Thinking | 9 June 2017
Accountancy firm accessorily liable for breaches of modern award
For the first time, an accounting firm, Ezy Accounting 123 Pty Ltd (Ezy Accounting), has been found accessorily liable for contraventions of a modern award by its client, Japanese food chain Blue Impression Pty Ltd (Blue Impression).
In 2014 the Fair Work Ombudsman (FWO) investigated Blue Impression and the operator of one of its restaurants (Wong) for contraventions of the Fast Food Industry Award 2010 (Award).
Facing prosecution and significant penalties, Blue Impression and Wong made full admissions to not paying employees correct minimum rates of pay, penalty rates, loadings and allowances under the Award.
In a decision on 28 April 2017, the Federal Circuit Court of Australia dealt with the involvement of Ezy Accounting in the admitted contraventions by providing payroll services to Blue Impression.
The FWO argued that:
- Blue Impression outsourced its payroll operations to Ezy Accounting. All payment processing, use of MYOB software to calculate wage payments, and the actual payment of wages was completed by Ezy Accounting.
- Ezy Accounting was aware of the applicable rates of pay and other employment entitlements owing to the employees under the Award as it had been the contact point between Blue Impression and the FWO in a 2014 audit where underpayments had been detected (these underpayments were not rectified).
Given this, the FWO alleged that there was a practical connection between Ezy Accounting and the contraventions and that they should be held accessorily liable under the Fair Work Act 2009 (Cth) (Act) for the Award breaches.
Ezy Accounting denied liability on the basis that it did not provide payroll services to Blue Impression. Rather, it argued they provided bookkeeping services, limited to data entry and processing. Ezy Accounting also denied that its director Mr Lau had requisite knowledge of the essential elements of the contraventions to be liable under the Act.
Justice O’Sullivan was satisfied that had Mr Lau not “shut his eyes,” he would be aware that Blue Impression had not paid the correct minimum rates, loadings and allowances under the Award.
The Court accepted the FWO’s submission that Ezy Accounting “had at their fingertips all the necessary information that confirmed the failure to meet the Award obligations,” but continued to process payments.
Ezy Accounting’s penalty is yet to be handed down, but under the Act is a maximum of $54,000.
Lesson for employers
With the FWO focusing on holding third parties accountable for breaches of the Act, professionals (including HR advisors, managers, recruiters, franchisors, lawyers and business consultants) should take care in scoping and providing their services and be mindful that a failure to make reasonable enquiries when advising clients will not be tolerated by the FWO. Professionals providing guidance, audits and payroll services to clients should be mindful of the obligations which exist under applicable industrial instruments, particularly where red flags exist.
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