This time it's personal! HR Manager found liable for "accessorial liability"

In-brief

The Fair Work Act 2009 (Cth) (FW Act) sets out a range of duties and prohibitions on employers in Australia, such as requirements to comply with the terms of modern awards and enterprise agreements, or not to engage in adverse action towards employees. Civil remedies may be sought for proven breaches of many of these obligations. Proceedings can be instituted by an employee, a union or in some cases, by an inspector such as the Fair Work Ombudsman seeking compensation and penalties.

Accessorial liability

The accessorial liability provisions in the FW Act enable individuals to be named as respondents to breaches of civil remedy provisions. In recent years, we have seen a range of individuals named as accessories to proceedings, including human resource managers and officers, payroll officers, company directors and even external advisors, including accountants.

Under section 550 of the FW Act, an individual may be liable under these provisions if the individual has:

• aided, abetted, counselled or procured the contravention;
• induced the contravention, whether by threats or promises or otherwise;
• been in any way, by act or omission, directly or indirectly, knowingly concerned in or party to the contravention; or
• conspired with others to effect the contravention.

The accessorial liability provisions can be a particularly useful tool for the Fair Work Ombudsman (FWO) if a company has gone into liquidation, as compensation and penalties can be recovered from the individuals involved in the contravention. In essence, the provisions remove the ability of an individual to avoid liability by using the corporate veil as a shield.

A recent decision of Katzmann J of the Federal Court of Australia in Fair Work Ombudsman v DTF World Square Pty Ltd (in liq) (No 3) [2023] FCA 201 resulted in adverse findings against the Human Resources Manager and the General Manager of a dumpling chain.

In that case, it was found that the Human Resources Manager of Din Tai Fung was "at least knowingly concerned” in numerous breaches of the FW Act and the Fair Work Regulations 2009 (Cth), including several breaches of:

• A modern award, namely the Restaurant Industry Award 2010;
• the National Employment Standards (NES); and
• the record keeping and pay slip obligations.

The judge, Katzmann J, found that it was readily apparent that the Human Resources Manager was “not simply acting as a conduit” but that she instructed a payroll officer on how to operate and administer the payroll system, which included the production of false and misleading records.

In relation to several contraventions of the Restaurant Industry Award 2010, her Honour held that:

“On the whole of the evidence it is inconceivable that Ms Parmenas did not know that minimum rates of pay and penalty rates had to be paid for work on Saturdays, Sundays and public holidays. I infer that she did know and that she knew that the amounts paid to the relevant Employees did not include those penalty rates.”

The case serves as a timely reminder that the FWO is increasingly looking to hold individuals to account if they are “involved in” breaches of civil remedy provisions under the FW Act.

What do managers and individuals involved in workplace law decisions need to do?

As a general guide, company directors, human resources and payroll staff and external advisors must:

1. be aware of entitlements under the FW Act, including but certainly not limited to the NES, applicable modern awards and enterprise agreements;
2. keep the general protections provisions front and centre if they are a decision maker in a disciplinary process which may result in the dismissal or another form of adverse action being taken against a person;
3. consider areas where further legal advice may need to be sought regarding a company’s obligations under the FW Act. Legal advice must be sought from lawyers, not accountants or non-qualified individuals;
4. make reasonable inquiries if they are put on notice about potential compliance issues under the FW Act;
5. not blindly act on instructions from managers without exercising independent judgment and scrutiny; and
6. be satisfied obligations under the FW Act are being discharged. This can be achieved through regular compliance audits.

In light of the ambitious employment and industrial relations law reform agenda of the Albanese-Labor government, now is an opportune time for businesses to review their internal and external systems for compliance and seek appropriate advice about compliance.

This article was first published by Dentons Australia here.