The Fair Work Ombudsman office has reportedly been seeking to have some repayments for underpaid employees recouped from not only the offending employer but also from advisory entities, such as accountants, that are involved with those employers.

Coleman Greig Lawyers says that the Fair Work Ombudsman (FWO) has been using the “accessorial liability” provisions of the Fair Work Act (section 550) to also target directors and managers of third-party entities (generally accounting and financial advice firms) that are knowingly involved in infringements of the act.

Coleman Greig Lawyers says the FWO has a “quite conscious” policy aiming to reach beyond an employer, even to external parties. (The FWO explains accessorial liability here.)

For example the law firm’s principal, Stephen Booth, says the FWO is running proceedings against one employer’s accountant that provided payroll services to a fast-food outlet operator in Melbourne.

The employer had underpaid two Taiwanese backpacker employees on working holiday visas to the tune of $9,549, and Booth says the accounting firm had processed pay for the two employees. “The FWO alleged that it knew the rates paid were below minimum rates as it had been involved in previous workplace audits which had identified underpayments”.

Booth says that while it is yet to be seen whether the FWO proves its case, “the mere fact of the prosecution does serve as a warning to advisers to be wary”.

Coleman Greig has identified several risk areas on which third-party advisers should be aware of. “If, as a professional adviser, you are aware of a client who is doing any of the following, you’re in risky territory,” Booth says. He includes:

  • systematically paying below award rates;
  • engaging in sham contracting (engaging people as “contractors” when they are in fact employees);
  • keeping inadequate payroll records (which has the effect of covering up underpayments); or,
  • apparently complying but in fact “clawing back” money from employees so that they are in effect underpaid.

“If, for example, you advise a client to convert current employees to contractors, or to engage unskilled workers to be contractors, it’s highly likely that you’re participating in sham contracting,” Booth says.

“Or if you know from your dealings with the client that the pay records are shoddy or shonky, then you may be implicated in underpayment claims (and liable for penalties and possibly for the underpayments themselves) because you didn’t exercise a professional responsibility to advise the client on the proper course of conduct.”

Booth indicates that case law in this area has not yet defined what is expected of advisers in fulfilling their duties. “Is it enough to advise the employer on good practice and legal compliance, and actions necessary to fix the problem?” he says. “Do you need to refuse to do any more work for your client, or is it sufficient for you to dissociate yourself from the risky area, having given the advice?”

At the very least, he suggests firms will need to keep a clear record of interactions with clients, including what had been asked of the accounting firm and what was provided. “There will be situations, particularly those involving exploitation of vulnerable workers, where it would be wise to get out altogether, if your client won’t take remedial action,” Booth says.