Accessorial Liability potential penalties increase to $108,000 for individuals

ELM: In 2016 we saw the issues of accessorial liability and supply chain responsibility hit the top of the FWO’s agenda. A lot of employers are now, more than ever before, more aware of who can be liable, why, how, and for how much. But we understand that there are new laws on their way. Daniel, can you give us further insight into the Fair Work Amendment (Protecting Vulnerable Workers) Bill 2017?

Daniel: As the title suggests, the Bill aims to respond to community concerns about the exploitation of vulnerable workers. Specifically, it amends the Fair Work Act 2009 in order to:

• Introduce greater penalties for ‘serious contraventions’ of certain workplace laws;
• Increase penalties for record-keeping failures;
• Strengthen supply-chain accountability;
• Prohibit employer demands of wage reimbursement;
• Improve evidence gathering powers of the Fair Work Ombudsman.

The most significant change relates to the new penalties proposed for ‘serious contraventions’. The maximum civil penalty for a ‘serious contravention’ will increase from the current 60 penalty units for individuals and 300 for bodies corporate, to 600 and 3,000 respectively. This will take potential penalties to $108,000 for individuals and $540,000 for companies. The higher penalties will apply where a contravention was deliberate and formed part of a systematic pattern of conduct.

The Bill is a response to a range of reports and inquiries that have demonstrated that previous workplace laws have not been sufficient to protect certain workers, especially migrants, who have been exploited by some unscrupulous employers.

ELM: With the increase in maximum fines jumping up tenfold, the financial impact on accessories and the company is going to be huge. Can we clarify if this is per contravention – how does this work then if multiple contraventions have been committed?

Daniel: It’s worth noting that we don’t yet know how much applicants, and especially the Fair Work Ombudsman, will use these new provisions and whether they will frequently allege a serious contravention. Proving a serious contravention will require stronger evidence and it may be that the Ombudsman will need to continue to rely on the standard provisions in many cases. However, theoretically, for each serious contravention alleged there will be a maximum penalty of $108,000 for individuals and $540,000 for companies.  Where there are multiple contraventions then the potential penalties will be even higher.  A contravention which affects a number of different workers might still be seen to arise from the same course of conduct and therefore constitute a single contravention, but we will have to wait and see what approach the FWO takes in this regard.

ELM: Talking about contraventions, outside of underpayments (which seems to be most common in the recent cases), what are the other common contraventions that fall under this topic?

Daniel: Underpayments (including of penalty rates, allowances and overtime) are certainly the most regular contraventions under this topic. Some of the other common contraventions include failure to keep appropriate employee records and sham contracting — and these are areas where the Fair Work Ombudsman will often pursue accessories. In the case of failing to keep records, this is because the breach undermines the Ombudsman’s ability to monitor compliance.

ELM: Can you please explain what it means if there is “no reverse onus for an accessory in adverse action claims”? How does this impact employers?

Daniel: In an ordinary adverse action (general protections) claim, there is a reverse onus of proof. This means that once an applicant establishes that an employer has taken adverse action (demotion, dismissal etc.) for an unlawful reason (exercise of workplace right, discrimination etc.), the employer must show that they did not take the adverse action for this reason. Most commonly this plays out as an employee claiming that they have been mistreated by an employer for an unlawful reason, forcing the employer to produce evidence as to why it acted lawfully.  This is the “reverse onus”.

In contrast, with an accessorial liability adverse action claim, the courts have held that it is up to the applicant to prove that the accessory acted for an unlawful reason. This would mean, for example, that an employee would need to prove that the individual representative of the employer, who the employee alleges should be held responsible, had knowledge that they were acting unlawfully or were wilfully blind to the situation. This does not really affect employers but provides some level of protection for individuals who might be the subject of an accessorial liability claim.

ELM: Lastly Daniel, what’s your biggest bit of advice to employers, whether at a company or an individual level, when it comes to accessorial liability?

Daniel: Accessorial liability is essentially a responsibility mechanism which aims to encourage compliance with laws by making individuals and associated companies liable for breaches of workplace laws. The best way to avoid accessorial liability is to ensure that your organisation has a culture of compliance.  Educating your staff about their employment law obligations and ensuring that they are aware of the potential personal consequences that can arise through accessorial liability is a key measure in helping to create this culture. Individuals and organisations need to be aware that remaining silent can carry risks, and that if they see something occurring which they have concerns about, they should be comfortable to raise it.

***

About Daniel Proietto:

Daniel heads up Lander & Rogers‘ national Workplace Relations & Safety team. He has practised in the areas of industrial relations and employment law for many years and his practice covers all aspects of these speciality areas. Daniel has acted in a number of significant post-employment restraint cases, and regularly assists employers to negotiate and finalise enterprise agreements in difficult and robust workplace environments. He has also provided advice on the engagement and termination of senior executives, including in relation to compliance with the complex termination benefits provisions in the Corporations Act 2001.