Fair Work Ombudsman gunning for accountants and financial advisers
We’ve written previously about the Fair Work Ombudsman’s (FWO) aggressive and innovative use of the accessorial liability provisions in s550 of the Fair Work Act to seek penalties, and to recoup employee underpayments, from not only the employer, but also directors and managers who are knowingly involved in infringements of the Act and awards.
Pursuing this one step further, the FWO is running proceedings against an employer’s accountant, Ezy Accounting 123 Pty Ltd. The FWO alleges that Ezy Accounting provided payroll services to Blue Impression Pty Ltd, a fast-food outlet operator in Melbourne-CBD, which had underpaid two Taiwanese backpacker employees on working holiday visas, to the tune of $9,549. Ezy Accounting had processed pay for the two employees, and the FWO alleged that it knew the rates paid were below minimum rates as it had been involved in previous workplace audits which had identified underpayments by Blue Impression. Blue Impression and its operations manager, Sze Teng Wong, are also subject to FWO action.
Whether the FWO proves its case against Ezy remains to be seen, but the mere fact of the prosecution does serve as a warning to advisers to be wary.
So, what are the risk areas?
If, as a professional adviser, you are aware of a client who is doing any of the following, you’re in risky territory:
- systematically paying below award rates;
- engaging in sham contracting (engaging people as “contractors” when they are in fact employees);
- keeping inadequate payroll records (which has the effect of covering up underpayments); or,
- apparently complying but in fact “clawing back” money from employees so that they are in effect underpaid.
If, for example, you advise a client to convert current employees to contractors, or to engage unskilled workers to be contractors, it’s highly likely that you’re participating in sham contracting. Or if you know from your dealings with the client that the pay records are shoddy or shonky, then you may be implicated in underpayment claims (and liable for penalties and possibly for the underpayments themselves) because you didn’t exercise a professional responsibility to advise the client on the proper course of conduct.
Case law in this area has not yet defined what is expected of advisers in fulfilling their responsibilities. Is it enough to advise the employer on good practice and legal compliance, and actions necessary to fix the problem? Do you need to refuse to do any more work for your client, or is it sufficient for you to dissociate yourself from the risky area, having given the advice? At the very least you need to give the advice and keep a clear record of having done so. There will be situations, particularly those involving exploitation of vulnerable workers, where it would be wise to get out altogether, if your client won’t take remedial action.
It is worth bearing in mind the old adage: he who sups with the Devil should use a long spoon!
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