Professional liability: Bid farewell to the corporate veil

Professional Liability
Chris Sheedy By Chris Sheedy, CA Today

20 September 2016

Natalie James, Australia’s Fair Work Ombudsman, has been conducting a series of presentations outlining her office’s new priorities - and accountants earn a special mention.

Businesses and individuals that are knowingly breaking workplace laws, particularly around the underpayment of vulnerable people such as immigrants, the disabled and the young, are now firmly in the sights of the Fair Work Ombudsman and will be personally prosecuted.

The corporate veil will no longer protect people as individuals, even if the company has since been dissolved. That is the message being broadcast loud and clear by Fair Work Ombudsman Natalie James.

Interestingly, it doesn’t matter how far down the chain the individual may be. Even a third party, such as an external accounting firm, will be prosecuted if they are found to have been a part of the contravention of the law.

In a recent presentation to an industry group, Natalie said tools have been made available by the government for the Fair Work Ombudsman to hold people involved in breaches of workplace laws to account.

There has never been a better time, she said, for professionals such as accountants to ensure they are always giving holistic and sound advice.

“Provisions extending liability for contraventions of the law to people involved in the relevant conduct have been a feature of workplace relations legislation for a decade now,” Natalie commented.

“Section 550 is a standard, bread and butter accessorial liability provision. There are similar clauses throughout the statute books, including occupational health and safety law, as well as corporations, competition and consumer legislation.

“We’re increasingly using this mechanism to ensure that someone is held to account when we find deliberate exploitation of vulnerable workers.”

The message is now clear. For individuals in the Australian accounting environment whose firms are knowingly involved with contraventions of workplace laws, it is no longer exclusively a problem for your directors. You are now personally responsible.

Natalie’s office has already found numerous cases of misconduct, all of which it is prosecuting in court and, for those concerned with reputation, in the media. One such example is a third-party accounting firm.

“A year or two ago, most of the accessories in our proceedings were directors of the corporate employer,” she said. “The reasons for this are obvious. The director is the person who leads, manages and controls the employing entity and is intimately involved in, and ultimately responsible for, the decisions of that entity – including decisions to comply (or not to comply) with workplace laws.

“Over time we have extended our use of accessorial liability to other persons involved in the contraventions. Accessories have included human resources staff; administration or day to day managers; staff engaged to assist with recruitment and supervision; and other companies or individuals involved through a supply chain or franchise network.

“We consider the part they have played, the conduct that has led to underpayment of employees and, as is always the case, whether the conduct was deliberate."

She continued: “In December last year, we initiated our first proceedings against a third-party accountancy firm as an accessory. We allege that this firm processed wage payments for workers at a Melbourne fast food restaurant, despite having explicit knowledge that those payments were well below the award rate.

"The accounting firm now faces penalties of up to $51,000 per breach. Our view is that accountants’ professional responsibility demands that they cannot close their eyes to breaches of the law by their clients.”

Individuals involved in producing false records for a company, Natalie went on to say, will also be held personally accountable for deceptive and unlawful conduct.

In another case, frozen yoghurt outlet Yogurberry in Sydney’s CBD was found to be underpaying a group of Korean backpackers. The employer is being taken to court, Natalie confirmed, but her office is also seeking orders against their accessories through the franchise network, including the head company, the master franchisor, the payroll company and the manager of the head company.

The message is now clear. For individuals in the Australian accounting environment whose firms are knowingly involved with contraventions of workplace laws, it is no longer exclusively a problem for your directors. You are now personally responsible.

About the author

Chris Sheedy is one of Australia’s busiest and most successful freelance writers. He has been published regularly in the Sydney Morning HeraldVirgin Australia VoyeurThe Australian MagazineGQIn The BlackCadillac, Management Today, Men’s Fitness and countless other big-brand publications. He is frequently commissioned to carry out copywriting and corporate writing projects for organisations, including banks, universities, television networks, restaurant chains and major charities, through his business The Hard Word.


  • Business
  • Accountancy
  • Australia

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