Wage increases less than 2 months away – don’t be caught out and always protect your Capital!
Accountant found to be an accessory for “wilful blindness” towards underpaid employees
In a precedent-setting decision by the Federal Circuit Court, an accountancy firm has been found accessorily liable for the underpayments of the employees of one of its clients.
Judge O’Sullivan found that Ezy Accounting 123 Pty Ltd (Ezy Accounting) “deliberately shut its eyes” in respect to the underpayments by its client, a fast food chain, and therefore was accessorily liable. Ezy Accounting is now awaiting the outcome of a penalty hearing.
For accountancy firms, this case demonstrates that it is unacceptable to play a passive role or ‘turn a blind eye’ to monitoring compliance with minimum wages and entitlements.
Background
Ezy Accounting provided bookkeeping and payroll services for its client, a Japanese fast food chain, Blue Impression Pty Ltd (Blue Impression). Ezy Accounting was run by Mr Eric Lau and his Wife Lina Hii, both certified accountants.
The Fair Work Ombudsman (FWO) commenced proceedings against Blue Impression and one of its managers, after receiving an underpayment complaint from an employee on a temporary working holiday visa. Ezy Accounting was also named as a respondent in the proceedings. The FWO alleged Ezy Accounting was knowingly involved in the underpayments of its client.
Blue Impression and its manager made full admissions in respect to the underpayments, however, Ezy Accounting denied its involvement.
The allegations against Ezy Accounting
The FWO alleged Ezy Accounting was involved in the underpayments made by Blue Impression and therefore, should be treated as having itself also contravened those provisions, under the accessorial liability provisions contained in section 550 of the Fair Work Act 2009 (the Act).
Ezy Accounting’s defence
Ezy Accounting denied it had such knowledge. In its defence, it claimed it only provided bookkeeping services and processed its client’s payroll, based on excel spreadsheets provided to it by Blue Impression which contained the name, hours and total amount of pay to be paid to the employees of its client. In evidence Mr Lau recounted “we don’t question the pay rate … we don’t raise questions. We just process what we are given.”
Relevantly, however, in 2014 Ezy Accounting also assisted Blue Impression with an FWO audit of underpayments at one of Blue Impression’s other restaurants.
Ezy Accounting’s case was that it could not be an accessory to the underpayments, as it did not have knowledge of the essential elements of the contraventions by Blue Impression.
Findings against Ezy Accounting
Judge O’Sullivan held that Ezy Accounting “deliberately shut its eyes” in respect to the underpayments and accordingly found Ezy Accounting accessorily liable for the underpayments by Blue Impression.
In his reasoning, Judge O’Sullivan commented that the evidence of not only Mr Lau, but also his wife, left the “clear impression” that their evidence was “tailored” to suit Ezy Accounting’s business interests and minimise their knowledge and involvement in the contraventions.
Judge O’Sullivan also commented that Mr Lau’s conduct, including not claiming to have seen documentation associated with the 2014 audit by Ezy Accounting, amounted to “wilful blindness.”
Ezy Accounting is now awaiting the outcome of a penalty hearing.
Lessons to be learned
With the annual wage increase only two months away, this decision serves as a timely reminder for employers to ensure wages paid to employees are compliant with the applicable industrial award or minimum wage. Of course, any accountants that are now asked to assist in this process should be particularly vigilant.
Pat Mannix, Partner, Paris Financial
Follow me on Twitter @mannix_pat
Image courtesy of Sira Anamwong at FreeDigitalPhotos.net