Tuesday, 27 October 2015

‘I didn’t know’ Is Not Good Enough

It is normally companies that are sued for breaching employment entitlements, both as a practical matter – because they have ‘deeper pockets’ – but also because they are the actual employer at law. However, in a worrying trend for HR managers and company directors, people in these roles are increasingly being sued in their personal capacity for taking part in their companies’ employment decisions, as two recent cases reveal.

Cerin v ACI Operations Pty Ltd [2015] FCCA 2762 (14 October 2015)

The first case concerned a worker who had been employed by ACI in South Australia since 1996.

In 2009 he suffered an injury which qualified him for workers’ compensation payments. In 2012, the employer ceased having to provide him with suitable employment under the South Australian workers’ compensation legislation. Shortly afterwards, in October 2012, the company gave him 28 days notice of termination, which was also permitted under the same State legislation.

The difficulty for ACI was that, whatever rights it had under the State laws, it was still required to provide 5 weeks notice under the National Employment Standards in the Fair Work Act 2009. This was not displaced by the workers’ compensation laws.

The employee sued, seeking underpayments of $181, as well as civil penalties from both ACI and its HR Managers for their roles in his dismissal.

The Federal Circuit Court accepted his complaint. As against ACI, the Court found that it had deliberately breached the Fair Work Act by failing to provide an NES benefit, and ordered it to pay a $20,400 civil penalty.

And even though the HR Manager had only been ‘incidentally’ involved in the company’s decision – which the Court said had been made by other, senior managers – she had issued the letter of dismissal and had authorised his payments, despite being aware that NES benefits applied.

As a result, she was also ordered to pay a civil penalty, limited however to 1/10th of the maximum penalty available, or $1,020, because of her lower level of blame.

Fair Work Ombudsman v Liquid Fuels Pty Ltd [2015] FCCA 2694 (8 October 2015)

A more serious case arose in relation to a family-operated BP service station, which employed two Indian students on visas as casual console operators, over 4½ year and 5½ year periods respectively between 2007 and 2013.

Initially they were employed on a flat rate of $10 per hour, which eventually rose after the employees complained, to a maximum of $17 for one employee.

After an investigation, the Fair Work Ombudsman sued the employer, seeking civil penalties for breaching the Fair Work Act and the former Workplace Relations Act, by not paying the correct base hourly rates, casual loadings, weekend and public holiday penalties, and overtime. It had also failed provide correct pay records and payslips recording the gross wages and hours worked.

The company admitted to the breaches. However the managers themselves, a husband and wife team who managed its operations, and the company’s sole director (who was the wife’s father) denied that they should be held accountable for the same conduct.

Under the Fair Work Act, a person can be liable for actions committed by a company if the person has “aided and abetted” the company, or they were in in any way “knowingly concerned” in the offending conduct.

The managers and the director agreed that they aware of the wages that were paid to the workers. However they said that they were not aware of the applicable Awards and underlying legislation, or the specific requirements they contained regarding rates and record keeping duties. They also referred to their difficulty in managing these issues, which they said were not in their field of expertise, and which they had not received training in before taking over the business.

As such, they said that they did not have the requisite degree of knowledge to have been “knowingly concerned” in the company’s breaches.

But the Court did not agree.

It said that it was unlikely that the managers, who were tertiary qualified and had MBAs, would not have been aware of the “essential elements” of the breaches, and that what had been paid to the employees was deficient.

And in relation to the director, the Court said it was enough that he had been “wilfully blind”, and had failed to make enquiries about what was required. Even if he did not have actual knowledge of the offending conduct (which the Court did not accept), he had “deliberately refrained” from making enquiries for fear of what he might find.

As such, both managers and the director were held to be liable for the breaches committed by the company. Further orders will be made on penalty after a separate hearing occurs.

What this means for you

Civil penalties for many breaches of the Fair Work Act and Modern Awards are high – up to $54,000 for a company per breach, and $10,800 per breach for an individual. This is before considering the cost of back-payments.

It is not just companies that can be sued for breaching workplace laws, but also its managers and directors if they have assisted or abetted the company’s actions, or have otherwise been “knowingly involved”.

If you have any questions about applicable minimum employment obligations, contact HR Legal.


This article was produced by HR Legal. It is intended to provide general information only in summary format on legal issues. It does not constitute legal advice, and should not be relied on as such.