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Employment and Migration Blog

HR Manager fined $21,760: Courts and FWO are sending a message

Posted by Stephen Booth on 21 Dec 2017

Assisted by Freya Booth

In FWO v NSH North Pty Ltd, trading as New Shanghai Charlestown (Federal Court 2017) the HR manager of a Chinese restaurant was fined $21,760 for knowingly processing underpayments and helping to falsify records. Under the Fair Work Act, she was liable as an accessory for the company’s failure to pay minimum rates and entitlements over a 16-month period, amounting in an underpayment of $583,688 that affected 80 restaurant staff.

The manager argued that cultural factors and family connections mitigated her culpability. She submitted that in Chinese culture junior employees can’t disobey directions from their superiors and it would be shameful to her family if she challenged the director of the restaurant, who was a family friend. She was also wary of defying the director because her 457 visa depended on her employment.

The Federal Court did not find these cultural explanations compelling. Justice Bromwich stated the “cultural and related factors…cut both ways. While they might be seen to reduce, to some limited extent, her moral culpability, they also indicate that the need for specific deterrence is heightened.” In relation to the visa, he said individuals must “put compliance with the law ahead of their personal interests.”

The court rejected her claim that she was in a similar position of vulnerability to that of the restaurant workers, because she was on a visa and from a non-English speaking background. Justice Bromwich drew a distinction between “vulnerability to being exploited, which is a position of victimhood, and supposed vulnerability by way of reduced ability to resist participation in illegal activity, which is a position of participation.”

The HR manager also argued she wasn’t liable because she wasn’t a qualified HR professional. Justice Bromwich found that she was university educated, had worked at PricewaterhouseCoopers for several years, and was on a salary of $100,000. Despite her lack of HR qualifications, “she had sufficient training or capacity to carry out the directions given to her in her role,” which the evidence showed included the capacity to search online for the correct rates of pay to use when falsifying records!

The HR manager said she had tried to raise her worries about the underpayments and falsification of records with the director but he dismissed her concerns and told her to conduct the payroll as instructed. Justice Bromwich said that being rebuffed by superiors when issues of illegal activity are raised does not excuse ongoing participation in that illegal activity.

This decision comes after a 2016 case in which the HR manager of a labour hire company, providing cleaners to Crown Casino, was found liable for knowingly making unlawful deductions from pay, and providing false and misleading records to the Fair Work Ombudsman. That HR manager was personally fined $9,920.

What should HR managers do?

HR managers are in a tricky position if they become aware of a breach of the law. It is important to put it on record, preferably in writing, that you don’t approve of what is happening however, this case suggests that merely voicing concerns, while carrying on with business as usual, is insufficient.

HR managers must not participate in contraventions. Justice Bromwich went so far as to say that “there is nothing wrong with sending the message that an employee should indeed resign if that is the only alternative to continuing to participate knowingly in illegal activity, ideally coupled with reporting the conduct to the FWO.”

This sets a high standard for professional conduct. HR managers and workplace advisers have been warned.

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