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Service station underpayments signals Court’s approach to accessorial liability of Managers and Directors

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It will no longer be accepted that managers or others “involved in” a contravention, such as underpayments, are not liable where they had knowledge or should have had knowledge of the underpayment

The Federal Circuit Court of Australia recently found a director and two managers of a company which operated a Victorian BP Service station personally liable for the underpayment of wages and breaches of the Fair Work Act 2009.

Fair Work Ombudsman v Liquid Fuel Pty Ltd & Ors [2015] FCCA 2694

The Federal Circuit Court of Australia (the Court) recently found a director and two managers of a company which operated a Victorian BP Service station personally liable for the underpayment of wages and breaches of the Fair Work Act 2009 (Cth) (FW Act).

 

Facts

The Fair Work Ombudsman (FWO) commenced proceedings against Liquid Fuel Pty Ltd (the Company) alleging that two service station attendants who held student visas were not paid their entitlements, including the correct hourly rate, casual loading, overtime, penalty and weekend rates. In addition, it was claimed that the Company breached the FW Act by its failure to keep proper records and issue payslips to the two employees.

The FWO further alleged Mr Xin Zhang, Ms Linda Qu (the Managers) and Mr Nian Li (the Director) were personally liable as accessories for the underpayments and the Company’s breaches of the FW Act and were individually named as Respondents in the proceedings.

Whilst the Company admitted that it was liable for the breaches, the Managers and Director denied that they were liable as accessories. It was submitted by the Managers and Director that for them to be also held liable, it must be shown that they each had actual knowledge that:

  • an industrial instrument existed;
  • the industrial instrument applied to the employees; and
  • the rates received by the employee were less than the minimum rates of pay.

The Managers and Director argued that they were ignorant of industrial matters and while they may have known the rates paid to the employees, they did not know that the rates paid were incorrect. As such, accessorial liability could not be established as the Managers and Director did not each have the required knowledge.

The FWO argued that the Managers and Director did have the actual knowledge of the facts and knowingly participated in each contravention. The evidence showed that the Managers and Director had joint and primary responsibility of the Company: the Director would set and adjust employee wages, while the Managers were responsible for the daily operation including recruitment, rostering, calculating weekly wages and issuing pay slips.

The FWO submitted that it was through the conduct of the Managers and Director that the contraventions occurred. It argued that the Managers and Director were ‘wilfully blind’ to their obligations in that they deliberately failed to make inquiries about the correct entitlements to be paid.

 

Decision

The Court rejected the submissions of the Managers and Director and did not accept that they were ignorant of industrial relations and did not know what they were doing. The Court was highly critical of the Director in particular: it was held that he was ‘wilfully blind’ and as he deliberately did not seek to make inquiries. For their part, the Court held that the Managers had actual knowledge of the contraventions and further, knowingly participated in the breaches.

 

What can your business learn from this decision?

The Court’s findings in respect of the knowledge of accessories signals that it is likely that it will no longer be accepted that managers or others “involved in” a contravention, such as underpayments, are not liable where they had knowledge or should have had knowledge of the underpayment. Under section 550 of the FW Act, managers, directors and even payroll and HR advisors may be personally liable for their actions / contraventions of the FW Act.

 

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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