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Accounting Firm liable for Client’s Wage Rort

Accountants and Bookkeepers beware – ensure you are qualified to speak on HR Matters and you provide your clients the correct information– from the HR Advisory team…

The Fair Work Ombudsman commenced legal action against EZY Accounting 123 Pty Ltd in the Federal Circuit Court, Melbourne in February 2017.

For the first time in history the agency began proceedings against an accountant for allegedly knowingly being part of contraventions of workplace law.

Last week Judge O’Sullivan of the Federal Circuit Court of Australia agreed and after describing the accounting company’s arguments as “risible denials” he ruled that the company “deliberately shut its eyes as to what was going on in a manner that amounted to connivance in the contraventions by it client”

EZY Accounting Argument:

1.        It was engaged to provide Tax, accounting and payroll services.

2.       It had no business discussing workplace law matters with its client.

3.       It had no authority to alter pay rates in the payroll system.

4.       It was not an expert in Australian employment law and HR matters.

5.       It had no knowledge of the employees, or who worked for its client or what they were being paid.

 After a Fair Work inspector, had visited and audited a restaurant that was part of a Japanese fast food restaurant chain operated by Blue Impressions, it was deemed that the Fast Food Industry Award 2010 applied to the business.

Through this process EZY Accounting was advised that the venue was operating under a modern award and was given the correct rates.

The company did not change the pay rates to be paid to employees because it had no authority to do so. “We don’t question the pay rate... we don’t raise questions. We just process what we are given,” the director of the EZY Accounting said. EZY Accounting 123 argued that it was the responsibility of its client, Blue Impression, to ensure its employees were paid correctly.

 BEWARE - The Law States:

Paying less than the modern award is a breach of the Fair Work Act because section 45 of that Act says that a “person must not contravene a term of a modern award”. Section 550 of the same Act says that a person who is involved in a breach of the Fair Work Act is deemed to be in the same position as a person who actually breached the Act.

A person is “involved” if he or she aided, abetted, counselled, or procured the breach, or, if he or she was any way, by act or omission, directly or indirectly, knowingly concerned in, a party to, or a conspirator with others to, the breach.

 Nowhere to Go

 The overwhelming fact here is that EZY Accounting knew about the underpayment as a result of the audit carried out by the Ombudsman’s office in February.

 “I accept the FWO’s submissions that EZY Accounting had at its fingertips all the necessary information that confirmed the failure to meet the Award obligations by Blue Impressions and nonetheless persisted with the maintenance of its payroll system with the inevitable result that the Award breaches occurred.”

Accordingly, the judge ruled that EZY Accounting 123 was an accessory to its client breaching the Fair Work Act.

As the judge will later rule on what penalties to impose, the case continues.

 Far Reaching Implications

 Again, the Fair Work Ombudsman has proven that arguments of “I did not know” (in terms of pay rates) is not acceptable and will not be tolerated. The evidence in this case was too strong.

 Payroll and Accounting companies need to very carefully consider when they are put on notice that their clients are deliberately breaching workplace laws if they should continue providing their services.

 This case is not just limited to payroll and accounting companies. The courts have held in several cases that companies and people that are not the direct employers of workers can be held liable for breaches of workplace law under the accessorial liability laws in section 550 These include franchisors in respect of their franchisee businesses and sub-contractors.

Information in HR Advice Online guides and blog posts is meant purely for educational discussion of human resources issues. It contains only general information about human resources matters and due to factors such as government legislation changes, may not be up-to-date at the time of reading. It is not legal advice and should not be treated as such.

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