The August newsletter from the Fair Work Ombudsman (FWO) draws attention to the issue of 'accessorial liability' under the Fair Work Act.
The FWO points out that they are prosecuting an increasing number of cases against parties who are alleged to have been 'involved' in a contravention of the act, even though they are not the employer.
The FWO draws attention to section 550 of the Fair Work Act which states:
Involvement in contravention treated in same way as actual contravention
(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.
In explaining their view of what this means for individuals, the FWO states:
Anyone who is found to be involved in a contravention of the Act can be personally liable for compensating employees and paying penalties imposed by the court. We have used this provision to hold company directors personally accountable for the actions of their companies. This effectively means that liquidating a company is no guarantee of avoiding the consequences of non-compliance with the Act.
But section 550 can extend to anyone involved in a contravention. This can include human resources and payroll officers, line managers, accountants and advisors.
The FWO also points out that there are broad implications for business that use 'outsourcing, franchise arrangements or complex supply chains', stating that, 'companies cannot outsource their non-compliance. For example if one company contracts another company to supply cleaning staff; and those cleaners are underpaid: both companies may be held accountable by a court.'
The FWO concedes that the 'full scope of section 550 in these types of arrangements has not been settled by the courts', but it seems clear that the FWO is determined to take action where it believes that a third party is involved in a contravention of the Act.
The FWO advises individuals, such as management teams, consultants and other advisers to ensure that they are aware of the applicable rules and follow them. Any advice given should be consistent with the Fair Work Act.
For companies involved in outsourcing, the FWO provides some resources to assist in reviewing compliance, including: