External accountants accessorially liable for award breaches
There have been a number of matters in the last few years wherein external advisors have been held accessorially liable for breaches of a modern award, the Fair Work Act 2009 (FW Act), sham contracting and underpayment of wages.
External consultants such as business coaches and HR consultants have been held personally responsible for providing quite frankly, poor and illegal advice to their clients. Importantly accountants are now being held liable for the work they undertake for their clients as in the recent prosecution by the Fair Work Ombudsman of Ezy Accounting 123 Pty Ltd (Accountants) in the Federal Circuit Court case of Fair Work Ombudsman v Blue Impression Pty Ltd & Ors  FCCA 810 (28 April 2017) (Blue Impression Case).
In the Blue Impression Case, the Fair Work Ombudsman (FWO) sought penalties against a Japanese restaurant, the owner of the restaurant and surprisingly the accountants. The alleged contraventions of the Fast Food Industry Award 2010 (Award) ranged from failure to pay loadings on weekends to failure to pay the minimum hourly rate of pay.
Interestingly, the Court agreed with the FWO that the accountants were knowingly concerned in or involved in the breaches of the Fair Work Act by their client and as such were accessorially liable.
What is accessorial liability?
Accessorial liability is, in practical terms, a shared responsibility of the wrongdoing or breach of the Fair Work Act. This could be by way of:
- Aiding or procuring in the contravention;
- Inducing the contravention;
- Been in any way, by act or omission, directly or indirectly, knowingly concerned in or party to the contravention; or
- Conspiracy with others to effect the contravention.
Some basic principles apply in this regard, and the common law provides some guidance:
- The person has knowledge and essential facts of the contravention;
- The person is knowingly concerned in or involved in the breach;
- The person is an intentional participant in the breach – wherein wilful blindness is not an excuse.
The penalties for such breaches are quite high and up to $54,000 for each contravention (and $10,800 for each individual).
In the Blue Impression Case, the company had admitted to the contraventions of the Award it was then a question of whether the Accountants were also liable as accessories. The Accountants put forward an argument that they were mere data entry, taking instructions from their client – it was not their responsibility (because they were not employment law experts) to ensure there was compliance with the Award.
However, this argument was countered by the FWO that the Accountants knew there was an underpayment of wages evidenced by various correspondence and a clear difference between the pay they had been instructed to insert into the system and the figure that was being shown on the MYOB payroll system.
Either by wilful blindness or by way of actively aiding in the underpayment the Court found the accountants were in breach of the Award and therefore the Fair Work Act.
Lessons to learn
It is easy to merely say as an accountant or advisor for a matter, that you are just taking instructions. But accountants and advisors need to be weary not to become accessorially liable for the mistakes made by their clients.
Here are practical steps that can be taken to reduce risk and liability:
- Have a Client Agreement which provides a release and indemnity for workplace or employment law breaches – this will give accountants contractual rights to enforce if they are ever held accessorially liable;
- A clear disclaimer in the Client Agreement – ensure that a disclaimer is inserted into the Client Agreement providing that the client acknowledges they comply with all relevant laws including those contained in the Fair Work Act;
- If there are doubts regarding a client complying with their legal obligations refer them an employment lawyer – some early legal advice can be the difference between a Blue Impression Case or a non-issue.
The accountants have not learnt of their penalties fate just yet – however it would seem that the FWO will be making submissions at the higher end – up to $324,000 – a potentially fatal commercial error on the accountants part.
Could you, your business or your advisor be vulnerable to an accessorial liability claim? NB Lawyers, the lawyers for employers, offer a free 20-minute consultation to discuss how you could be exposed to pecuniary penalties.