Ignorance of the law is no excuse for HR Managers
As an HR Manager, failure to be aware of, or carry out, workplace legal obligations, could put you at risk of being held personally liable for breaches in workplace law.
A recent ruling by the Federal Circuit Court of Victoria relating to unlawful deductions by an employer fully emphasises the weight placed on the role of the HR Manager by the Court, in running the human resources activities of an employer.
Furthermore, the case highlights the need for HR Managers to know the precise nature of an employer’s legal obligations, and to act upon that knowledge, regardless of their employer’s express wishes.
The Federal Circuit Court held that a recruitment and labour hire company had made unlawful deductions from the wages of cleaners working in Melbourne’s Federation Square and Crown Casino, and then knowingly falsified employment records submitted to the Fair Work Ombudsman after a targeted audit in January 2012.
The employer had deducted administration fees and meal allowances from the wages of employees, which were in breach of section 323 and section 324 of the Fair Work Act 2009 (Cth). Section 323 requires the employer to pay employee amounts payable in relation to the performance of work in full. Section 324 permits various deductions, but only if a number of preconditions are met, including that:
- the deduction is authorised in writing by the employee; and
- is principally for the employee’s benefit.
The HR Manager admitted that he knew about the practices and processes for payment of wages to employees, including the deduction of administration fees and meal deductions from employees’ wages. However, the HR Manager claimed that he did not know that such deductions were contrary to the Fair Work Act.
Section 550 of the Fair Work Act sets out the accessory liability of HR Managers and provides that a person is involved in a contravention of a civil penalty provision if, and only if, the person:
- has aided, abetted, counselled or procured the contravention; or
- has induced the contravention, whether by threats or promises or otherwise; or
- has been in any way, by act or omission, directly or indirectly, knowingly concerned in or party to the contravention; or
- has conspired with others to effect the contravention.
The Court’s Findings
The Federal Circuit Court held that as the HR Manager had knowledge of the constituent parts of the contravention, albeit that he may not have known which section of the Fair Work Act had been breached, this was sufficient to constitute involvement within the meaning of section 550. This was because it could be said that the HR Manager was “directly or indirectly, knowingly concerned in or party to the contravention”, and had taken no steps to correct it.
The HR Manager was also personally liable for being concerned in the provision of falsified employment records to the Fair Work Ombudsman, which omitted any reference to the deductions.
There will be a penalty hearing later in the year. The maximum penalty for an individual is $10,800 per offence.
Sage Advice for HR Managers
This decision makes it clear that if an HR Manager is running the human resources activities of an employer, and is intimately involved with Award matters, then it is likely that the HR Manager will be deemed to have knowledge that unlawful deductions were being made. This stands even if the HR Manager does not have actual knowledge of the provisions of the Fair Work Act that are being contravened.
This case serves as a trite reminder that ignorance of the law is no excuse for HR Managers.
Failure to be aware of the obligations imposed by the Fair Work Act, Modern Award or other statutory requirements, creates a personal exposure to liability for HR Managers in all sorts of circumstances, including deductions from wages and the maintenance of proper employee records.
HR Managers need to know the precise nature of the legal obligations of an employer and then act upon that knowledge irrespective of any contrary views of their superiors.
About Tim Greenall:
Tim Greenall advises on all aspects of employment law, enterprise bargaining, equal opportunity and occupational health and safety.
He acts for employers in a diverse range of industries including retail and manufacturing, professional services, higher education and research, in addition to executives and managers on individual employment issues. He also works with insolvency administrators on employment aspects of restructuring projects.
He is an accredited mediator bringing a strategic approach to the resolution of workplace issues and problems.
Tim regularly represents clients in the Fair Work Commission, as well as all Victorian and Federal Courts.
Tim has 30 years’ experience as a commercial and workplace relations lawyer including two years practising in London, UK. Prior to joining Madgwicks, Tim practised at a major global law firm and was also a Partner at a medium-sized commercial law firm, based in Melbourne.