Accountants: Could YOU be found guilty if your client breaches the Fair Work Act?

Imagine the scenario: you assist a client with their bookkeeping, accounting and payroll records. You know, or suspect, that the pay rates given to you do not correspond with the Award applicable to the client’s business, and as a result, the employees are being underpaid. You decide not to raise the issue with the client and just process the information as it is given to you. After all, if your client is foolish enough to risk prosecution by the Fair Work Ombudsman, it’s not your problem is it? It’s their obligation not yours, right? You can just turn “a blind eye” to it, can’t you?

Well, no, you can’t.

The Fair Work Act makes it very clear that if a person is an accessory to a breach of the Act, that is, if they directly or indirectly know of a breach and are party to it, they, as well as the actual employer, will be liable to be prosecuted.

Natalie James, the Fair Work Ombudsman, has consistently warned that professionals cannot avoid responsibility for their client’s breaches by shutting their eyes when providing advice and assistance to businesses. She is determined to hold them accountable, as well as their clients.

In a warning case to all professional advisers, this is what has happened to an accountancy firm in Melbourne recently, when in the first cast of this kind, the firm was convicted of eight contraventions of the Fair Work Act for their part in underpaying their client’s employees.

The facts

The firm, called Ezy 123 Accounting (“Ezy”), had a client called Blue Impression that ran a chain of Japanese fast food restaurants and retained Ezy to provide book keeping services, including processing their pay roll. Each pay period, Blue Impressions provided Ezy with a spreadsheet containing the names of each employee, their hours worked and the amount to be paid to them. Ezy’s job was to input this into MYOB, check the calculations and produce payroll records.

Ezy admitted that its director:

  • Knew that there had previously been problems with Blue Impressions underpaying its employees, resulting in an audit by the Fair Work Ombudsman;
  • Knew the minimum rates which were applicable under the relevant Award;
  • Did not question or alter the rates in Ezy’s system for either new or existing staff and therefore knew that there was a risk of underpayment;
  • Continued to process the payroll.

Ezy relied on the “Nuremberg Defence”, claiming they were simply following  client orders. They had no authority to question and therefore did not look into the particular payment arrangements of each employee. Instead, they simply entered the details provided on the spreadsheet and processed the payments through MYOB.

If some of these details seem familiar to you, it might be because we alerted you to the pending Court action last year. You can read that article here.  

The Court’s findings

The Court found that Ezy engaged in “designed or calculated ignorance” of Blue Impression’s underpayments. Ezy had a key role in determining it’s client’s obligations to its employees and controlled the MYOB system.

By deliberately not questioning the rates when processing the payroll (despite having the information about the Award rates) the actions of Ezy and its director amounted to “connivance in the contraventions” by Blue Impression.

What are the lessons accountants should take from this case?

The key component behind Ezy’s guilt was that it continued to take an active role in the contraventions by processing the payroll without question, even though it knew that the rates were incorrect.

An accountant who acts in accordance with their professional obligations, diligently undertakes any necessary enquiries, and gives advice in good faith is unlikely to be held liable if their client chooses to ignore that advice and subsequently breaches the Act.

Similarly, where an accountant provides services to a client, has no prior knowledge of a breach, and there are no indicators to alert them of a potential risk, it is hard to see that they could be found guilty of knowingly aiding and abetting their client.

It’s a timely reminder that there is a great deal of information readily available online from the Fair Work Ombudsman about employment terms and conditions, and they issue regular media alerts, making it easier for accountants to keep up to date with any changes. It would be difficult to suggest that an accountant is acting diligently and not engaging in wilful blindness if they take on the obligations of processing payroll and do not satisfy themselves that the pay rates provided to them comply with either the Federal Minimum Wage or a relevant Award.

The bottom line

You do not have an obligation to stop your client from contravening the Act, however you cannot help them to do it. The onus is increasingly being put on professional advisors to ensure they know the rules and it’s more important than ever to be vigilant when providing advice to clients.

Our experienced employment law team will be running a special seminar where we will discuss the implications of this decision and provide you with advice on how to ensure you are not held liable for your client's breaches of the Fair Work Act. To view further details about this seminar, please click here

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