ACCOUNTANT LIABLE AS AN ACCESSORY TO UNDERPAYMENT OF WAGES

Legal Directions

Introduction

In Fair Work Ombudsman v Blue Impression Pty Ltd & Ors [2017] FCCA 810, the Federal Circuit Court ruled that an accountant can be held liable as an accessory to its client’s breaches of the Fair Work Act 2009 (Cth).

Background

The Fair Work Ombudsman (FWO) brought proceedings against Blue Impression
Pty Ltd  (the Employer), the Employer’s manager and its accountant,
Ezy Accounting 123 Pty Ltd (the Accountant), for breaches of the Fair Work Act 2009 (FW Act).

The Employer and its manager made admissions to contravening section 45 of the
FW Act by failing to pay an employee the proper wages / allowances and failing to provide him with the proper breaks in accordance with the relevant workplace award (the Award).

Section 45 is a civil remedy provision and, under section 546 of the FW Act, the Court can order that a person who breaches this section pays a pecuniary penalty to the Commonwealth, a particular organisation, or a particular person.

The Accountant provided payroll services to the Employer. The FWO claimed that the Accountant was liable as an accessory under section 550 of the FW Act for the contraventions by the Employer and the manager.

Judge O’Sullivan summarised what needs to be established for a person to have accessorial liability under s.550 by being a knowing participant, namely that the participant:

a) have knowledge of the essential facts constituting the contravention;

b) must be knowingly concerned in the contravention;

c) must be an intentional participant in the contravention based on actual not constructive knowledge of the essential facts constituting the contravention – although constructive knowledge may be sufficient under s.550(2)(c) of the
FW Act in cases of wilful blindness; and

d) need not know that the matters in question constituted a contravention.

His Honour stated that, importantly, in order to be a knowing participant ‘it was not necessary to show that [the alleged accessory] was aware of the details of each particular contravention if he was aware of a system that tended to produce or lead to contraventions.’

The Accountant’s director gave evidence that the Accountant’s role was limited to bookkeeping work, data entry and uploading wages data provided by the Employer into MYOB files. He said he had never met the employee and did not have anything to do with setting his rate of pay. He also gave evidence that he was aware of the Award but had not read it and did not know what rates of pay it prescribed.

The director went on to give evidence that his staff entered the rates that the Employer’s employees would be paid into MYOB and that, even though he knew these rates were lower than what was specified in the Award, he had no authority to alter the rates.

His Honour found that the Accountant (through its director) deliberately shut its eyes to what was going on in a manner that amounted to connivance in the contraventions by [the Employer]’. His Honour reasoned that the Accountant’s director exercised overriding control over the Accountant’s activities, admitted he knew of the Award and that it provided minimum rates.

His Honour held that because of the Accountant’s director’s ‘wilful blindness [the Accountant] should be found to be aware of the essential matters which go to make up the contraventions admitted by [the Employer]’. His Honour also held that ‘…I am satisfied it is possible to infer actual knowledge on the part of [the Accountant’s director] from a combination of suspicious circumstances and a failure to make inquiries.’ Accordingly, his Honour made a declaration that the Accountant was an accessory under section 550 of the FWA.

The Court will decide on penalties in a separate hearing.

Comments

We note that, depending on the terms of the policy, a civil penalty might be covered under an insurance policy. However, many policies exclude indemnity for civil penalties where the breach arises from an intentional, wilful, reckless or deliberate act, error or omission, so this could become relevant when the test of whether or not the participant is liable as an accessory is applied.

Authored by Stephanie Young, Senior Associate, Melbourne


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