Accessorial liability

Did you know your Australian business can be liable for the conduct of your labour hire provider?

Imagine you enter negotiations with a labour hire provider to supply staff to your company. You receive a quote and the hourly rate is so competitive, you wonder how the provider could afford to pay its employees at least the award wage rate.

Despite your concern, you sign a contract and start engaging the services of the labour hire provider. Six months later, you learn that one of labour hire provider’s employees who has been supplied to you has made a complaint of underpayment to the Fair Work Ombudsman (FWO).

Following an investigation by the Fair Work Ombudsman (FWO), it turns out that the employee has been substantially underpaid in breach of the Fair Work Act 2009 (Cth) (FW Act).

Should you be worried that the FWO could prosecute you and your business for being involved in the contravention of the FW Act by the labour hire provider?

The answer is yes and amendments to the FW Act to increase fines for serious contraventions could mean it’s time to rethink who your labour hire provider is.

What is accessorial liability?

It’s well known that companies and individuals can be prosecuted and fined if they contravene the FW Act by underpaying employees.

But did you know that companies and individuals can also be prosecuted and fined because of their involvement in another person’s contravention?

This kind of liability – liability for the conduct of others – is commonly called accessorial liability and for some time, the FWO has been keenly pursuing companies and even individuals for their involvement in contraventions by others breaching industrial laws.

2017’s amendments of the FW Act to protect workers included a new category of contravention called a ‘serious contravention’ (having knowledge of the contravention and systematic conduct), increasing the maximum financial penalty from $63,000 to $630,000 for companies and from $12,600 to $63,000 for individuals.

What you need to know about accessorial liability

Under the FW Act, you or your business could be prosecuted for being ‘involved in’ a contravention of the FW Act by another company or person. A common example of a contravention is underpayment of wages.

Under section 550(2) of the FW Act, a company or a person will be ‘involved in’ a contravention if it:
(a) aids, abets, counsels or procures the contravention;
(b) induces the contravention whether by promises or threats;
(c) is in any way, by act or omission, directly or indirectly, knowingly concerned in, or party to the contravention; or
(d) conspires with others to affect the contravention.

If a company or person is ‘involved in’ a contravention, they are taken to have contravened the FW Act themselves.

The FWO relies on this provision to prosecute individuals such as directors, executives, human resource advisors and recruiters for breaches of the FW Act by the companies they represent.

In addition, the FWO has more recently started to prosecute companies and individuals who are strangers to the employment relationship, on the basis they were ‘involved in’ another person’s contravention.

This could include being involved in a contravention by a labour hire provider you engage. For example, if you have direct knowledge that they are underpaying their employees and turn a blind eye to it.

Protect yourself

The FWO’s focus on the prosecution of accessories, along with its increased powers and tougher penalties, mean that companies (whether they directly employ staff or not) need to understand their obligations under the FW Act.

In the labour hire context, companies should only engage with reputable labour hire providers to minimise the risk of being held liable for a provider’s unlawful practices.

Holding multi-jurisdictional licences and labour hire agreements, Easy Payroll Global is a direct employer of record for workforces around the world. Connect with us today to discuss how we can provide a compliant staffing solution for your business.

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