New Risk for Accountants

Accountant faces legal action for processing underpayments

A Victorian accounting firm faces legal action for its alleged involvement in the underpayment of wages to two of its client’s employees.

The Fair Work Ombudsman (‘FWO’) has commenced proceedings in the Federal Circuit Court against EZY Accounting 123 Pty Ltd (‘EZY Accounting’) for allegedly being involved in contraventions of the Fair Work Act 2009 (Cth) (“FW Act”) by its client, Blue Impression Pty Ltd (‘Blue Impression’).

EZY Accounting provided payroll services to Blue Impression.

FWO alleges that EZY Accounting’s involvement in the contravention was that it knew when providing these payroll services that the wage rates paid to two of Blue Impression’s employees were well below those set out in the Fast Food Industry Award 2010.

Blue Impression operates a fast food restaurant in Melbourne.  The restaurant allegedly underpaid two of its employees a total of $9,549.00 between September 2014 and April 2015.

FWO says the two employees, staying in Australia on 417 working holiday visas, were not paid the following minimum entitlements required to be provided under the Fast Food Industry Award 2010:

  • The minimum base rate of pay as the employees were paid flat rates as low as $16.50 an hour;
  • The required amount of penalty rates for work on the weekend or public holidays; or
  • The required amount for casual loadings.

FWO is seeking the imposition of a civil penalty upon EZY Accounting on the basis that it was an accessory to the contraventions by Blue Impression because they processed the underpayments.

In 2014, Blue Impression was reminded of its obligations under the FW Act after an audit found that it underpaid 12 employees a total of $8,800.  EZY Accounting was involved in the audit as they assisted Blue Impression to calculate and rectify the underpayments.  FWO says that EZY Accountants were therefore aware of the minimum wages payable under the Fast Food Industry Award 2010.

Blue Impression and EZY Accounting each now face penalties of up to $51,000 per contravention, while Blue Impression’s operations manager also faces penalties of up to $10,200 per contravention.

Key message for advisers

For some time, the FWO has been closely examining the involvement of third parties in contraventions of the FW Act, but this is the first time that the FWO has commenced legal action against an accountant as an accessory.  In a recent statement, the FWO said:

Small business relies heavily on trusted advisers, and if they give incorrect or bad advice, or deliberately assist with the contravention, should they not be held accountable?  In situations where we believe accountants or other professionals knowingly facilitate contraventions of workplace laws, we are prepared to hold them to account.[1]

It is important for accountants and advisers assisting businesses with their employment obligations to be aware that where this results in the business contravening a civil penalty provision of the FW Act, whether because of an underpayment or non-payment of a minimum entitlement under a Modern Award or the National Employment Standards, that they may be taken to have contravened the same civil penalty provision of the FW Act themselves[2].

The EZY Accounting case demonstrates the need for accountants and business advisers to ensure their advice is compliant with the FW Act.  Although accountants cannot be held to the same standard as legal advisers, we suggest that accountants who are involved with the calculation and processing of payments to their clients’ employees will need to be able to establish that they have taken steps to ensure they are not involved in any contravention of the FW Act.


[1] https://www.fairwork.gov.au/about-us/news-and-media-releases/2016-media-releases/february-2016/20160219-blue-impression-litigation

[2] Fair Work Act 2009 (Cth) s 550

 

For more information, please contact:
Ben Duggan

Ben Duggan
Director
p.  +61 8 8124 1881
e.  Email me


Director

This communication provides general information which is current as at the time of production. The information contained in this communication does not constitute advice and should not be relied upon as such. Professional advice should be sought prior to any action being taken in reliance on any of the information. Should you wish to discuss any matter raised in this report, or what it means for you, your business or your clients' businesses, please feel free to contact us.

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