Beware of Accessorial Liability of Third Parties
Accessorial liability provisions in the Fair Work Act 2009 (Cth) (“FW Act”) may extend to third parties that are not the direct employer of an employee. Employers need to be conscious of s.550 of the FW Act and its implications.
Section 550 states:
(1) A person who is involved in a contravention of a civil remedy provision is taken to have contravened that provision.
(2) 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.
This means the reach of s.550 of the FW Act could reach as far as involving, sub-contractors, Human Resources Practitioners and other advisors such as lawyers and accountants if they satisfy s.550 of the FW Act.
The Fair Work Ombudsman (“FWO”) recently released data that stated that every matter that they took to court, 92% of them roped in an accessory (ie: a party other than the employer). In 2015-16, this included Accountants and HR Managers.
FWO has sent a clear message to employers and accessories that they too could be personally liable for their involvement in contraventions of the FW Act. So much so, that the FWO has expressed its intention to pierce the corporate veil to enforce the provisions and penalties of the FW Act against individuals. This was evidenced in the case of Fair Work Ombudsman v Step Ahead Security Services Pty Ltd & Anor  FCCA 1482.
A further case that has considered the issue of third part liability is the Federal Court case of Fair Work Ombudsman v South Jin Pty Ltd  FCA 1456 (“South Jin”).
The facts of the South Jin case include:
- Integrated Trolley Management Ltd (“Integrated”) has contracts with Woolworths and Coles to provide trolley collection services for certain supermarkets.
- ITM contracted some of the services to Coastal Trolley Services Pty Ltd (“Coastal”).
- Coastal then further subcontracted work to South Jin.
- South Jin employed the workers and at times, underpaid the employees.
- The Director of Coastal, Mr Stroop negotiated Coastal’s contract with Integrated and South Jin.
- The issue that arose was that South Jin’s employees were covered by a Modern Award that stipulated minimum rates of pay. South Jin was unable to meet all the Modern Award’s obligations.
- Negotiations were taking place between Integrated and Woolworths and Coles about the increase of payments under the contract. However, this took some time. In turn, the benefits or actions did not flow on to Coastal or South Jin.
The FWO prosecuted South Jin, Mr Jin personally and Mr Stroop from Coastal under s.550 for accessorial liability.
In order to be found to have been an accessory to a breach (i.e. knowingly concerned), the Court stated that:
a person must have engaged in some conduct which implicates or involves him or her in the contravention, so that there is a practical connection between the person and the contravention.
In particular, a person must have had actual knowledge of the essential elements of the contravention even if they do not know that the conduct was unlawful. An employer deliberately refraining from seeking advice or guidance on possible breaches for fear that a breach would be identified is not a defence of not having “actual knowledge”.
In this case, the Court imposed a penalty of $8,500 on Mr Stroop and a penalty of $38,000 on Coastal.
The law is still developing. Fair Work Ombudsman v Blue Impression Pty Ltd & Ors has been set down before the Federal Circuit Court for a two-day hearing in February 2017. This case also involves an Accounting firm called EZY Accounting 123 Pty Ltd as a possible accessory to alleged breaches by Blue Impression Pty Ltd.
Message for Employers
The FWO, as the regulator of the FW Act, has always taken a strong stance on employers breaching the provisions of the FW Act. However, the risk areas have now been exposed with respect to employer’s commercial undertakings as seen in the case of South Jin and for advisors such as HR Managers, Accountants and even possibly lawyers providing advice in this area.
Ignorance of the FW Act and the employer’s obligations under an industrial instrument is no excuse and penalties would apply if substantiated.
Employers may feel that this now imposes a heavy burden to actively seek out all the possible contraventions and to remedy them. This would be best practice and an employer’s obligations to ensure that compliance with the FW Act occurs within their businesses. In respect of the advisors to the employers, they would need to consider their own obligations when dealing with matters that come before them.