Accounting firm found liable by Federal Court for client’s underpayment of employees

The Full Federal Court handed down a significant decision on 20 August 2018, finding that accessorial liability extends to advisors involved in underpayments. The matter of Ezy Accounting 123 Pty Ltd v Fair Work Ombudsman [2018] FCAFC 134 involved an appeal by Ezy Accounting (Ezy) against penalties imposed by the Federal Circuit Court for failure to advise their client of contraventions of the Fair Work Act (Act).

In 2017, the Fair Work Ombudsman (Ombudsman) identified various contraventions of the Act by Blue Impression Pty Ltd (Blue Impression), a Japanese fast food chain. Blue Impression engaged Ezy to rectify the contraventions, however, further contraventions occurred. The Ombudsman commenced proceedings against Blue Impression and Ezy, following a complaint by a Blue Impression employee. While Blue Impression admitted the contraventions, Ezy denied any liability.

The Federal Circuit Court, in its 2017 decision, found Ezy had been involved in seven contraventions of section 45 of the Act, and further considered that Ezy had ‘itself’ contravened the sections pursuant to section 550 of the Act. Section 45 of the Act makes it unlawful to breach the terms of a Modern Award. A penalty of $53,880 was imposed on Ezy for its role in underpayment of Blue Impression staff. Ezy appealed the decision to the Full Court of the Federal Court.

The Circuit Court decision was upheld, with the Full Court finding that Ezy had actual knowledge of the Award itself, the requirements of the Award and the facts which constituted the contraventions.

The Full Court confirmed that a practical connection was established between Ezy’s involvement in the contravention of the Award obligations and the conduct of Blue Impression. The Full Court referred to the fact that the knowledge and involvement of Ezy was sufficient to implicate them in Blue Impression’s contraventions of the Award, irrespective of the fact that they did not know about the particular employment of the Blue Impression employee, the hours he worked or the relevant provisions of the Act giving rise to entitlements to be paid a particular penalty rate.

It was concluded that the primary Judge was correct to conclude that the accessorial liability criteria had been satisfied, finding that Ezy were involved in the underpayment breaches of the Award by Blue Impression. As such, the Full Court found that no appealable error existed. The Full Court did, however, reduce the penalty imposed to $51,330, setting aside breaches of rest and meal break Award provisions.

For further information or advice, please contact:

Jim Rutherford
Principal
Harwood Andrews
T + 03 5226 8579
E: jrutherford@ha.legal

Sonia McCabe
Senior Associate
Harwood Andrews
T + 03 5226 8558
E: smccabe@ha.legal

Sophie Ware
Associate
Harwood Andrews
T + 03 5225 5222
E: sware@ha.legal