Accountancy firm faced with $53,880 penalty for underpayments by its client

In May this year Macpherson Kelley published an article about accounting firm Ezy Accounting 123 Pty Ltd (Ezy), which was found to be an accessory to underpayments made by one of its clients, Blue Impression Pty Ltd (Blue Impression). The underpayments related to the Japanese fast food chain’s failure to pay the minimum hourly rate, penalties and loadings to its employees.

On 16 November 2017, the Federal Circuit Court delivered its much anticipated decision as to the penalty to be imposed against Ezy in this precedent setting case on the liability of third parties as accessories.

Judge John O’Sullivan ordered Ezy to pay a penalty of $53,880 (which is 15% of the maximum which can be awarded). Blue Impression did not get off lightly and was ordered to pay a penalty of $115,706.25 (which is 25% of the maximum which can be awarded).

In his decision, Judge O’Sullivan found Ezy’s involvement was an aggravating factor in the underpayments and relevantly noted that:

“Ezy was involved in a relationship with [Blue Impression] where it provided payroll services. As such it must put compliance with the law ahead of business interests. Ezy had a responsibility to ensure there was compliance with, inter alia, the FW Act. Where, as here Ezy had been found, through Mr Lau, to be knowingly involved in conduct that constitutes illegality this is a circumstance of aggravation”.

Incidentally, earlier this month a human resources manager who processed almost $583,688 in underpayments and aided in the falsification of records provided to the Fair Work Ombudsman was fined $21,760 under the accessorial liability provisions. The manager’s claims that defiance of her boss was not tolerated in Chinese culture and that her actions were to safeguard her visa status were not found to be mitigating factors.

Lessons

This emerging trend in case law demonstrates that trusted advisors such as accountants or human resource professionals can no longer play a passive role or ‘turn a blind eye’ to monitoring compliance with minimum wages and entitlements.

It is incumbent on trusted advisors to be proactive in ensuring that their clients are complying with the law when it comes to paying minimum wages and entitlements. This means accountants and other trusted advisors need to check applicable minimum wages and entitlements where they are providing payroll and related services.

For assistance with checking compliance with current rates of pay or award classifications, please do not hesitate to contact our Workplace Relations team.

This article was written by George Haros, Principal Lawyer – Workplace Relations and Natasha Horvat, Associate – Workplace Relations. 

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