If you’re aware of a breach of the Fair Work Act and don’t act to stop it, you could find yourself in legal hot water.
A HR manager has been charged with accessorial liability for making unlawful wage deductions and knowingly falsified employment records of cleaners working in Melbourne's Federation Square and Crown Casino.
The Federal Circuit Court found the director and HR manager of recruitment and labour hire company OzStaff Career Services Pty Ltd were jointly liable for the breach.
Judge Philip Burchardt found the company had falsified employment records provided to the FWO after a targeted audit in January 2012, and breached sections of the Fair Work Act by deducting administration fees from 102 employees and taking meal allowances from a further 44 employees.
By deducting an administration fee and meal deduction of at least $25 a week from each employee, OzStaff was not complying with the Fair Work Act, the FWO claimed.
The FWO alleged the deductions were unlawful because they were not authorized by the employees, nor did they serve to benefit the employees.
The recruitment company was also in breach of the Fair Work Regulations for failing to ensure employee records were not false or misleading.
While the company and its director admitted they knew the administration fee and meal deductions were unlawful, the HR manager initially denied knowledge or involvement, even though he was aware of the practices and processes of paying employee wages.
However, the court held the HR manager jointly liable for the breach, with Judge Burchardt saying the evidence showed that it was “more probable than otherwise” that the HR manager knew that the company and its director were breaking the law by taking administration fees and meal deduction.
The judge refused to accept that the HR manager was not aware that the deductions were being made, nor that he was ignorant of the fact OzStaff had intentionally supplied false and misleading records to the FWO, hiding the unlawful deductions.
"[The HR manager] was aware that the deductions were being made. He had knowledge of this, as I find,” Judge Burchardt said.
Being aware of a breach and not acting out to stop it will land HR managers in legal hot water, says Aaron Goonrey, Partner at Lander & Rogers.
“For you to be “involved” in a contravention of the Fair Work Act, you must have had knowledge of the essential facts constituting the contravention; you must have been knowingly concerned in it; and you must have been an intentional participant in the contravention based on your actual knowledge,” Goonrey says.
“A key point to remember is that you don’t even have to know that the actions in question constituted a contravention for you to be legally considered “involved” in that contravention,” he says.
He says HR managers are more likely to be “involved” in a contravention if they are involved in the day-to-day operations of the employer and have a higher degree of control.
“However, you need not hold any special or senior position - anyone can be liable,” Goonrey cautions.
Indeed, a person who knows of the contravention and takes no steps to correct it is clearly in some way, at least indirectly, a person who has “in any way, by act or omission, directly or indirectly, knowingly concerned in or party to the contravention,”,” the judge said.
“He (the HR manager) was clearly involved within the meaning of s.550 of the FW Act," Judge Burchardt said.
The judge also said OzStaff had given "false and misleading" records to the FWO, hiding details of the meal deductions and administration fee.
The company’s sole director was slapped with an accessorial liability charge, despite claiming that he was unaware of the unlawful practices.
"[It] is clear in my view beyond doubt that the [director] was knowingly involved with the contravention in the provision of false and misleading pay records," the judge said.
A penalty hearing is set down for August.
Lander & Rogers advice for HR to avoid accessorial liability includes:
Know your obligations:
Because of the scope of accessorial liability, it is extremely important that you are aware of the obligations mandated by the Fair Work Act, modern award or industrial agreement.
Ignorance of the law or wilful blindness will not excuse you from liability.
Think before you act:
It is important to be aware that seemingly menial tasks - such as typing up contracts or drafting letters - can result in a finding of personal liability if the contracts or letters contravene the Fair Work Act.
Any actions undertaken at the direction of a more senior employee should be carefully considered. If, for example, a manager carries out an activity on the instruction of a director and does not consider the legal implications, the manager cannot later shift the blame to the more senior employee.
Perform regular workplace audits (health checks):
To ensure minimum legislative and award / agreement obligations are being met, and include appropriate clauses to this effect in agreements with contractors.
Ensure regular training:
Relevant staff (including procurement teams) should be appropriately trained on their responsibilities under the Fair Work Act.
Seek assistance if needed:
Always seek professional advice if you are in doubt.
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