When mistakes become personal – Personal liability as an HR Manager
It’s not just Directors who can be held personally liable when something goes wrong. Managers who are directly involved in an infringement can also experience the same fate.
In the case of Cerin v ACI Operations Pty Ltd, Mr Cerin brought a claim against his employer ACI Operations and the Human Resources Manager, Ms Nicola Powell. Mr Cerin alleged that the notice provisions in the National Employment Standards (NES) and the Fair Work Act had been breached upon termination of his employment, when he was provided 28 days’ payment in lieu of notice, instead of the five weeks which he was entitled to under the NES.
Mr Cerin had been injured at work and had received workers compensation payments for some time. The company decided that there were no suitable alternative positions for him and that his employment could not continue. Under the relevant South Australian workers compensation rules the company had to give Mr Cerin 28 days notice, which it did.
The workers compensation rules didn’t displace the greater entitlement under the NES. The loss Mr Cerin suffered in not being paid the extra week’s notice was $181.66 - the difference between an extra week’s wages, and the weekly workers compensation payment that he was receiving.
Mr Cerin submitted that Ms Powell was aware of the NES provisions and made a "deliberate and conscious decision" that he wouldn’t be given five weeks notice. Ms Powell on the other hand, submitted that the payment of 28 days notice was a matter of procedure, complied with the relevant compensation laws, and was not a deliberate failure to apply the extra week’s notice as provided under the NES.
The Court held that Ms Powell knew about the NES, and, in failing to provide the correct notice to Mr Cerin, was personally liable for a contravention of the NES provisions. The maximum penalty for the company was $51,000 and the maximum penalty for Ms Powell as an individual was $10,200. The judge fined the company $20,400 and fined Ms Powell $1,020.
The Court noted that ACI Operations was a large international company. This was not a situation where the company was lacking in human resources experience, so as to excuse such an error. It had persisted in refusing to pay the extra notice once the breach of the NES (a statutory obligation, not a matter for negotiation) was brought to its attention.
As the NES provides a guaranteed safety net of minimum entitlements for employees, and as Mr Cerin was an injured and vulnerable employee, the Court held that a penalty should be set that would deter other employers from infringing the NES.
This is not the first time an HR Manager has been penalised. Penalties have also been imposed on an HR Manager involved in sham contracting of vulnerable and exploited workers: the manager’s argument that he was just following orders cut no ice.
In the 2010 case of Fair Work Ombudsman v Centennial Financial Services Pty Ltd & Ors, the Fair Work Ombudsman brought proceedings against Centennial Financial Services, the company’s sole director and shareholder, and Mr Chorazy, the company’s HR Manager. The company was found to have failed to pay nine employees their minimum employment entitlements, including accrued annual leave, over 13 months, as well as engaging in sham contracting by converting employees to contractors. The director was liable for nine contraventions was ordered to pay a total of $13,400 in penalties. Mr Chorazy was liable for 11 contraventions and was ordered to pay a total of $3,750.
Defending his actions, Mr Chorazy said that he had no knowledge of the difference between employees and contractors prior to working at Centennial Financial Services. He went on to say that when he was told to type out a new contractor agreement for existing employees, he didn’t notice that the duties and key performance indicators were identical to the employment agreements that he had initially issued to the employees - the only change being that the employees would receive a commission rather than receiving wages.
The court did not excuse Mr Chorazy from liability. Just doing as he was told was not a defence - as a responsible executive, he was expected to apply some independent judgment, and the sham nature of the new arrangements should have been obvious to him. The Court found that Mr Chorazy was materially involved in almost all aspects of the contraventions and that he was liable as an accessory to those contraventions.
These cases demonstrate that HR Managers can be directly penalised for being involved in company actions in breach of the Fair Work Act. While penalties against managers aren’t frequent, they do highlight the responsibilities of HR professionals to uphold the law and to take responsibility.
If you need advice in relation to your obligations as an HR Manager under the Fair Work Act and other legislation towards your employees, contact our Employment Law team:
Stephen Booth, Principal
Phone: +61 2 9895 9222
Lisa Qiu, Lawyer
Phone: +61 2 9895 9207