Mind your Accessories: Accessorial Liabilitiy

90% of cases the Fair Work Ombudsman (FWO) prosecuted in the past 12 months against employers included an accessory as a party to Court proceedings.

This practice is referred to “accessorial liability.” The “accessories” have included company directors, human resources staff, line managers, administrative staff and payroll officers. Employers and franchisors should also be on notice that the FWO has recently signalled that it will increasingly pursue orders that require a franchisor to pay employees of its franchisees for any unpaid wages and to impose other measures to ensure franchisee compliance with workplace laws.

Who and How?

Accessorial liability is not new – the Fair Work Act (the Act), consistent with its Workchoices predecessor legislation, extends the responsibility for contraventions to a person who is “involved in” a contravention of the Act. While the Courts have defined “involved in” very broadly, individuals outside the direct employee-employer relationship are more likely to be held accountable if they have been materially involved in a breach of workplace laws.

FWO has cast when determining if an individual has been “involved in” a contravention of the Act. These cases have shown that:

• Seemingly menial tasks, such as preparing letters or contracts, could lead to an assumption of liability if that person is aware that those actions are in contravention of the Act.
• Any prior dealings with the FWO will lead to an assumption that the individual has knowledge of workplace laws and any subsequent contraventions of the law will be treated more seriously.
• The FWO is now more willing to seek orders that individuals (as opposed to the corporate entity) pay underpaid wages to employees, as well as pay penalties for contraventions of the Act.
• In labour hire arrangements, the Court will consider the entire supply chain – with liability extending to both the labour hire company and the host employer if the host was aware the labour hire company underpaid its staff.
• Franchisors can be held accountable for the actions of their franchisees – with orders extending beyond financial penalties, requiring widespread external audits and workplace relations training for managers.
• Liability doesn’t end when an individual’s employment or involvement with a particular employer ceases – the Court can impose an attachment of earnings order to recover unpaid penalties from wages paid by a new employer.

Take home messages for employers

• Understand that ignorance of the law or wilful blindness are not defences to any allegations of contraventions of workplace laws.
• Undertake due diligence about your supply chain to make sure that contractors are complying with workplace laws.
• Ensure regular training is provided to management teams and other relevant staff so they are aware of your business’ legal obligations.
• Review internal procedures and check that comprehensive record-keeping is being conducted by responsible staff.
• Franchisors should take reasonable steps to be informed of their franchisees’ actions and ensure compliance with the Act extends across the franchise network.

HR Legal can assist you understand your legal obligations, including providing your staff with any training they may need to comply with workplace laws and assisting with FWO investigations into alleged contraventions of the Act.

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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.