Accounting firm found liable for client's underpayments
Accounting firms providing payroll services to clients who have underpaid staff, can be held liable for contraventions of the Fair Work Act.
In what’s seen as a precedent-setting decision, the Federal Circuit Court has ruled Ezy Accounting 123 Pty Ltd liable for contraventions of the Act by its client Blue Impression Pty Ltd in underpaying each of two Taiwanese workers nearly $10,000.
As this newsletter is published, the Court had yet to determine penalties against the accounting firm, which could be as much as $54,000 for each contravention.
The case has made it clear that anyone in a firm involved in similar contraventions – even to simply “deliberately shutting their eyes” – render that firm liable to penalties.
Origin of the offence
Ezy Accounting was processing wage payments to employees at Blue Impression’s Melbourne Japanese fast food outlet Hanaichi, when the Fair Work Ombudsman alleged two workers were being paid less than the “lawful minimum”.
The Ombudsman also alleged the accounting firm was aware of this, and accordingly took it to Court for contraventions of the Fair Work Act.
Ezy Accounting’s bookkeeper told the court: “I did not know which award applied to employees of Blue Impression at Hanaichi
“I did not know the name of any award which applied.
“I did not know the amount of any minimum award which applied.
“I did not know the amount of any minimum rate set out in any relevant award.”
The bookkeeper went on to deny any knowledge of whether or not rates being paid complied with an award.
“I did not think twice about it. It never crossed my mind. Only now looking back, I believe it was not my business to know whether rates complied with any award. I believe that was a matter for the employer.”
Unacceptable to the court
The Court was not prepared to accept this excuse for underpaying each of two employees by almost $10,000.
In his judgement, Judge John O’Sullivan said even “the most basic query” would have revealed to Ezy Accounting that Blue Impression’s employees were being underpaid.
His Honor ruled the accounting firm had “deliberately shut its eyes” to contraventions of the Act that were occurring.
The Ombudsman was able to satisfy the Court that Ezy Accounting had assisted its client following a 2014 audit that raised questions about underpayments.
Accordingly, the accounting firm had been informed by letter of the Award’s “payment provisions for ordinary hours, hours on Saturdays and Sundays, along with allowances including those for uniforms”.
In his finding favoring the Ombudsman, Judge O’Sullivan stated: “As a result of what I’m satisfied was willful blindness [by the accounting firm’s director], Ezy Accounting should be found to be aware of the essential matters which go to make up admitted contraventions.”
Warning to advisory businesses
Macks Advisory warns this case is indicative of the Fair Work Ombudsman’s mounting interest in the increasing number of businesses operating in accounting and advisory areas that offer staff payroll services.
The Ombudsman’s looking more closely than ever before at whom should be held responsible for underpayments.
There have been previous cases where payroll managers and even HR managers have been held liable for underpayments.
Any business that employs such people who contravene the Fair Work Act knowingly, or, as a result of not bothering to acquaint themselves with even basics of the Act’s requirements, runs dangerous risks.
The Ezy Accounting case is a salutary reminder to all advisors or suppliers of payroll services, that it’s incumbent upon them to make all necessary inquiries relative to workers’ payments, and to give appropriate advice to their clients.
To have knowledge of wrongdoing and fail to take steps to right those wrongs is to take a risk with grave consequences.
Macks Advisory’s legal advice on this matter, is that in extreme cases, even mentors to payroll managers could be held liable for underpayments. We’re also informed however that advisors who give correct advice in good faith are unlikely to encounter problems.
