We were warned.
The Fair Work Ombudsman (FWO) has had professional advisors in its sights for a while now and it appears that in the decision of FWO v Blue Impression Pty Ltd & Ors  FCCA 810, the FWO has got its first scalp, or has it?
Is it as frightening to professional advisors as it seems?
‘No’, Luke Connolly explains.
In the decision of FWO v Blue Impression Pty Ltd & Ors  FCCA 810, Judge O’Sullivan in the Federal Circuit Court has been prepared to take the leap and find a professional advisor liable under section 550 of the Fair Work Act (FW Act) (as a knowing participant in the breaches).
In this case, the employer, Blue Impression (a restaurant) was prosecuted by the FWO. It admitted the breaches of the Fast Food Industry Award and underpaying of its staff. This decision then focused on the FWOs prosecution of the accounting firm that provided payroll services to Blue Impression and the allegation it was guilty of being an accessory to the admitted breaches given the payroll services it provided and thus being knowingly involved in the breaches.
Ezy Accounting 123 (Ezy) denied liability stating it was a mere service provider, its service was lawful and proper, that it was not responsible for ensuring compliance with the award and that it did not have knowledge of any breaches occurring.
This wasn’t accepted by the Court and Ezy was found liable under section 550 as an accessory to the breaches admitted by Blue Impression (save for a meal break breach). It now faces the same penalties as the employer.
Should professional advisers shudder over this decision?
Is it ground breaking? Does it open the flood gates against professional advisors? Is it the case the FWO has been waiting for and that professional advisors have been fearing?
No, in my view.
Because this case turns on very unique facts as opposed to more general conduct of professional advisors.
This was a case where an accounting firm went a step further with its services and offered external payroll services and Blue Impression accepted this outsourcing service.
In a separate FWO audit in 2014 (a crucial fact), Ezy was put on notice of underpayments to Blue Impression staff and given information of rates and the award that applied. Ezy also had intimate knowledge of and continued to handle the payroll for Blue Impression after this audit and where underpayments continued. Accordingly, Ezy had knowledge of the essential elements of the breaches, or put another way, it could not sensibly deny it did not.
It is therefore not ground breaking that when Blue Impression pleaded guilty, Ezy was in trouble and unlikely to defend a prosecution under section 550 given the circumstances and reasonably clear principles governing the application of section 550 of the FW Act.
Section 550 of the Fair Work Act explained
Section 550 has a reasonably high threshold and requires something more than circumstantial, presumed or imputed knowledge of a breach of the FW Act. Actual knowledge must be proven (although it can be inferred by the court based on the evidence proven – that is, the person must have known on the proven facts). As may be becoming apparent to you, this doesn’t appear to have been an overly difficult exercise on the facts of this case.
So, should persons such as payroll service providers and principals (engaging contractors) be nervous and review their business systems following this decision? Yes, they certainly should. Should the broader professional advisory community (i.e. accountants/lawyers) be shuddering over this decision, ‘no’, it should not. It’s not the case we have been waiting for… but I’m sure it’s coming – just don’t let it be you.
Let’s just hope this focus by the FWO on section 550 and landing the “big fish” professional advisor, it doesn’t deter creativity and boldness in clever commercial and strategic thinking given by professionals to employers and that the right balance can be struck between pursuing irresponsible, negligent and poor advisors and leaving lawful ingenuity to flourish.
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This article does not constitute legal advice or a legal opinion on any matter discussed and, accordingly, it should not be relied upon. It should not be regarded as a comprehensive statement of the law and practice in this area. If you require any advice or information, please speak to practicing lawyer in your jurisdiction. No individual who is a member, partner, shareholder or consultant of, in or to any constituent part of Interstellar Group Pte. Ltd. accepts or assumes responsibility, or has any liability, to any person in respect of this article.