In this week’s blog we take a look at a recent employment law case in which a former director, general manager and accountant were ordered to pay significant penalties as a result of their involvement in breaches of the Fair Work Act 2009 (Cth)(‘Fair Work Act’). 

The FWO was able to rely on the “accessorial liability” provisions of the Fair Work Act to bring claims on the individuals involved in the contraventions, not just the employing entity.

What is accessorial liability?

In the context of employment law, accessorial liability occurs when an individual is held to be personally responsible for their role in breaches of the Fair Work Act. This occurs when a company (usually the employer) breaches a civil remedy provision of the Fair Work Act and those involved in the breach are also taken to have breached the provision.

What is a civil remedy provision? 

A civil remedy provision is a provision of the Fair Work Act which if breached, allows the person affected by the breach (or the Fair Work Ombudsman on their behalf) to apply to the relevant court for an order that a pecuniary penalty (monetary fine) be paid by those who breached the provision.

Who can be found to be liable?

Section 550 of the Fair Work Act provides that a person who is involved in a contravention of a civil remedy provision is taken to have contravened that provision. 

A person will be involved in a contravention, if and only if the person:

  1. has aided, abetted, counselled or procured the contravention; or
  2. has induced the contravention, whether by threats or promises or otherwise; or
  3. has been in any way, by act or omission, directly or indirectly, knowingly concerned in or party to the contravention; or
  4. has conspired with others to effect the contravention.

These provisions allow the Fair Work Ombudsman (FWO) to pursue those directly involved in contraventions of the Fair Work Act (such as directors, HR Managers, payroll officers, accountants etc.). 

It is well established that these provisions could be used against persons directly running a business (directors, senior employees, etc) as well as external advisers (such as accountants, etc).

They are also often used to pursue individuals when the business has gone into liquidation (as was the situation in the case discussed below). However they are also frequently used in cases where action is also being taken against the employing entity.

Fair Work Ombudsman v J.D. Chapel Nominees Pty Ltd (in liq) [2024] FedCFamC2G 85

This matter was heard in the Federal Circuit and Family Court of Australia before Riley J and involved the determination of penalties for those involved in breaches of the Fair Work Act by a group of companies known as the ‘La La Bar Group’.  The La La Bar Group consists of the following companies:

  • Number 17 Pty Ltd (“Number 17”);
  • Hotel Boogie Pty Ltd (“Hotel Boogie”);
  • The Elwood Lounge Pty Ltd (“Elwood Lounge”);
  • La La Land Australia Pty Ltd (“La La Land”);
  • Athina Windsor Nominees Pty Ltd (“Athina Windsor”);
  • MC Bar Group Pty Ltd (“MC Bar”);
  • Blue Bar 330 Pty Ltd  (“Blue Bar”); and
  • J.D. Chapel Nominees Pty Ltd (“Jane Doe Bar”);

The La La Bar Group were the subject of surprise audits in August 2019 in response to allegations that workers at the venues were being underpaid hourly wages, denied workplace entitlements such as overtime and penalty rates, and were being paid cash-in-hand off the books. 

Background

Prior to these proceedings being commenced 7 of the 8 companies in the La La group went into liquidation, with the final company in the group (J.D. Chapel Nominees Pty Ltd) going into liquidation and being deregistered after the commencement of the matter. Subsequently no penalties were sought against any of the companies, rather penalties were sought directly against those involved in the contraventions, namely: 

  • Mr Keri Taiaroa, a former director and shareholder of six La La Bar Group companies;
  • Mr Matthew Sanger, former general manager of six La La Bar Group companies;
  • Nicholas Accounting Management Services Pty Ltd (NAMS), a Melbourne-based firm that provided accounting services to the eight La La Bar Group companies; and
  • Mr Nicholas Nicolaou, the sole director of Nicholas Accounting Management Services Pty Ltd. .

During the proceedings, all of the parties reached separate agreements with the FWO and admitted liability to the breaches of the Fair Work Act they had been accused of, so the court was solely required to determine a penalty for the 4 parties.   

Mr Keri Taiaroa and Mr Mathew Singer 

The case against Mr Taiaroa and Mr Singer was brought by the FWO for their involvement in the La La Bar Group’s failure to maintain records of hours worked by casual or irregular part-time employees and for failing to keep records of  their entitlements to loadings, allowances or penalty rates as required by the Fair Work Regulations 2009. 

In determining the penalty that would be imposed on Mr Taiaroa and Mr Singer the court highlighted that their breaches of their record keeping obligations were deliberate and had the potential to result in significant underpayments to employees (although that was not the purpose of these proceedings). 

Riley J also took exception to Mr Taiaroa and Mr Singer’s attempt at contrition, labelling it as minimalistic, and stating that it did not appear genuine but rather was an attempt to minimise the ultimate penalty they would receive. 

The FWO argued in this matter that there was a strong need for general deterrence as the Pub, Tavern and Bars industry was given a high rating for industry disputes with the FWO following a FWO Report which covered the period from July 2017 to December 2022. The report also highlighted that the industry was involved in 1,772 disputes with the FWO despite there only being 5,170 employing businesses in that period.  

In Mr Taiaroa and Mr Singer’s favour, both had admitted to their contraventions of the Fair Work Act and as such the applicable penalties were discounted. We also note that a further discount of 40% was applied to the penalties in accordance with the ‘totality principle’ which reduces penalties when there is significant overlap in the conduct that caused the contraventions. 

Ultimately Mr Taiaroa was ordered to pay a penalty of $41,368 and Mr Singer was ordered to pay $26,893 

Nicholas Accounting Management Services Pty Ltd (NAMS) and Nicholas Nicolaou

The case against NAMS and Mr Nicolaou was brought in relation to their failure to comply with a written notice to produce issued and served by the FWO. A notice to produce can be issued by the FWO and it requires a party who is served with one to produce specific documents or information that is relevant to an ongoing investigation. In this matter, the FWO had issued NAMS and Mr Nicolaou with notices to produce various documents and information in relation to their investigation into the La La Bar Group regarding underpayment of wages and record keeping obligations discussed above.  

It was NAMS argument that it did not have authority to provide documents relating to the La La Bar Group in response to the notice to produce without the approval of Mr Taiaroa. It was argued by the FWO and was ultimately accepted by the court that this authority had previously been granted in August 2019 after Mr Taiaroa instructed Mr Nicolaou to provide the documents that were in his possession to the FWO.

It was Mr Nicolaou’s argument that the documents requested by the FWO did not exist in a neat, complete set of documents. The court rejected this argument and found that Mr Nicolaou was involved in extensive communications with the FWO and was in possession of documents that would have answered the FWO’s notice to produce. The documents in question were eventually seized by the FWO during the course of an unannounced site visit to the NAMS’ office on 29 January 2020. 

It was the FWO’s argument that NAMS and Mr Nicolaou’s failure to comply with the notice to produce undermined the FWO’s ability to investigate contraventions of the Fair Work Act which resulted in a loss to the public for the extra resources required to establish those contraventions, such as the site visit on 29 January 2020 which involved multiple FWO and ATO staff. 

In determining the applicable penalty for NAMS and Mr Nicolau the court considered the need for general and specific deterrence and specifically noted that as they are still in business and Mr Nicolaou is a registered accountant, their penalty required a significant measure specific deterrence. Riley J also commented that both NAMS and Mr Nicolau should have had the basic professional competence to comply with legal requirements of the FWO. 

Ultimately NAMS was ordered to pay a penalty of $34,020 and Mr Nicolaou was personally ordered to pay $35,154 for his contraventions.

Need further help? 

If you are an employer and require assistance in complying with your record keeping obligations or responding to a notice from the Fair Work Ombudsman please contact EI Legal at: info@eilegal.com.au

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