Landmark decision on Accountant’s accessorial liability for client’s breach of workplace laws

The Federal Circuit Court has handed down an important decision, highlighting risks to accountants and other businesses that provide employment advice, payroll or bookkeeping services to employer clients.

The Fair Work Ombudsman commenced legal proceedings in late 2015 against a fast food industry employer, its director, and an external accounting firm, alleging contraventions of the Fair Work Act. The employer admitted to failing to pay its employees their minimum hourly rates of pay, loadings, penalty rates and allowances, and to not providing prescribed rest and meal breaks in accordance with the Fast Food Industry Award.   The director also admitted her involvement in the contraventions.  

The Melbourne based accounting firm denied the Ombudsman’s claim that it had been involved in the employer’s contraventions, arguing that it had been engaged by the employer to provide bookkeeping services, including payroll data entry and processing work, but was not under any duty to ensure that its client complied with the law, or to check that the rates being paid to the employees were sufficient.

Judge O’Sullivan found that the accounting firm knew the award prescribed minimum rates of pay and that the employer had previously underpaid its employees, but failed to make inquiries.  It ‘deliberately shut its eyes to what was going on’ to the extent that this amounted to wilful blindness and involvement in the employer’s contraventions of the Fair Work Act.

Under the Fair Work Act, any third party who is involved in a contravention of the Act, including contravening terms of a modern award, is taken to have contravened a civil remedy provision themselves.  The accounting firm now faces penalties of up to $51,000 for each of the seven contraventions of the Fair Work Act.

This case is the first time the Fair Work Ombudsman has pursued legal action against an external service provider for its involvement in an employer’s contraventions of workplace laws, but is unlikely to be the last, as the Ombudsman has increasingly indicated a willingness to take legal action against any party who facilitates breaches of workplace laws.

Business advisers and service providers should be aware that if they provide incorrect advice about employee entitlements, assist clients to contravene workplace laws, or turn a blind eye to a client’s unlawful conduct, they may be exposing themselves to the risk of civil penalties, and can also be held liable to rectify underpayments to their client’s employees.

If you need assistance to understand award entitlements or advice about any other workplace matter, please contact:

Jim Rutherford
Principal
T 03 5226 8579
E jrutherford@ha.legal

Sonia McCabe
Senior Associate
T 03 5226 8558
E smccabe@ha.legal

Jenni Walker
Lawyer
T 03 5226 8577
E jwalker@ha.legal