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Company liquidated and workers underpaid?

Accessorial liability extended to directors to recover payments

A director of a liquidated company and his wife were ordered by the Federal Circuit Court to reimburse company employees who had been underpaid.

The Fair Work Ombudsman relied on the third party liability provisions in the Fair Work Act 2009 which extend liability to individual persons “involved” or “knowingly concerned” in contraventions of civil remedy provisions.

To prove liability, the Fair Work Ombudsman needed to prove that the person had engaged in conduct that implicated or involved that person in the contravention and that there was a practical connection between that person and the contravention.

In FWO v Sinpek Pty Ltd (In Liquidation) & Ors [2020] FCCA 88, the Fair Work Ombudsman obtained orders against a director and his wife to personally reimburse two underpaid workers $52,722.48.

The Fair Work Ombudsman proved underpayment and other workplace contraventions occurred between 8 January 2015 and 10 August 2016, including the employer requiring employees to pay their tax refunds to the employer.

There is an increasing trend in cases brought by the Fair Work Ombudsman to join individuals as second, third or fourth respondents to legal proceedings. In some cases, the defendants are the lawyers, accountants and HR Managers of the business.

Third party liability goes beyond underpayments

Additionally, third party liability can extend much further than simply in underpayment cases.
Any breach of a civil remedy provision in the Fair Work Act, including unlawful dismissal, may allow a claimant to join individuals as defendants in proceedings if they can show a practical connection between that person and the contravention.

In FWBII v Baulderstone Pty Ltd [2014] FCCA 721, two HR managers were found to be liable after they followed their employer’s instruction to terminate an employee’s contract because the employee resigned his union membership.

Protecting against the risk of prosecution

Because the penalties are personal and can be for significant financial amounts, people who participate in employment functions for a business need to ensure that they do not do anything that would place them at risk of prosecution. It is a good idea to obtain qualified legal advice if there are any concerns about employment obligations.


Legal help available

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Please note that this article has been prepared by Margaret Miller, partner of Bell Legal Group, for information purposes only. It is not legal advice nor should it be relied upon as such.