Accounting Firm Cops Penalty for Involvement in Client's Employee Underpayments

It may come as a surprise that not only can employers be penalised for underpaying employees, but also the employer’s external service providers and advisers, such as accountants.

The recent decisions of the Federal Circuit Court in Fair Work Ombudsman v Blue Impression Pty Ltd [2017] FCCA 810 and Fair Work Ombudsman v Blue Impression Pty Ltd (No 2) [2017] FCCA 2797 highlight the readiness of the Fair Work Ombudsman to prosecute parties involved in the exploitation of workers, and of the Courts to order hefty penalties to those found in breach of the law.

In this case, Ezy Accounting 123 Pty Ltd (“Ezy Accounting”) was engaged to supply external payroll services to its client, a fast food outlet. Ezy Accounting said its services were limited to uploading client data onto MYOB and that it had no authority to adjust pay rates, which were provided by its client.

The Fair Work Ombudsman commenced legal action against Ezy Accounting after an employee complained they had been underpaid $750. By this stage the Fair Work Ombudsman had previously put Ezy Accounting and its client on notice after an audit found prior underpayments had occurred.

The Court found that Ezy Accounting was knowingly involved in the $750 underpayments and ordered it to pay a penalty of $53,880, a sum greater than 70 times the underpayment itself.

The Court did not accept Ezy Accounting’s argument that it merely provided data entry services on its client’s instructions, or that knowledge of the correct pay rates was outside its role. Indeed, the Court found that Ezy Accounting was engaged in a “deliberate shutting of the eyes or calculated ignorance” with respect to the underpayments.

In Australia, any person can be made liable for an employee being paid less than the minimum wages and entitlements if they have:

• aided, abetted, counselled or procured the contravention;
• induced the contravention;
• been in any way knowingly concerned in or party to the contravention; or
• conspired with others to effect the contravention.

In finding that Ezy Accounting was knowingly involved, the Court said that it “had at their fingertips all the necessary information that confirmed the failure to meet the Award obligations by the first respondent [its client] and nonetheless persisted with the maintenance of its payroll system with the inevitable result that the Award breaches occurred.”

The lesson is clear, nobody should allow himself or herself to be in a position where they are knowingly involved in a breach of workplace laws, otherwise they are exposed to the risk of substantial penalties.

For advice in relation to all your employment law queries, please contact Michelle Morton or Sally McCutcheon of our office.