Accessorial liability occurs when a third party is found to be involved with, and liable for, the breaches of another. Since we last wrote on this topic, on 3 November 2016, there have been some important new developments.
Accessorial liability is defined in s.550 of the Fair Work Act 2010 (Cth) (“FW Act”) as:
- A person who is involved in a contravention of a civil remedy provision is taken to have contravened that provision.
- A person is involved in a contravention of a civil remedy provision if, and only if, the person:
(a) has aided, abetted, counselled or procured the contravention; or
(b) has induced the contravention, whether by threats or promises or otherwise; or
(c) has been in any way, by act or omission, directly or indirectly, knowingly concerned in or party to the contravention; or
(d) has conspired with others to effect the contravention.
The application of these provisions to service providers, in particular accountants, was considered in Fair Work Ombudsman v Blue Impression Pty Ltd & Ors  FCCA 810 (28 April 2017).
A Japanese fast food chain has a number of locations in Melbourne. The chain was investigated by the Fair Work Ombudsman (“FWO”) in 2014 over alleged breaches of the Fast Food Industry Award 2010 (“the Award”).
These breaches included a failure to pay the minimum wage and various loadings such as evening, weekend and public holiday loading.
The Third Respondent was EZY Accounting 123 (“EZY”). EZY had provided bookkeeping services for the food chain which included preparing payroll records on MYOB accounting software.
Both First Respondent, the corporate entity that owned the fast food chain, and the Second Respondent, who was responsible for the day-to-day running of the store that was in breach, made full admissions of their breaches. Therefore, the case was determined on the issue of whether EZY was or was not accessorily liable.
The FWO alleged that after notifying the First Respondent of the breaches to the Award following the audit, EZY was also made aware of the audit findings. Despite having been put on notice of the breaches, EZY failed to change the future pay slips of any employees, perpetuating the breaches.
EZY claimed it was only providing “mechanical data entry work” and was not authorised to make any changes to the figures provided by its client. Furthermore, the director of EZY gave evidence that “… we don’t question the pay rate … we don’t raise questions. We just process what we are given.” As accountants, EZY claimed that they were not specialists in employment issues and had no knowledge of the required wages and loadings.
The FWO however alleged that as EZY was provided with a letter detailing the correct rates of pay and other obligations, they were on notice to correct the payslips after that date.
Judge O’Sullivan was highly critical of the Respondent’s witnesses, stating that their “risible” evidence “was remarkable for the precision with which details of what were said to be matters not known to those witnesses were not known” and that the evidence “left the clear impression of designed or calculated ignorance” and was “at times self-serving”.
His Honour found that EZY:
… had at their fingertips all the necessary information that confirmed the failure to meet the Award obligations by the first respondent and nonetheless persisted with the maintenance of its (payroll) system with the inevitable result that the Award breaches occurred’.
The question as to the penalty will be decided at a later date with all three Respondents being required to appear before the Court.
Message for Employers and Service Providers
This case demonstrates the willingness of the Courts and the FWO to pursue not just employers who breach the FW Act but also employees and third party service providers who allow breaches to perpetuate.
All employers (and service providers) should take care to avoid breaches of the FW Act and service providers such as accountants should notify their clients in writing of any breaches they discover.
The greatest mistake made by EZY was its failure to bring to the client’s attention and then try to correct various FW Act breaches once it was put on notice of those breaches by the FWO audit and subsequent notification.
Whether they would have been found to have been in breach had they not been made aware was not discussed in the case and remains an unanswered question. However, any service provider notices suspicious conduct in its own or in its client’s records, they must realise that they may be liable even if not directly involved in the breach.