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Court penalises accountant for involvement in employer’s failure to keep employee records

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Put your records on

The Fair Work Regulations 2009 (Cth) impose a number of obligations on employers with respect to the making and keeping of employee records and pay slips.

The Fair Work Regulations 2009 (Cth) (FW Regulations) impose a number of obligations on employers with respect to the making and keeping of employee records and pay slips.

The FW Regulations set out what records an employer is required to hold and the period for which they must be kept.  The records that must be kept include a description of the nature of an employee’s employment, their pay and overtime, leave, superannuation and any individual flexibility agreements.

The FW Regulations also describe the specific details that an employer must set out on every pay slip that is provided to an employee such as the identity of the employer, the employee’s rate of pay, the gross and net amounts paid to an employee as well as the period in respect of which such payments are made.

These record-keeping obligations are important because they ensure that employees are properly informed about what they are paid and whether or not that pay is in accordance with their statutory entitlements. It is for this reason that a failure to comply with record-keeping obligations is often heavily penalised by the courts. Such penalties are not limited to employers but may also be imposed upon any person or company that is involved in the contravention.

Take, for example, the recent decision of the Federal Circuit Court of Australia (the Court) in Fair Work Ombudsman v Austop Natural Therapy and Supplies Pty Ltd & Ors [2020] FCCA 2920. In this decision, an employer and its two directors were penalised for underpaying an employee a total of $13,521.68 during a period of seven months in 2017. The employee had been required to work 5-7 days a week, was paid cash on a commission-only basis (40-45% of the price of each massage performed) and was not provided with any pay slips.

The employer was also penalised for failing to keep employee records and pay slips in accordance with the FW Regulations, for keeping records that it knew were false and misleading and for using those false records by providing them to the Fair Work Ombudsman (FWO).

In addition to those penalties, the Court also issued penalties on the employer’s external accountant totalling $5,000.00 for its involvement in the employer’s contravention of the FW Regulations, pursuant to the accessorial liability provisions of the Fair Work Act 2009 (Cth).  The accountant was found to have been knowingly involved in the employer’s contraventions after it admitted to creating pay slips, with the authorisation of the employer, purported to be in relation to the employee’s employment. The payslips falsely showed that the employee was paid an hourly rate of pay, that overtime and annual leave taken was paid to the employee as well as incorrect gross and net amounts paid. The accountant then made use of those records, again with the authorisation of the employer, by providing the pay slips to a Fair Work Inspector in response to a Notice to Produce with the knowledge that the pay slips were false and misleading.

In determining the penalty to be imposed, the Court noted that the accountant had admitted to the contravention at an early stage of the matter and was co-operative, despite initially alleging that the pay slips were only prepared as an “example” of what the employee should have been paid. It also took into account that the accountant had changed its company name and had ceased providing accounting services.

However, the Court considered that there needed to be a strong disincentive to similar businesses who purportedly provide professional services. The Court also stated at [103] that higher penalties needed to be imposed in respect of a failure to comply with record-keeping and pay slip obligations “because a failure to comply with those provisions makes it very difficult for an employee to determine what their rate of pay is and whether they are being properly paid”.

Lessons for employers

As the Court stated in this decision, the keeping of accurate employee records and pay slips is a crucial aspect of Australia’s workplace laws. It ensures that employees are provided with the information needed to ascertain whether or not they are being paid correctly.

The failure to comply with this obligation does not simply rest on the employer. External companies who provide assistance to employers in relation to the payment of employees, such as accounting, payroll and bookkeeping firms, may also be found to be liable for an employer’s contraventions if they are involved.  

Information provided in this blog is not legal advice and should not be relied upon as such. Workplace Law does not accept liability for any loss or damage arising from reliance on the content of this blog, or from links on this website to any external website. Where applicable, liability is limited by a scheme approved under Professional Standards Legislation.

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