Short Paying Staff
Lessons for admin staff - not just directors.
Managers who are aware of breaches of workplace laws in their business may be personally liable for those contraventions, even if they did all they reasonably could to try to fix the breach, according to a recent decision of the Federal Circuit Court of Australia.
In the decision of Fair Work Ombudsman v Priority Matters Pty Ltd & Ors (No 4) [2019] FCCA 56, the Court found that two directors were liable for breaches of the Fair Work Act 2009 (Cth) (FW Act) by being “involved” in underpaying 43 employees more than $1 million between the months of February 2013 and December 2013. The penalty is yet to be imposed.
The finding of liability was made despite the Court acknowledging that the directors were ‘hardworking and honest people caught up in adverse events beyond their control’ and that the directors had taken all ‘reasonable steps’ to try to make payment of the employee entitlements
Application of the law to the facts
In this case, multiple employees were simply not paid their wages or entitlements for a period of time due to the fact that the respondent companies had run out of money to pay their staff.
At all relevant times, the directors believed that they could (in part) pay the staff entitlements out of their own pockets, and that otherwise funds would be imminently received from other sources in particular the Australian Tax Office. Indeed, one of the directors, Mr Silverbrook, was at pains to stress that he did ‘everything humanely possible under the most extenuating of circumstances to ensure all employees received their lawful entitlements’.
In making his findings - and while expressly accepting that the directors had taken ‘all reasonable steps’ to try and effect payment of the employee’s entitlements during the relevant period – Judge Driver held that this fact was not relevant to the question of whether or not the directors were liable for the purposes of section 550 of the FW Act. Judge Driver held that the directors were knowingly involved in the contraventions as they were demonstrably aware of the essential matters that made up the contraventions being that:
wages and entitlements were payable to the employees
the employees, for varying periods, did not receive any such wages or entitlements.
On that basis, it did not matter that there may have been a plausible reason for the non-payment, nor that the directors were honest about discussing those facts with their employees. It was also not held to be relevant, for example, that:
the employees had previously received payments well in excess of their entitlements
the employees were ultimately repaid all monies they otherwise would have been entitled to receive
a reason for the non-payment of monies was an unforeseeable ‘hold up’ of monies payable to the companies from the Australian Tax Office.
Rather, what mattered was the fact of the non-payment, and the director's knowledge of and participation in that conduct. While the above matters were not relevant to the question of liability, they are relevant mitigating matters for the assessment of a penalty.
The lessons
Managers in businesses should be aware that:
Scope of ‘Persons’ - A director is not the only person who can be ‘relevantly involved’ in a contravention of the FW Act. ‘Persons’ for the purposes of s550 of the FW Act can include (without limitation) accountants, HR Managers, payroll officers and other managers
Good intentions are not relevant - While it may impact upon the penalty ultimately imposed by a Court, the fact that a person may genuinely and reasonably be taking steps to rectify the contravention and/or that the person has rectified the contravention, will not affect an assessment of liability – that is, whether the person is ‘knowingly involved’ in that contravention
Ignorance of the law is no excuse- It is no excuse for a person to say that they were not aware that particular conduct or actions breached the FW Act. As such, all managers must ensure that they are aware of and keep up to date with employment law obligations.
Excerpts from Holding Redlich