Human Resources manager receives hefty fine in accessorial liability crackdown

In a judgment handed down last Friday, the Federal Court found that employees at the New Shanghai Charlestown restaurant in Newcastle had been underpaid by almost $584,000 between July 2013 and November 2014.

In assessing the HR manager's liability for the underpayments, the Court found that the HR manager was aware of the relevant Award and the correct rates of pay to be paid to employees prior to the contravention period, and had told her boss that the actual rates of pay being applied were below minimum Award entitlements.

The court found that despite her advice being "rebuffed" by the boss, the HR manager's culpability was not reduced. Similarly, the court considered that even though the HR manager was following a direction by her employer to create false time and wage records for production to the FWO, this did not preclude a finding of accessorial liability.

The court said:

"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, in a case such as this, to the FWO".

The court also rejected the HR manager's arguments that her culpability was reduced because of cultural and familial factors. The HR manager had suggested that defiance of a boss by a junior employee is not tolerated in Chinese culture (which the HR manager was raised in), and that it would have brought shame on her family to disrespect her employer.

The court said that as a matter of public policy, the cultural explanation for the contraventions could only be given limited weight in determining the manager's responsibility for her actions.

The court also declined to apply a discount to the HR manager's penalty because she was a first-time contravener. It found that the financial harm suffered by the employees in this case was real and substantial, and occurred over a significant period of time. Accordingly, a discount on the penalty was not warranted.

In addition to fining the company which operated the restaurant and employed the staff the amount of $301,920, the court also found the company's sole director/shareholder liable for his involvement in the contraventions, and imposed a personal penalty of $54,672. The restaurant manager was fined $18,496 for her part in the breaches.

Implications for HR managers:

• HR managers who are aware of contraventions of the Fair Work Act, Awards, or other industrial agreements should act quickly to take steps to ensure those breaches are remedied.
• Simply notifying a senior manager about a known or suspected breach may not be enough to avoid liability under the accessorial liability provisions of the Fair Work Act.
• If, after notifying a senior manager, breaches of the Fair Work Act or industrial agreements persist, HR managers should consider escalating the matter internally, externally, and, potentially, resigning.
• This case suggests that it is appropriate for HR managers to report persistent and ongoing breaches to the Fair Work Ombudsman in order to discharge their statutory duty to ensure the Fair Work Act and industrial agreements are not contravened.

Need advice?

If you have any doubt about accessorial liability under the Fair Work Act and what it means for you and your business, please contact us. We would be happy to work with you to ensure that you comply with your legal obligations.

If you are interested in this topic, please see our earlier articles "Accessorial liability and advisers: wanting to do the right thing is not enough" and "Accessorial liability under the Fair Work Act - are you personally liable?".

¹ Fair Work Ombudsman v NSH North Pty Ltd trading as New Shanghai Charlestown [2017] FCA 1301