Accountants now liable for Fair Work breaches made by clients

Accountants now liable for Fair Work breaches made by clients

The Fair Work Ombudsman has won its first case against an accountant being ‘knowingly involved’ in the workplace breaches of his client. The accountant could now face up to $357,000 in penalties, as though he committed the breaches himself.

Fair Work Ombudsman v Blue Impression Pty Ltd

On 28 April 2017, the Federal Circuit Court handed down its judgement in Fair Work Ombudsman v Blue Impression Pty Ltd. The judgment held that an accountant who processed payroll for a business was as an accessory to breaches of the Fair Work Act 2009 (Cth).

Blue Impression ran Japanese restaurants in Melbourne, which employed workers under the Fast Food Industry Award 2010. Ezy Accounting 123 Pty Ltd was the accountant for the business, and took Excel spreadsheets prepared by the business and input them into MYOB for the processing of payroll.

The Fair Work Ombudsman investigated the restaurants and found breaches of the Award, including breaches relating to minimum hourly rates, evening loading, Saturday and Sunday loading, public holiday penalty rates, rest and meal breaks, and a special clothing allowance.
In 2016, the Ombudsman commenced proceedings against Blue Impression in the Federal Circuit Court, for contraventions of the Fair Work Act 2009 (Cth). However, the Ombudsman then included Ezy Accounting, as a defendant to the proceedings, on the basis the accountant was an accessory to these breaches (and should also be responsible for the breaches).

At the time, the Fair Work Ombudsman itself noted that: “It is the first time the Agency has initiated proceedings against an accountant for allegedly knowingly being involved in contraventions of workplace law.”

The Ombudsman sought to apply s 550 of the Fair Work Act 2009 (Cth) which operates to make someone liable for a contravention they did not do themselves, if they were “involved” by helping it happen or being “knowingly concerned in” the contravention.

The accountant argued he was not involved in the breaches of the Award because employment law is outside of his professional expertise and the scope of his work for the business. The accountant also argued that he had no actual knowledge the breaches were happening (“I did not hire the relevant employees, and I did not know how long they worked”).
However, the Court said that none of this mattered.

The Court decided, the accountant does not need to have expertise in employment law, and it is not acceptable to say that it was not his job to check this. The Court held that the accountant did have actual knowledge the breaches were happening (and was wilfully blind to them) because the accountant had been previously told the payroll system was underpaying employees, and he did not change this (which would inevitably lead to underpayments continuing). The Court ignored the accountant’s argument that his client told him not to change the payroll system, and that the accountant did not have authority to change it.

In the end, the Court found the accountant firm liable for the breaches of the Award under s 550 of the Fair Work Act 2009 (Cth), as though the accountant had done them himself.

The Court has adjourned the proceedings to decide on the penalties that should be imposed on the accountant, which could be a maximum of $51,000 per contravention (and there were 6 contraventions).

So what does this case mean?

The Blue Impression case shows that an accountant can be held liable for the workplace breaches committed by its clients.

It is not enough for an accountant to say that workplace law is outside of their area of expertise, or that they are only performing data entry.
The Court found that the accountant had “actual knowledge” of the workplace breaches on relatively scant evidence, and it was no excuse for the accountant to say he did not have the power to change the payroll system.

What can accountants do to minimise this risk?

We recommend that your standard terms of engagement with your clients include a clear disclaimer of what you are doing and what you are not doing. Your engagement terms should also provide an undertaking from your client that they will comply with all laws relevant to the areas you are assisting them with, including their workplace requirements – and that your client will release and indemnify you if you are ever held liable for their workplace breaches.

Obviously, the best defence is to make sure your clients are meeting all their legal obligations, including providing entitlements to their employees under the relevant Award or the National Employment Standards. If you have any doubts that your client is not meeting their legal obligations – then based on this decision, you must cease to act for them. Otherwise you may be held liable as an accessory to their breaches. It is that simple.

How we can help

Andreyev Lawyers can help you prepare your standard terms of engagement to address the clear risks highlighted by the Blue Impression case. We can also assist your clients ensure they are meeting their requirements under employment law.

Call us now on 1300 654 590 to discuss these important issues.

References
http://www.austlii.edu.au/cgi-bin/sinodisp/au/cases/cth/FCCA/2017/810.html
https://www.fairwork.gov.au/about-us/news-and-media-releases/2016-media-releases/february-2016/20160219-blue-impression-litigation