Underpayment of workers: are you liable?

The exploitation of vulnerable workers has been getting a lot of press recently, but did you know that it is not just the company or business involved that may be liable to penalties?

In two recent cases, the Fair Work Ombudsman (FWO) has used accessorial liability laws to successfully obtain penalties from a professional services firm and the HR manager of a business for their involvement in the underpayment of workers.

Exploitation of vulnerable workers has been covered extensively in recent news, whether it be young naive Gen Ys, desperate for a job, or migrant workers who do not know their rights. The Fair Work Ombudsman (FWO) has recently used accessorial liability laws to obtain penalties against a professional services firm as well as a HR manager for a restaurant for the underpayment of vulnerable workers.

Recent cases

The professional services firm was a Victorian-based accounting firm, which had provided payroll services to a company and processed wage payments which facilitated $750 of the underpayments in relation to a foreign worker. The accounting firm was penalised $53,880 for facilitating the underpayment, while the company involved was penalised $115,706.

In addition to prosecuting companies and firms, the FWO is also prepared to go after individuals. An HR manager for a restaurant in NSW was penalised $21,760 for her role in facilitating what has been described as “wide-scale exploitation of overseas workers”.

These cases show that it does not matter what the quantum of the underpayment to workers are, even a small underpayment to workers will result in a large penalty. According to Acting FWO Kristen Hannah:

“[It] is prepared to use accessorial liability laws to hold any party involved in the exploitation of vulnerable workers to account” whether it be the business itself, its internal management, or its advisers.

It is clear from the judgments of the accessorial liability cases that anyone that has been knowingly involved in illegal conduct would be open to these accessorial liability claims. In the case of professional services firms, it must put compliance ahead of its business interests. Similarly, if you work in a business that you know is exploiting workers then according to the presiding judge in the case, “there is nothing wrong with sending the message that an employee should indeed resign if that is the only alternative to continuing to participate knowingly in illegal activity”.

What does this mean for your business?

You will need to make sure your workers are getting paid the correct awards, allowances, overtime, and penalty rates. Businesses also need to be aware that the Fair Work Amendment (Protecting Vulnerable Workers) Act 2017 has now come into effect. This means that the maximum penalties are now increased for certain conduct, including the deliberate exploitation of workers and keeping false records.

How about if you are an employee?

If you’re the employee of a business and are knowingly involved in underpaying workers, then you may be liable for accessorial liability. This is the case even if you are, or assert that you were, acting on someone else’s instructions (as was the case with the HR manager). The Court has made it clear that quitting is a clear alternative.

Contact us for more information

Unsure of what your liabilities are? There are many resources available on the FWO website, or you could consult us, or your payroll services provider, for more information.