As discussed in previous alerts, those “involved” in various contraventions of the Fair Work Act can face personal liability, apart from any liability that is assigned to an employer.
What happens, however, in situations where company directors and managers are held to be “involved” in such breaches? Are they responsible for meeting any shortfall in the payment of entitlements which the company cannot meet?
This matter was recently considered by the Federal Circuit Court.
In the matter of the Fair Work Ombudsman v. Liquid Fuel and Others, it was alleged that an employer was in breach of various provisions of the Fair Work Act and its predecessor.
In particular, it was claimed, and the employer admitted, that two casual console operators at a service station had, among other things, not been paid:
- the basic periodic rate of pay;
- casual loading;
- the correct Modern Award rate of pay; and
- relevant overtime rates.
It was alleged that the two managers of the business (the second and third respondents) and a director (the fourth respondent) were liable as accessories.
It was noted that the second respondent had a Master of Business qualification from Monash University and that all three respondents were aware of the wages being paid to the workers.
In relation to a submission that the fourth respondent had a lack of knowledge of the running of the relevant business, Judge O’Sullivan found:
“The fourth respondent’s evidence left the clear impression that by a pretence a former lecturer in mathematics with a PhD confronted with the (workers’) enquiries regarding wages affected ignorance of the laws that applied. The fourth respondent’s evidence that he was concerned about the finance of the business at the Site belies the veracity of his claims that he was not aware of the first respondent’s obligations to the (workers)”.
The court found that the second, third and fourth respondents were each “involved” in relevant contraventions of the Fair Work Act and its predecessor and made declarations as to their liability. The matter has been stood over to determine the penalties to be imposed on each of the respondents.
The upshot of this decision is that regardless of the ultimate liability of the company employer, the individual managers and director of the employer have also been held liable for various breaches of the employer. This means that even if the employer is not in a position to meet the shortfall in wages and entitlements which have not been paid, the workers may be in a position to claim these from the director, for example.
The respondents may also be held liable for pecuniary penalties, which for individuals can be in the order of up to $10,800.
This decision serves as a reminder that regardless of the ultimate position of a corporate entity in relation to its creditors, individuals involved in relevant contraventions of the Fair Work Act in particular, can be held personally liable for the debts of a company to its employees.