Key Advisors Warned - Resign Or Be Fined

The recent case of a HR manager prosecuted for accessorial liability highlights the growing risks for key advisors if a business refuses to comply with the Fair Work Act. In his ruling, Justice Bromwich went so far as to say that a key advisor should "resign if that is the only alternative to continuing to participate knowingly in illegal activity" and report the matter to the Fair Work Ombudsman. Otherwise you risk being personally fined.

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 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.

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!

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.

Do you know your legal obligations?

Most businesses - including small businesses - are now covered by the Fair Work Act 2009.

Fair Work Inspectors appointed the Fair Work Ombudsman have the power to enter a workplace at any time to inspect records and ensure compliance.

Employers risk big penalties for each breach of the Fair Work Act 2009.

Learn more about fines and penalties

Learn more about recent prosecutions for breaching workplace laws

Are you at risk?

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