Our national workplace watchdog won a landmark legal action last month (November) against an accounting firm who facilitated underpayments of staff wages for a client Japanese fast-food operator.   The decision of the Federal Circuit Court sends a clear message that external advisors, including accountants will be held legally responsible for involvement in exploiting staff.

The Federal Circuit Court fined the Victorian accounting firm, Ezy Accounting 123 with a financial penalty of $53,880.00 after finding that the accountants facilitated underpayments to staff of its client Japanese fast-food operator, Blue Impression.  This penalty followed a fine against Blue Impression of $115,706.00 after it admitted underpayment of 2 staff at its outlet in Melbourne.  These financial penalties, imposed by the Federal Circuit Court, are the result of legal action by the Fair Work Ombudsman.

The Court ruling against the accountants is a type of “accessory to the crime” decision because the under-paid workers were not actually staff of the accountancy firm because the staff were employed by the Japanese fast-food operator.  The accountants had provided payroll services for its client (the Japanese fast-food operator) and which included the processing of wages despite knowing that the rates the worker was being paid was below lawful minimum.   The workers, aged in their 20s, had been paid a flat rate of wages that was below the minimum hourly rate and not enough to cover public holiday penalty rates and weekend, night and casual loadings to which they were entitled under the Fast Food Industry Award.  The workers were also not provided with a clothing allowance and were not given suitable breaks during their work shift, again in contravention of the prescribed entitlements under law.

The Fair Work Ombudsman is a department of our Federal Government which supports the up-holding of laws about employment conditions and most importantly employee entitlements which includes prescribed minimum rates of salary, and other entitlements such as holiday and sick leave.  The enforcement of the laws is typically between the employer and the employee, which makes this hot-off-the-press Court decision so influential, because it extends the enforcement of worker’s rights beyond the direct employer.

The accountant argued in Court that the worker was not an employee of the accounting firm.  Typically, workplace laws are directed towards to the relationship between the employer (boss) and the staff members (employees).   In this ground-breaking case Judge John O’Sullivan said, “Ezy was involved in a relationship with its client (the Japanese fast-food operator) where it provided payroll services.  As such it must put compliance with the law ahead of business interests.”  The Judge also pointed to the way that the 2 workers were vulnerable (particularly since they were on working holiday in Australia) and had been “the victim of exploitation”.  It was also relevant that the accountant had been involved in assisting the company to calculate wage payments and through that activity was aware of the minimum Award rates.  The Judge said that it was a “circumstance of aggravation” that the accountant had been “knowingly involved in conduct that constitutes illegality”.

This crucial part of this Court decision is known as the accessorial liability laws, since responsibility extends not only to the direct employer/manager that exploits their employees, but also to external advisors (such as accountants) who facilitate the under payment of workers.   This decision by the Court makes it clear that if you are knowingly involved in the exploitation of workers (and particularly employees who are vulnerable) that you face significant financial penalties.  A trusted advisor, such as an accountant, is obligated to explain the rules to their clients and not become involved in breaches of the law themselves.

Employers and employees can visit www.fairwork.gov.au or call the Fair Work Info line on 13 13 94 for free advice and assistance about their rights and obligations in the work place.

Authored by Mitchell Clark – Partner at MBA Lawyers