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On 28 April 2017 the Federal Circuit Court of Australia (‘the FCCA’) held, in a precedent setting decision, that an accounting firm was accessorily liable for their involvement in contraventions of the Fair Work Act 2009 (Cth) (‘the FW Act’)[1].

Judge O’Sullivan in Fair Work Ombudsman v Blue Impression Pty Ltd & Ors [2017] FCCA 810 considered whether the third respondent, Ezy Accounting 123 Pty Ltd (‘Ezy’), was involved in contraventions of the FW Act, admitted by its client, Blue Impression Pty Ltd (‘Blue Impression’).[2]

Background

The proceedings arose out of a Fair Work Ombudsman (‘the FWO’) “investigation into a request for assistance made by Mr Zheng”, an employee of Blue Impression (‘Employee’), in relation to his employment.[3] The Employee was employed on a casual basis and his employment was governed by the Fast Food Industry Award 2010 (‘Award’).[4]

The FWO alleged that Ezy was involved in and accessorily liable for several of Blue Impression’s contraventions of the FW Act in relation to the Employee.[5]

Blue Impressions contravened the FW Act by:

  • failing to pay the minimum hourly rate of pay;
  • failing to pay the evening loading;
  • failing to pay the Saturday and Sunday loading;
  • failing to pay the public holiday penalty rate;
  • failing to provide rest breaks and meal breaks; and
  • failing to pay the special clothing allowance.[6]

It was the view of the FWO that Ezy was an “intentional participant in the contravention and either/or aided, abetted or by its acts or omissions directly or indirectly was knowingly concerned in or a party to those contraventions”.[7]

Ezy is a tax and accounting business that was established in 2003, who provided payroll and booking keeping services to its client, Blue Impression.

Ezy denied liability stating it was not aware of the duties, total number of hours, meal breaks of the Employee or failure to pay penalty rates, allowances or loading to the Employee.[8] Further, it was submitted that Ezy was not the employer of the Employee and thus owed no primary legal obligation in relation to minimum entitlements received.[9]

The law on accessorial liability

Section 45 of the FW Act provides that “a person must not contravene a term of a modern award”.[10]

On application to the FCCA, the Federal Court or an eligible State or Territory court, a person may, if the court is satisfied that the person has contravened a civil remedy provision of the FW Act, be ordered to pay a pecuniary penalty that the court considers is appropriate.[11]

“It is not only the person who has contravened a civil remedy provision who may be liable”.[12] Under section 550 a “person who is involved in a contravention of a civil remedy provision is taken to have contravened that provision”.[13]

Importantly in this case and for the purposes of the FW Act, the actions and inactions of the director of Ezy, Mr Lau, were taken to be conduct engaged in by the body corporate, Ezy.[14]

The precedent setting decision

The FCCA believed that Mr Lau’s (and thus Ezy’s) answer to claims that Ezy were involved in Blue Impression contraventions was best summarised by his answer:

… we don’t question the pay rate… we don’t raise questions. We just process what we are given”.[15]

The court noted that in 2014, as a result of an audit of Hanaichi QV, a business of Blue Impression, Mr Lau had received a letter which identified provisions of the Award in detail. Further, as a result of the audit, Mr Lau knew how to check the correct Award rates and that it was inevitable that if rates were not changed in Ezy’s MYOB system, there would be underpayments.[16]

Having heard all the evidence, Judge O’Sullivan was “left with the clear impression” that Mr Lau knew Blue Impression had been underpaying their employees in 2014 and were still underpaying at the relevant time for the purposes of the proceeding.[17]

The court was satisfied that:

  • Ezy knew the Employee worked for Blue Impression;[18]
  • Mr Lau must have known Blue Impression was underpaying employees as a result of the Audit;[19]
  • Ezy “(through Mr Lau) deliberately shut its eyes to what was going on in a manner that amounted to connivance in the contractions by” Blue Impression;[20] and
  • as a result of Mr Lau’s wilful blindness “Ezy should be found to be aware of the essential matters which go to make up the contraventions admitted by Blue Impression”.[21]

Justice O’Sullivan accepted FWO’s submissions that Ezy had “at their fingertips all necessary information” that showed Blue Impression failed to meet Award obligations and yet continued with their bookkeeping services, with the “inevitable result that breaches would occur”.[22]

Ezy was found to be involved in Blue Impression contraventions of the FW Act, except for the contravention in relation to meal breaks (between the period of 15 September and 5 October 2014).[23]Thus, the FWO established that declarations should be made that Ezy was accessorily liable.[24]

Significance of this decision

This decision serves as a stark warning to professional advisors that they cannot turn a blind eye to award underpayments by their clients and if they do so they risk being liable as an accessory.

If you would like to discuss this article or have any queries relating to employment law, please contact Michael Bishop or Amelita Hensman on (03) 9614 7707.

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[1] Section numbers in the body of this article refer to the Fair Work Act 2009 (Cth) unless otherwise specified.

[2] Fair Work Ombudsman v Blue Impression Pty Ltd & Ors [2017] FCCA 810.

[3] Ibid 6.

[4] Ibid.

[5] Ibid 7.

[6] Ibid 13.

[7] Ibid 12.

[8] Ibid 15, 16.

[9] Ibid 28.

[10] Fair Work Act 2009 (Cth) s 45.

[11] Ibid s 546(1).

[12] Fair Work Ombudsman v Blue Impression Pty Ltd & Ors [2017] FCCA 810, 18.

[13] Ibid 84; Fair Work Act 2009 (Cth) s 550(1).

[14] Ibids 793.

[15] Fair Work Ombudsman v Blue Impression Pty Ltd & Ors [2017] FCCA 810, 37.

[16] Ibid 89.

[17] Ibid 42.

[18] Ibid 85.

[19] Ibid 86.

[20] Ibid 102.

[21] Ibid 103.

[22] Fair Work Ombudsman v Blue Impression Pty Ltd & Ors [2017] FCCA 810, 108.

[23] Ibid 109.

[24] Ibid 110.

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