In recent years, the Fair Work Ombudsman (FWO) has made it clear that it is prepared to prosecute not only employers, but also individuals and third parties ‘involved in’ contraventions of the Fair Work Act 2009 (Cth) (FW Act).
Most recently, the FWO was successful in its prosecution of a Chinese restaurant as well as its sole director, its human resources manager and its store manager for various breaches of the FW Act, which resulted in 85 employees being underpaid a total of $583,688.68 over a 16 month period.
In Fair Work Ombudsman v NSH North Pty Ltd trading as New Shanghai Charlestown [2017] FCA 1301, the Federal Court of Australia (FCA) held that a restaurant failed to pay its employees their minimum rates of pay, loadings and penalty rates in accordance with the Restaurant Industry Award 2010.
The FCA also found that the sole director, human resources manager and store manager were accessorily liable for breaches of the FW Act concerning underpayment, and were also involved in creating and producing false time and wages records and payslips in response to a notice of produce from the FWO.
In this matter, the human resources manager was responsible for payroll processing and payment of wages as well as human resources administration including preparing employment contracts and position descriptions, handling leave enquiries and advising the restaurant and its director on compliance with industrial laws. The store manager was responsible for the day to day management and supervision of employees and organised the employees’ days and hours of work.
The human resources manager denied that she had a role in the operation of and day to day management of the restaurant and should therefore not be held liable for any breaches of the FW Act. She claimed that she was following the directions of the restaurant director and used the information provided to her by the store manager. The human resources manager also claimed, as she was on a 457 visa, she was dependent on her continuing employment and that in the Chinese culture, she was required to be obedient to the restaurant director.
The FCA did not accept that the human resources manager had limited culpability in the contraventions. There was evidence that she had provided advice to the restaurant director in 2013 about the correct award entitlement but nevertheless knowingly continued to participate in the contraventions and further, took no steps to ensure the restaurant complied with its obligations. The FCA also noted that the human resources manager had an active role in the creation of false documents and was aware that the false records would be provided to the FWO.
The FCA did not accept that the human resources manager was in a vulnerable position due to her visa status, commenting that her position was distinct from being vulnerable to exploitation.
The FCA commented that each of the store manager and the human resources manager had the “moral choice to walk away rather than continue to participate in the offending”. The FCA sent a very clear message to individuals in this position: “[t]here is nothing wrong with sending the message that an employee should indeed resign if that is the only alternative to continuing to participate knowingly in illegal activity, ideally coupled with reporting the conduct, in a case such as this, to the FWO.”
In the FCA’s view, the public interest in ensuring compliance would not be served if a person who continued to participate in a contravention was excused only because they had previously raised issues of compliance and was rejected.
Accordingly, the human resources manager and the store manager were ordered to pay penalties of $21,760 and $18,496 respectively.
This decision demonstrates that the Courts will not readily accept that individuals are not personally liable for contraventions of the FW Act if they are responsible for, or should have known, about minimum wages and entitlements. It will not be good enough for human resources or payroll professionals to raise issues of non-compliance if they do not then rectify the issues and ensure compliance or if they do nothing for fear of losing their jobs.
The FCA has made it clear, by referring to moral choices, that their expectation is that HR, Payroll and managers will simply ‘do the right thing’ no matter what the personal cost.
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