Sladen Snippet - Accounting firm liable for involvement in client’s underpayment of wages

In the landmark decision of Fair Work Ombudsman v Blue Impression Pty Ltd & Ors [2017] FCCA 810, the Federal Circuit Court has found that Melbourne accounting firm, Ezy Accounting 123 Pty Ltd (Ezy Accounting), was knowingly involved and accessorially liable for its client’s failure to pay its employees award rates of pay.

The Fair Work Ombudsman (FWO) commenced legal proceedings in late 2015 against a Japanese fast food restaurant, its director, and Ezy Accounting, alleging contraventions of the Fair Work Act 2009 (Cth)(FW Act). In particular, these contraventions concerned the underpayment of two Taiwanese backpackers employed by Blue Impression who were not paid the minimum hourly rates of pay, loadings, penalty rates and allowances, and not provided with prescribed rest and meal breaks in accordance with the Fast Food Industry Award 2010. This resulted in an underpayment of approximately $9,549 between September 2014 and April 2015.

The employer admitted to these contraventions and the director herself had admitted to her involvement in the contraventions. 

The accounting firm, however, denied the FWO’s claim that it had been involved in the employer’s contraventions, arguing that it had been engaged by the employer to provide bookkeeping services, including payroll data entry and processing work, but was not under any duty to ensure that its client complied with the law, or to check that the rates being paid to the employees were sufficient.

Judge O’Sullivan found that the accounting firm knew the award prescribed minimum rates of pay and that the employer had previously underpaid its employees, but failed to make inquiries. In fact, O’Sullivan J said that the accounting firm had ‘deliberately shut its eyes to what was going on’ to the extent that this amounted to wilful blindness and involvement in the employer’s contraventions of the FW Act.  

Under the FW Act, any third party who is involved in a contravention of the FW Act, including contravening terms of a modern award, can be taken to have contravened a civil remedy provision themselves. The accounting firm now faces penalties of up to $54,000 for each of the seven contraventions of the FW Act.

This case is the first time the FWO has pursued legal action against an accounting firm for its involvement in underpayment contraventions by an employer, but is unlikely to be the last.

In recent years, the FWO has demonstrated a willingness to take legal action against any third party, including human resource professionals, payroll managers and advisors, who facilitate breaches of workplace laws.

Business advisers and service providers should be aware that if they provide incorrect or bad advice about employee entitlements, play a role in a client’s contravention of workplace laws, or turn a blind eye to a client’s unlawful conduct, they may be exposing themselves to the risk of civil penalties, and can also be held liable to rectify underpayments to their client’s employees.

If you need assistance to understand award entitlements or advice about any other workplace matter, please contact:

Louise Houlihan
Sladen Legal
M +61 409 835 809| T+61 3 9611 0144
Level 5, 707 Collins Street, Melbourne, 3008, Victoria, Australia

Jane McKay
Senior Associate
Sladen Legal
M +61 409 183 975| T +61 3 9611 0155
Level 5, 707 Collins Street, Melbourne, 3008, Victoria, Australia