There have been a number of decisions recently where employees have been held personally liable for breaches of the Fair Work Act by following direction from senior management. HR practitioners and managers are therefore asking how far their liability extends?
A recent case (Director of The Fair Work Building Industry Inspectorate v Baulderstone Pty Ltd & Ors(2014)FCCA 721) has again highlighted the personal liability of HR practitionersfor breaches of the Fair Work Act 2009 (FW Act).
The personal liability of HR practitionersfor breaches of the civil remedy provisions of theFW Act are as extensive as those that apply to senior managers and directors. Further, “working as directed” by a senior manager is not a valid defence for a breach of a civil remedy provision.
The area of law that this falls under is called ‘accessorial liability’. As the name suggests, it goes to being an accessory to a breach and not just the instigator or driver of a breach. Section 550 oftheFWActprovides that a person who is “involved” in a contravention of a civil remedy provision is taken to have contravened the provision and is therefore personally liable for a penalty of up to $10,800 per breach. The corporate entity will also attract fines of up to $54,000. (These penalty rates are current for the period 21 July 2015 to 20 July 2018).
Section 550 (2)states:
"An individual is “involved” in a contravention 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."
There are a number of sections within FW Act that, if breached, give rise to civil penalties with thecivil remedy provisionslisted under section539 of the FW Act.
This list is too exhaustive to state in its entiretyhowever it includes civil remedies in relation to:
This creates quite a broad liability. An employee, whether it is a HR Manager or other manager within the business does not have to aware they are breaching the Act. If their actions or inactions meet the definition of S.550(2), then they will be “involved” in the contravention. Ignorance of the law is not a defence in a prosecution under the Act.
In Director of the Fair Work Building Industry Inspectorate v Baulderstone, two HR Managers were fined $3,500 each for encouraging an employee to sign a contract variation tobecome a wages employee and thus surrendering his status and conditions as a salaried employee. The reasons provided to the employee was that his status of a salaried employee was incompatible with that of a Safety Officer; his role at the time.
The Federal Circuit Court found the managers were deceptive in their conduct as the real reason for the contract variation was union displeasure at the fact the employee was not a union member. As a result, the two HR managers and the senior operational manager they reported to (who provided direction)breached the employee’s freedom of association to choose to not be a member of the union.
Whilst Baulderstone itself was fined, the judge stated in relation to each HR Manager:
“I propose to assess the pecuniary penalty on the basis that (the HR Manager) had a choice of not implementing the decision, but failed to exercise that choice.
….The pecuniary penalty should incorporate an element of general deterrence to deter persons in subordinate positions from complying with directions from superiors to engage in conduct that may involve contraventions the FW Act.”
The extent of the liability was demonstrated in Fair Work Ombudsman v Centennial Financial Services Pty Ltd (2010) 245 FLR 242 . This case was an example of ‘sham-contracting’ where employees were deemed “sub-contractors” to avoid minimum employee wages and other award provisions. The non-payment of entitlements under an award and sham contracting are separate civil remedy breaches under the FW Act.
In this case the managing director instructed the HR manager to convert the employees to o sub-contractors The Federal Magistrate accepted that the HR manager did not demonstrate an understanding of the law and that he did not have any control over the actions of the company, describing their role as “little more than the (directors) typist”. Despite this,the Federal Magistrate found that the HR manager was knowingly involved in a breach stating that:
"A person is ‘knowingly concerned’ in a contravention if he or she has knowledge of the essential facts constituting the contravention and is an intentional participant in it, the necessary intent being based on knowledge of the essential elements of the contravention".
The HR manager and director werefined $3,750 and $13,200 respectively.
The good news is that liability for civil penalties is not absolute or strict. HR professionals (or those responsible for such matters in the workplace)can take a number of actions to limit their exposure relating to abreach of a civil remedy and establish possible defences should a prosecution arise. This includes:
The civil remedy provisions of the FW Act are designed to drive responsible conduct and to make those responsible with an organsiation the drivers of compliance in a business rather than drivers or facilitators of non-compliance.
Increasingly the Fair Work Ombudsman is prepared to prosecute HR staffas well as relevant directors and managers for breaches of the FW Act. HR practionersare advised that to manage theirs and the organisations risks in relation to breaches of the FW Actthat the actively champion compliance consistent with the intent of the legislation.
