Husband and wife ordered to meet bankrupt company’s employment entitlements

Liquidating a company won’t necessarily avoid husbands and wives from back-paying employees out their own pockets.

In FWO v Sinpek Pty Ltd (In Liquidation) & Ors [2020] FCCA 88, the national workplace regulator secured orders against a director and spouse to personally reimburse two underpaid workers $52,722.48.

The Fair Work Ombudsman proved various underpayment and other workplace contraventions occurring between 8 January 2015 and 10 August 2016, which included requirements for employees to re-pay their tax returns to the employer and meet the costs of stolen fuel.

Central to the FWO’s success was its reliance on third party liability provisions in the Fair Work Act 2009, which extend exposure to contraventions of ‘civil remedy provisions’ to any individual person that was ‘involved’ or ‘knowingly concerned’ in the contravention.

Section 550 of the Act is extracted below:

550 – Involvement in contravention treated in same way as actual contravention

  1.  Person who is involved in a contravention of a civil remedy provision is taken to have that provision.
  2.  A person is involved in a contravention of a civil remedy provision if, and only if, the person:

    (a) aided, abetted, counselled or procured the contravention; or

    (b) has induced the contravention, whether by threats or promises or otherwise; or

    (c) has been in any way, by act or omission, directly or indirectly, knowingly concerned in or party to the contravention; or

    (d) has conspired with others to effect the contravention.

To be knowingly concerned in a contravention, the person must have engaged in some act or conduct which “implicates or involves him or her” in the contravention so that there be a “practical connection between” the person and the contravention.

An analysis of historical FWO initiated cases demonstrates a consistent trend in it continuing to name individual persons as second, third or fourth respondents to legal proceedings (including Accountants[1] and HR Managers[2], for example).

Third party liability doesn’t end with underpayment cases either. Any breach of a civil remedy provision contained in the Fair Work Act, including unlawful dismissals, entitles an applicant to explore whether an individual should also be held to account.

Further, it’s unlikely you would be forgiven if you were only following your supervisor’s orders. For example, in FWBII v Baulderstone Pty Ltd [2014] FCCA 721, two HR managers were found to be co-liable after they complied with an employer’s instruction to terminate an employee’s salary contract because the employee resigned his membership with the CFMEU.

Accessory Liability – what you need to consider

Given the arm of accessory liability is longer and broader than you might think, all persons that are in any way involved within an organisation’s HR function need to consider the following:

  • Advice on employment obligations should only ever be obtained from qualified experts (an accountant shouldn’t give workplace relations advice, in the same way that an employment lawyer shouldn’t give tax advice).
  • If you are in doubt of your obligations, request that advice be verified in writing.
  • Ignorance is not always bliss. You can’t un-know what you know.
  • If you are an advisor and your client won’t accept your advice, you may need to consider recommending that they obtain a second opinion or ceasing to act for that client.

For more information or guidance regarding your obligations as an employer, please do not hesitate to contact us.

[1] FWO v Blue Impression Pty Ltd & Ors [2017] FCCA 810

[2] FWO v Oz Staff Career Services Pty Ltd [2016] FCCA 105