Act where they are “involved in” the contravention.

Section 550(2) defines where a person is “involved in” a contravention, which is only if the person:

  1. has aided, abetted, counselled or procured the contravention; or
  2. has induced the contravention, whether by threats or promises or otherwise; or
  3. has been in any way, by act or omission, directly or indirectly, knowingly concerned in or party to the contravention; or
  4. has conspired with others to effect the contravention.

Mr Lau, of EZY Accounting,  claimed that he was not “involved in” the contraventions. Mr Lau argued that he was not retained to know whether Blue Impression was paying its employees minimum entitlements under the Award and sought to show he did not know the essential terms of the contraventions.

The primary Judge found that Mr Lau had actual knowledge of the Award and of the contravention of the Award.  The Judge stated that Mr Lau was aware that the Award provided a base rate of pay, penalty rates and allowances and that he knew Blue Impression was underpaying its staff because the rates in the EZY Accounting system were not meeting the obligations set by the Award. This was enough to find that Mr Lau was “involved in” contraventions of the Act. EZY Accounting appealed this decision.

On Appeal

On appeal to the Full Court of the Federal Court of Australia, it was found that Mr Lau was sufficiently “involved in” the contravention of the Act.

A discussion of the relevant legal principles revealed that for a person to be “knowingly concerned” in or party to a contravention, the person must have engaged in conduct which “implicated or involves” that person in the contravention so that there is a “practical connection” between the person and the contravention. Previous cases have also established that accessorial liability involves that person being a knowing and intentional participant to the contravention.

The Court held there was a “practical connection” between Mr Lau’s involvement in contravening the Award and the conduct of Blue Impression and that this connection implicated him in the contravention. Because it was not in dispute that Mr Lau has actual knowledge of the Award, it was unnecessary for the Court to determine whether an accessory need have more knowledge of the contravening conduct or the actual award.

The Court agreed with the primary Judge in that Mr Lau was “knowingly concerned” with Blue Impressions contravening conduct and hence satisfied the criteria in section 550(2) of the Act. It was found that Mr Lau knew the system of payment, he knew the Award provided for base and penalty rates and that the outcome of his facilitation of Blue Impression’s system would be that employees would not be paid according to the Award.

This level of involvement was sufficient to contravene the Act despite the fact Mr Lau did not know about the specific employees or the specific penalty rate hours that employees worked and were entitled to. The basis for this finding was that where an alleged accessory has knowledge of a system producing outcomes, and those outcomes are contraventions, it is not a requirement to show that the alleged accessory knew the specifics of each instance of those outcomes in order to show the requisite knowledge.

Ezy Accounting was ordered to pay a $51,330 pecuniary penalty.

Practical Tips

This case demonstrates the Ombudsman’s willingness to pursue not only businesses not meeting their obligations under the Act but also external agencies that facilitate these contraventions. The Ombudsman is prepared to enforce accessorial liability laws to ensure that vulnerable employees are not exploited.

If you are found to be involved in a contravention there are significant consequences. External advisors must ensure they are legally compliant and do not facilitate any breaches under the Act. If advisors become aware of potential or actual contraventions of the Act they should explain these to their clients. If the contraventions persist, advisors should remove themselves from any further involvement and seek legal advice if necessary.

If you would like to discuss any aspect of this article further, please do not hesitate to email Alicia Hill or Chao Ni, or phone +61 3 8540 0200.