The Fair Work Ombudsman is coming after directors, HR managers, contractors and franchisors

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By Lisa Anaf, Partner, and Diana Diaz, Senior Associate

In a speech to a New South Wales Australian Human Resources Institute (AHRI) network last week, the Fair Work Ombudsman (FWO), Natalie James, spoke candidly about the Ombudsman’s “active and evolving approach to accessorial liability” for breaches of workplace laws.[1]

As HR professionals would know, the Fair Work Act 2009 (Cth) includes accessorial provisions that hold individuals and companies responsible in the breaches of others if they are also “involved” in the contravention.  Involvement in a contravention can happen in a number of ways, such as by:

  • aiding, abetting, counselling, procuring or inducing a contravention;
  • being in any way, knowingly concerned in or party to the contravention; or
  • conspiring with others to effect the contravention.

Although the FWO has traditionally used accessorial liability as a useful back-up in situations where an employer is thought to be at risk of going under and leaving employee entitlements unpaid, the FWO has stepped up its use of the provisions and in the last financial year it has sought orders against accessories in 46 of 50 court proceedings.

In deciding whether to issue proceedings directly against an accessory, James said that the FWO looks for what she called “classic criteria,” being the involvement of vulnerable employees, a deliberate attempt to “exploit the legal framework to avoid paying employees their entitlements” and a history of non-compliance.

James spoke of situations where the FWO has:

  • successfully obtained orders for penalties and underpayments in excess of $70,000 directly from the former director of a company that had been wound up;
  • issued proceedings against an accounting firm that processed wage payments for a fast food restaurant in circumstances where the FWO alleges that the firm had “explicit knowledge that those payments were well below the award rate;” and
  • issued proceedings against a frozen yoghurt outlet for underpayments, and joined other accessories in the franchise network including the head company master franchisor, the payroll company and a manager of the head company for their alleged involvement in the underpayment.

It is also important to remember that before the Federal election the Commonwealth Government committed, amongst other matters, to increase penalties for serious contraventions of workplace laws, expand existing laws by capturing franchisors and parent companies who fail to deal with exploitation by their franchisees, and strengthen the FWO’s powers so that it can compel individuals to produce information and answer questions.

If those commitments find their way into law, and assuming that the FWO continues down its path of joining accessories involved in contraventions to its proceedings, then individuals who play a role in setting and overseeing employee terms and conditions within businesses should heed James’ warning to AHRI HR professionals:

“…there has never been a better time to ensure you are giving holistic and sound advice about compliance with workplace laws.”

So how do individuals directly working in a business minimise the risk to them personally?

The FWO is sending a clear signal to employees; that just because they are not the director, does not mean they are immune from prosecution.

It has therefore never been more important for HR Managers, legal counsel, advisors and franchisees to satisfy themselves that their business is meeting its minimum legal obligations to employees.  This may mean conducting semi-regular audits of pay, conditions and record-keeping obligations.  Such audits are important particularly in industries that engage vulnerable and low-paid employees where the difference between compliance and non-compliance may be as innocent as a delay in passing on an increase to the minimum wage.

If an audit identifies underpayments or other irregularities, then of course the next step for those individuals would be to immediately take steps to remedy that situation and ensure that the business is compliant into the future.

If you are a franchisor, or other advisor or service provider, your situation is somewhat more complicated and may depend on what knowledge you have about the business in question.  What is clear however is that franchisors and other service providers cannot turn a blind eye if they become aware of a breach in their network or their clients’ business.


[1] An adviser’s responsibility: the Fair Work Ombudsman’s approach to accessorial liability – Address to the Australian Human Resources Institute (AHRI) Employee Relations / Industrial Relations Network NSW by Natalie James, Fair Work Ombudsman, Wednesday, 27 July 2016

For further information, please do not hesitate to contact us.

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    Workplace Relations, Employment & Safety

    Contractor did not engage workers at time of incident, so acquitted of WHS charges