Human Resources Managers need to be careful to ensure they are not involved in a contravention of the Fair Work Act 2009 (Cth) (FW Act) otherwise they could be held personally liable under section 550 of the FW Act, face prosecution and significant financial penalties. This may be the case even if the person did not realise they were doing anything wrong.
The recent decision of Judge Burchardt in FWO v Oz Staff Career Services Pty Ltd & Ors [2016] FCCA 105 (Oz Staff) highlights that Human Resources Managers and other senior personnel in a workplace cannot simply hide behind their employer when it comes to complying with the provisions of the FW Act.
Background
In 2012, the Fair Work Ombudsman (FWO) undertook a targeted audit of the payment records for a labour hire company which employed over 100 casual cleaners. As a consequence of that audit, the FWO commenced proceedings against the Company as well as its Chief Executive Officer (CEO) and Human Resources Manager (HR Manager), in their personal capacity. The proceedings alleged that the Company had breached:
- Section 323 of the Act by deducting an “Administration Fee” and “Meal Deduction” unlawfully from employee wages; and
- Regulation 3.44 of the Fair Work Regulations 2009 (Cth) (Regulations) by altering its pay slips to cover up the unlawful deductions.
The FWO alleged that the CEO and HR Manager were “involved” in the contraventions by having knowledge of the constituent parts of the contraventions.
The first question to decide was whether the Company had breached the FW Act. The Company ultimately admitted that it had made a number of unlawful deductions from its employees’ wages. The Court also found that the Company was in breach of the Regulations as the pay slips produced by the Company to the FWO were false and misleading because they had been altered to remove the unauthorised deductions. The CEO and HR Manager denied any involvement in the false and misleading pay slips.
Personal liability
A major issue in dispute in this case was the state of knowledge of the CEO and HR Manager about the contraventions of the Company.
The Court found that the CEO (who importantly, was also the sole director of the Company) was at all relevant times in total control of the business. Further, there was evidence that the CEO had asserted at a meeting with a Fair Work Investigator that he was well aware of the deductions but he did not consider them to be “illegal”.
The HR Manager admitted that he knew generically about the practices and procedures for the payment of wages to employees, including deductions, but denied any involvement or knowledge of the contraventions as he did not have responsibility for issuing the Company’s payslips.
The Court was unimpressed by this explanation. It said “I simply do not accept that the person running the Human Resources activities of the [Company] and intimately involved, as he clearly was, with Award matters was not aware not only that the deductions were being made but that the records which were forwarded to the [FWO] not showing those deductions were false and misleading.”
The Court found that both the CEO and HR Manager were clearly involved in the Company’s contraventions of the FW Act because they were involved in determining the employees’ rates of pay and also the FWO investigation. Accordingly, the Court ruled that they had actual knowledge of the contraventions and were therefore personally liable. A penalty hearing has been set down for August 2016. Each employee faces maximum penalties of $10,800 per contravention in respect of the unlawful deductions and $3,600 per contravention in respect of the employee records.
Lessons for employers
The judgment in Oz Skills is a warning that any person who knows of a contravention and takes no steps to correct it will likely be “knowingly concerned with the contravention” and, therefore, personally liable. It is not necessary for the person to appreciate that their act or omission constitutes a breach of the FW Act. All that is required is that the person intentionally participates in the act or omission which gives rise to the contravention. Human Resources Managers and senior personnel, therefore, need to be familiar with relevant minimum terms and conditions of employment and record keeping obligations and if required, should seek legal advice to ensure compliance with the provisions of the FW Act.
Most of the recent decisions concerning accessorial liability under the FW Act have concerned more serious and wilful contraventions of the legislation. Nonetheless, the Oz Skills case highlights the importance of Human Resources Managers and other senior personnel being fully informed of the provisions of the FW Act and relevant industrial instruments. Human Resources Managers and other senior personnel must take proactive steps to comply with their obligations (including by ensuring deductions from wages are lawful and employee records are accurately maintained) and take prompt remedial action when errors are discovered.
If you are interested to know more about accessorial liability and the steps you and your business can take to minimise your exposure to legal claims, we would be pleased to discuss developing tailored strategies to help manage these risks. Please contact any member of our Workplace Relations and Safety Group.
This article was written by Jessica Nicholls, Associate and Clare Raimondo, Partner.