If an HR professional is knowingly a party to a breach of labour laws, even in a consultancy role, they can now be held personally liable for that breach. Here’s what you need to know.
When Fair Work Ombudsman Natalie James spoke at a recent gathering of HR professionals she mentioned that, in December last year, her office had initiated proceedings against a third-party accountancy firm.
The business, her office alleges, processed wage payments for staff at a Melbourne fast-food restaurant and those payments were well below award rate.
“The accounting firm now faces penalties of up to $51,000 per breach,” James told the AHRI NSW Employee Relations/Industrial Relations Network Forum. “Our view is that accountants’ professional responsibility demands that they cannot close their eyes to breaches of the law by their clients.”
This view, from the office of the Fair Work Ombudsman, is not exclusive to accounting firms. James went on to describe another case that has been filed against the operators of a group of Chinese restaurants in which the director, the restaurant manager and the HR manager have been named as accessories. “We say they were involved in the underpayment of hospitality staff employed by the company,” she said.
Lifting the corporate veil
The message James was conveying loud and clear was that the corporate veil will no longer protect individuals from liability if it can be proven that they were involved in some sort of wrongdoing. Her office is particularly concerned to stamp out the exploitation of the vulnerable, such as immigrants, the unskilled and younger workers.
No matter how far down the chain an HR professional happens to be, even if you’re simply consulting to a business in which a labour law is being broken, it is quite possible that you could be personally prosecuted. So what exactly does this mean for the HR profession?
John Alexander, convenor of AHRI’s NSW ER/IR Network Group and head of human resources for Caritas Australia, says the presentation by James reaffirmed to him the importance of HR practitioners staying ahead of the knowledge curve in all areas of their practice.
“AHRI itself is trying to support an elevated capability and higher levels of knowledge by practitioners. There is a strong message that you really do need to stay on top of your field.”
Neil Napper, partner at Lander & Rogers and head of the company’s Sydney team of workplace relations and safety lawyers, who was also at the forum, says the key message for him was that the ombudsman is very focused on accessorial liability as a means to ensure that labour laws are complied with.
“It was a major message,” Napper says. “It has very important implications not only for human resources managers, but for all individuals involved in advising businesses about labour law matters.”
The accessorial liability that James has been discussing with various industry and professional groups means it’s not just directors of companies who could potentially be prosecuted when a breach is identified – whether that company has been shut down or not.
Anybody in the organisation, and individuals paid by the business as advisers, can also be named as an accessory and fined.
“You can be penalised and issued with a civil penalty of up to $10,800 dollars per breach,” Napper says.
You might also be required to pay the unpaid wages, if that was the nature of the breach. “That payment could potentially dwarf the civil penalties that are imposed,” Napper says.
“So you’ve got these significant financial penalties, but beyond that you have massive reputational damage and loss to your professional standing by being publicly named, which is another feature of the Ombudsman’s activities. Naming and shaming is very much a part of this exercise and it is one that, in many ways, has the most impact.”
“One might suggest,” James said, “if you were wanting to keep your organisation out of the courts and the newspapers, that there has never been a better time to ensure you are giving holistic and sound advice about compliance with workplace laws.”
Should the HR profession feel some shame in the fact that the Ombudsman’s office is having to announce a strategy to police the actions of individuals in HR? Is it an indication that things are going wrong and that stricter regulation is required?
Alexander thinks not. “I think it is just about expanding the knowledge of HR people,” he says. “The intent was not to say, ‘You are all bad people and we are sending our inspectors out.’ The Ombudsman’s office has simply identified issues that they want to ensure we are aware of, because they don’t want us to get caught up in some sort of problem. If you are unsure, they are saying, speak to us or speak to somebody else. Make sure you’re not at risk. I think that was the point.”
Who then does an HR specialist approach for advice if they feel the business they work for, or the client to whom they consult, is behaving in a questionable manner?
Alexander suggests calling AHRI’s assistance line for general advice. “Organisations will often belong to an employer association, which offers expert advice in this area, or they may seek their own legal advice,” he says. “Finally, the Ombudsman made it quite clear that her office is also happy to speak with anybody concerned about the behaviour of a business.”
“Above all,” the Ombudsman stressed, “you must explain the rules to your clients, make it clear when they are in danger of breaking them and not become involved in breaches of the law yourself. In the case of workplace laws, if you are involved in facilitating a breach of the law, you are personally at risk of being found to be an accessory.”