In May, we wrote about an accounting firm, Ezy 123 Accounting (“Ezy”), which had been found guilty of accessorial liability under the Fair Work Act 2009 (“the Act”) for choosing to assist an employer to underpay its employees. It provided payroll services to the employer and had knowingly used incorrect pay rates. Last Friday, 17 November 2017, another chapter in the case occurred with the Federal Circuit Court imposing a hefty penalty on both the firm and the employer.
Judge Simpson reminded Ezy that in providing its services, it had a responsibility to ensure that there was compliance with the Act by its client. Ezy could not put its business interests ahead of compliance with the law.
Unlike the employer, who was involved in contraventions resulting in an underpayment of just over $9,500, Ezy’s offending had resulted in an underpayment of $750 over the space of two fortnights. However, due to the large number of contraventions that it had committed, the maximum penalty that could be imposed totalled $357,000.
Ezy argued that the employer must bear the primary responsibility for the breach, rather than itself as a service provider. While the Court acknowledged that there was a difference in culpability, the fact remained that Ezy had chosen to participate in the illegal activity of its client.
After considering the nature of the conduct, the amount of the underpayments, the degree of co-operation with the Fair Work Ombudsman that had occurred and the need to promote deterrence, the Court imposed a fine on the employer that was 25% of the maximum penalty applicable. In the case of Ezy, the fine was 15% of the maximum, totalling $53,880.
The Court was at pains to ensure that the penalties were “set at a level to make [it] clear [that] penalties for such conduct are not to be regarded as an acceptable cost of doing business.”
Ezy noted in Court that there had been a significant and detrimental effect on their business due to the amount of publicity that the case had attracted. A fine of more than $50,000 will no doubt have further impact. The case of Ezy 123 should serve as a cautionary tale for all professional advisers – involvement in a contravention of the Act is not worth any potential business gains.
One last word of warning. This case relates to events that occurred before the amendments enacted by the Fair Work Amendment (Protecting Vulnerable Workers) Act 2017 began.
The amendments created a new category of offence called a “serious contravention” where the person or business knowingly contravenes an obligation under the Act and the contravention is part of a systematic pattern of conduct affecting one or more people. The penalties imposed are ten times the base penalty, while the penalties for failure to keep accurate records have also increased. Had the actions in the Ezy 123 case occurred after those amendments, it is likely that Ezy 123 would have been paying a much larger fine.