Breaking Down Accessorial Liability: Ignorance vs Knowledge in the Fair Work Act

Accessorial Liability

The Fair Work Act of 2009 (FWA) encompasses several civil penalty regulations. Hence, the court can mandate entities that violate these regulations to pay hefty amounts either as a penalty or to the victims affected by these violations.

The FWA’s civil penalty regulations include:

• Compliance with the National Employment Standards, modern awards, and enterprise agreements
• Preservation of workplace rights and additional employee safeguards
• Entry rights
• Industrial action.

Most of these rulings, especially those drawing maximum attention, are against large corporations or franchises. However, individuals who are part of a civil penalty violation under the Act can also be held responsible.

This is referred to as accessorial liability and it holds critical significance for directors, HR and managerial staff involved in managing employee matters.

Section 550 of FWA outlines the limits of accessorial liability. A person associated with a violation of a civil remedy regulation is considered to have breached that regulation.

A person is associated with a violation of a civil remedy regulation only if the person:

• Has assisted, instigated, advised or induced the violation
• Provoked the violation, via threats, promises or otherwise
• Has in any way, by action or negligence, directly or indirectly, knowingly contributed to or been involved in the violation
• Conspired with others to commit the violation

The case of Fair Work Ombudsman v South Jin Pty Ltd looked into a wide range of issues pertaining to accessorial liability. It set the fundamental principle that a person’s actions must implicate or involve them in a violation, thereby creating a link between the individual and the violation.

In reality, this implies that the person involved must be aware of some or all facts constituting a violation, and there must be some behaviour that contributed to, or failed to prevent the violation.

Inaction can be deemed as behaviour, if the person was aware of a breach and failed to prevent or report it. This was proven in FWO v Oz Staff Career Services, where an HR manager was aware of a pay-back scheme and wage deductions against employees and failed to act on the situation.

What knowledge should the person have?

The courts have generally ruled that individuals must have an actual knowledge of the fundamental elements of the breach. Courts have stated that assumed or inferred knowledge, where a person’s knowledge is presumed owing to their position or duty to exercise reasonable care, is not adequate to incur accessorial liability.

Actual knowledge can be proven when:

• The person is directly aware of the breach facts (for instance, owing to an audit, or because they have seen documents or had conversations)
• The person has encountered evident circumstances constituting a breach where an ordinary, decent person would recognise the wrongdoing
• Where a person suspects wrongful behaviour and intentionally chooses not to dig deeper fearing they might incriminate themselves (also called wilful blindness).

Does the knowledge have to relate to a specific breach?

The case of FWO v Grouped Property Services ruled that knowledge of a system or practice leading to a breach may suffice to mean knowledge of the particular violations caused by that system. There remain questions regarding the knowledge level that will implicate an individual in specific violations, for instance:

• Knowledge of the award rate in underpayment cases might not be necessary, but only if it’s very evident that workers are being underpaid
• If an individual is aware of past violations and knows that systems have not been updated, this may imply ongoing knowledge of the initial violation

Underpayments

A recent noteworthy case filed by the Fair Work Ombudsman included a company trading as Ezy Accounting that rendered payroll services to an employer. Although the accounting company was only assigned to pay what the employer instructed, it was found to be involved in the violation since it was aware of systematic underpayments owing to a prior audit and didn’t ensure it was complying with the law.

Adverse Action

Another case involved the dismissal of an employee due to their union membership, which constituted prohibited adverse action under the FWA. An HR manager was found to be an accessory as they were part of the meeting where the employee was forced to resign and knew that the dismissal was for a prohibited reason.

Lessons for Managers and HR

Despite certain aspects of the law relating to accessorial liability remaining somewhat undecided, the lessons derived are clear: ensure that you’re aware of all the facts regarding how employees are being treated; if you have suspicions, speak out and don’t presume that you can avoid liability for merely following orders.

For further guidance and assistance, reach out to our team of experienced consultants here at Preston HR for individualised advice that you can trust.