Company director personally liable for award underpayments for ‘wilful blindness’

 In Law

Accessory liability provisions are increasingly being used to pursue directors and managers of businesses personally, for breaches of obligations to employees.

Under these accessory liability rules, the Federal Circuit Court this week found a director of a company who operated a BP service station (and the director’s son and daughter in law who managed the business), personally liable for the company’s breaches of various workplace laws. The proceedings were brought against the three family members in their individual capacities.

The employees in question were paid below minimum awards rates, were not paid casual loadings, penalty rates for weekends and public holidays or overtime. The company also failed to maintain the required employee records, or to provide payslips to the workers.

Director ‘deliberately avoided making enquiries for fear that he would discover the truth’ about underpayments.

The three individuals argued that they should not be personally liable simply because that manager or director “knows what an employee receives and that an industrial instrument exists”. The Court was unconvinced and found:

  • The application of industrial laws and awards is well known.
  • All three individuals were well educated, could not rely upon ignorance of their obligations, and were expected to have made the appropriate enquiries about their obligations.
  • The company director had been ‘wilfully blind’ and deliberately avoided making enquiries for fear that he would discover the truth about the underpayments and other breaches.
  • The son and daughter-in-law with joint responsibility for the day to day running of the operation knew that proper records were not kept and that payslips containing required information were not provided to employees.

Other recent cases involving personal liability for employed managers and directors.

In recent months, various other employed managers and directors have been found personally liable for breaches of workplace laws. Some examples include:

  • The General Manager of a Port Kembla Coal Terminal was found personally liable for a decision to make an employee redundant because of his activities as a union representative.
  • Directors and a ‘successor’ scaffolding company were ordered to pay over $100,000 in penalties after an employee was dismissed because of his complaint to his union.
  • Two HR managers in a building company were ordered to pay penalties for taking adverse action against an employee, despite doing so as ordered by their superior; the employed managers should have refused to comply with the order.
  • Penalties for breaches of workplace law are up to $10,800 per breach for individuals.

Implications for employers

  • A lack of understanding of awards and legislation may not permit directors and employed managers to avoid liability. A higher standard (and an expectation that enquiries will be made) may apply to educated directors and managers
  • Employed managers directed to undertake activities that may be unlawful, should seek their own advice about the activities, and whether they can refuse to comply with such instructions.
  • Employers should seek specialist advice about whether the business’ current arrangements comply with underlying awards, enterprise agreements, the Fair Work Act and other applicable instruments to minimise the risk of inadvertent breaches. Further, the risk of individual liability for directors and managers responsible for decision making.

Employers should seek advice before undertaking dismissals, restructures or other actions that may expose the business, and the directors and managers personally, to claims.

This article was written by Denise O’Reilly, Director, O’Reilly Workplace Law
16 October 2015

If you have any questions about this article, or your obligations under workplace laws, please contact info@oreillyworkplacelaw.com.au

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