Not so EZY: Employer’s accountants liable for client’s Fair Work Act contraventions
The Full Federal Court (FFC) in EZY Accounting 123 Pty Ltd v Fair Work Ombudsman  FCAFC 134 has upheld a Federal Circuit Court (FCC) decision to fine an accounting firm who performed the payroll and audit function for its client. The employer client admitted contravening the Fair Work Act 2009 (Cth) (Act) and the accountant was found to have been “involved in” the client’s contraventions of the Act. The contraventions in question involved the underpayment of staff.
This has obvious ramifications for accounting firms and business consulting firms that perform payroll and audit functions. The scope of accessorial liability is clearly broad.
Background and Arguments
The Fair Work Ombudsman (FWO) identified contraventions of the Act by a Japanese fast food chain operated by a company named Blue Impression Pty Ltd (Blue Impression). Blue Impression engaged EZY Accounting 123 Pty Ltd (EZY) to provide assistance with rectifying the contraventions.
Despite EZY’s work, the contraventions continued – in particular against a Blue Impression employee named Mr Zheng (Zheng). The FWO commenced proceedings against Blue Impression and EZY. The FWO alleged “Ezy had actual knowledge of the factual matrix of the admitted contraventions by [Blue Impression], was an intentional participant in those and either/or aided, abetted or by its acts or omissions directly or indirectly was knowingly concerned in or a party to those contraventions. Accordingly the FWO alleged Ezy pursuant to s.550 of the FW Act was involved in, and therefore should be treated as having itself also contravened those provisions”: (Judge O’Sullivan in Fair Work Ombudsman v Blue Impression & Ors  FCCA 810 at paragraph 12.)
Blue Impression admitted the contraventions, but EZY denied any liability arguing there was no basis upon which EZY could be found to have been “involved in” (within the meaning of section 550 of the Act) the contraventions of section 45 of the Act.
Section 45 of the Act sets out that a person must not contravene a term of a modern award. Section 550 is subtitled “Involvement in contravention treated in same way as actual contravention” and reads as follows:
(1) A person who is involved in a contravention of a civil remedy provision is taken to have contravened that provision.
(2) A person is involved in a contravention of a civil remedy provision if, and only if, the person:
(a) has aided, abetted, counselled or procured the contravention; or
(b) has induced the contravention, whether by threats or promises or otherwise; or
(c) has been in any way, by act or omission, directly or indirectly, knowingly concerned in or party to the contravention; or
(d) has conspired with others to effect the contravention.
Decision at First Instance
EZY attempted to argue that it knew nothing about Zheng specifically and that it only had a limited retainer in that:
- it did not advise Blue Impression in respect of its Award obligations; and
- it did not have instructions to amend the figures it obtained from Blue Impression to input into its MYOB payroll file.
EZY had tried to “put itself into a position where it could contend that it had no knowledge of the essential ingredients of the contravention and (accordingly) could not fall within s.550(2) of the [Act]”: (Flick, Bromberg and O’Callaghan JJ in the FFC decision at paragraph 16.)
At first instance the FWO were successful against EZY with the FCC finding that EZY was “involved in” Blue Impression’s contraventions. The FCC found that EZY, despite its assertions about a limited retainer:
- was aware of the applicable Award provisions;
- did not change the payroll data figures that EZY knew had been incorrect and the subject of the FWO audit which resulted in contraventions occurring;
- did not make enquiries or follow up that the figures given to it by Blue Impression were correct and was wilfully blind;
- therefore had actual knowledge (not just mere constructive knowledge) of both the Award and the requirements of the Award and the facts which constituted a contravention of the Award; and accordingly
- fell foul of s550(2) of the Act.
Blue Impression was fined $115,706.25 and EZY fined $53,880.
Decision on Appeal
After examining the evidence in the FCC, the FFC found no appellable error and upheld the FCC’s decision. In so doing, the FFC confirmed Justice Katzmann’s decision in another case (Fair Work Ombudsman v Grouped Property Services Pty Ltd  FCA 1034). Her Honour held that: “where an alleged accessory is aware of a system producing certain outcomes, and those outcomes constitute contraventions of the [Fair Work] Act, it is unnecessary to show that the alleged accessory knew the details of each particular instance of those outcomes in order to show the requisite knowledge”.
EZY’s fine was reduced to $51,330.
This decision has serious implications. If you are an accountant or a consultant performing a payroll or audit function for a client, you must carefully review and clarify your instructions. If you are in receipt of instructions that appear suspicious, it appears that you have an obligation to ask the difficult questions and insist on seeing the source of the client’s data. If you have a concern about the client’s conduct, you should advise them of their obligations and, if they do not act on your advice, cease acting for them.
Although this case turned on its particular facts, it has broad application as it appears to place a greater responsibility on payroll accountants and other outsourced service providers to ensure their clients comply with Awards. This has the flow on effect of ensuring compliance with superannuation payment obligations.
If you are an accountant or consultant providing payroll advice to an employer, a limited retainer, or an attempt at a limited retainer, is unlikely to provide a defence to your client’s Fair Work Act contraventions. Any correspondence or documents that could constitute actual or constructive knowledge of a contravention of the Act, places you very much in the firing line for being “involved in” a contravention.
In this case, the fine and legal costs incurred by EZY would most likely have been far greater than the fees generated by the work.
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