19 August 2013
Kathryn Dent, Director
On a fine winter’s morning in June 2013 set against the iconic Sydney Harbour backdrop, some of PCS’ valued clients and supporters attended our latest Breakfast Briefing, interested to learn more about the personal risks inherent in managing people.
PCS Directors Kathryn Dent and Nichola Constant shared the stage and exchanged their experiences and extrapolated workplace scenarios where there was, or could be, exposure to personal as well as organisational liability. The practical examples given and experiences recalled highlighted to the attendees the need for vigilance in managing people not only to protect their organisations from legal action, but also themselves, and how they might effectively achieve this.
Section 550 of the Fair Work Act 2009 (Cth)
An exploration of this section was a recurring theme throughout the morning given that it imposes liability on individuals where they are “involved in” breaches of the Fair Work Act 2009 (Cth) (the “FW Act”). Both Directors explained throughout the morning that the phrase “involved in” was broad and covered the acts of aiding, abetting, counselling, procuring, inducing, directly or indirectly (being) knowingly concerned in or party to, or conspiring. As a consequence, members of the audience were encouraged, in order to avoid a charge under section 550, to take such action as required (given the circumstances of the issue) to demonstrate no involvement in any breach or better still, to show attempts at compliance with the FW Act.
This was logically the rst area reviewed during the Briefing given that prior to the commencement of any working relationship employers (and their internal advisors such as HR Managers) have to decide whether to engage or employ a worker, that is, decide whether the worker is being contracted as an independent contractor or an employee. Kathryn highlighted that sections 357-359 of the FW Act were an incentive to ensure correct characterisation as these sections make it an offence to engage in “sham contracting”. Also, because of the operation of section 550, individuals who are part of that decision-making process may be personally liable, as was demonstrated in several cases discussed including Fair Work Building Inspectorate v Supernova Contractors Pty Ltd & Anor; Australian Building & Construction Commissioner v Inner Strength Steel Fixing Pty Ltd ).1
Similar provisions imposing personal liability could arise in this area if it was determined that the scheme was for tax avoidance purposes.
In addition to the defence of “not being involved” in the offence, speci cally with sham contracting, an individual who could demonstrate other relevant defences, including that they did not know or were not reckless to the character of the contract, might escape liability, such as occurred in Fenwick v World of Maths.2 Establishing this defence would require the individual to understand the indicia of employees and independent contractors and to characterise and enter into the relationship on this basis.
Recruitment and Selection
Concurrent with the characterisation process is the recruitment and selection process of the individual who will be physically performing the work. That of itself leads to another area of exposure to personal liability, with Nichola traversing the laws that govern what employers, and individuals acting on their behalf (as employees or agents such as recruiters) should and should not say to these workers, including representations which could be the subject of misleading and deceptive conduct allegations under the Competition and Consumer Act 2010 (Cth).
Pay Records and Benefits
If an organisation, following the above process, decided to employ an employee, as opposed to an independent contractor, then the employer is obliged to issue payslips, keep employment records and comply with a minimum set of terms and conditions derived from a modern award, an enterprise agreement, or the National Employment Standards all of which are governed by the FW Act (the “FW Act minima”), and other legislation, including long service leave obligations under State and Territory legislation. Kathryn indicated that a breach of any of the FW Act minima could trigger a civil penalty and by virtue of section 550, liability would extend to any involvement by an individual in these breaches. Common examples given of these breaches were underpayment of award rates of pay and penalty rates and failure to issue payslips and maintain employee records as was demonstrated in Fair Work Ombudsman v Nicole Patrice Dawe.3
While privacy obligations were discussed, given the exemption for “employee records”, the extent to which an individual within an organisation dealing with workplace matters could be held liable for a breach of the Privacy Act 1988 (Cth) was not clear.
Not only does the breach of an enterprise agreement potentially implicate individuals but so may the process of entering into one. Nichola highlighted the various obligations required during the process of making an enterprise agreement and where individuals may be liable.
The discussion then turned to a very topical issue, that of “workplace culture” and more speci cally in the context of individual liability, behaviours that negatively impact on it, for example, harassment, discrimination and bullying. Kathryn reminded the audience that the laws prohibiting discrimination apply not only during recruitment and selection but throughout the relationship and on termination.
Kathryn discussed the provisions within the Anti Discrimination Act 1977 (NSW) (the “AD Act”) that make it unlawful for a person to cause, instruct, induce, aid or permit another person to do an act that is unlawful by reason of a provision of the AD Act.
Additionally the AD Act and the Sex Discrimination Act 1984 (Cth), both directly impose personal liability by making it unlawful for individuals (for example an employee, a contract worker or a “workplace participant”) to engage in sexual harassment and two cases were discussed where individuals were held liable.4
The acts of inciting, assisting or promoting were highlighted as giving rise to individual liability under the Racial Discrimination Act 1975 (Cth) and the Disability Discrimination Act 1992 (Cth) as was any discriminatory conduct under section 550 through a breach of section 351 (which is in the general protections provisions of the FW Act).
At the time of the Briefing, the Fair Work Amendment Act 2013 (the “FW Amendment Act”), had not yet been passed by Parliament but was discussed and given it is now law, the reality (as foreshadowed) is that after 1 January 2014, if an anti-bullying order is made by the Fair Work Commission a breach of it may implicate individuals if they have the requisite degree of “involvement” to attract section 550.
Bullying can also result in prosecutions under work health and safety laws. These laws themselves impose obligations on organisations and all individuals from Board level to “worker” so there is plenty of scope for an individual to be prosecuted, at some level, where the work health and safety risk emanates from bullying behaviour. This occurred in Inspector Gregory Maddaford v Graham Gerard Coleman & Anor.5
Work Health and Safety
Nichola then proceeded to highlight more generally individuals’ liabilities for work health and safety. Individuals under the Work Health and Safety Act 2011 (NSW) ranges from “officers” who must exercise “due diligence” to “workers” who must exercise “reasonable care”. The concept of personal liability in this area is not new.
In addition to discrimination and adverse action considerations, individuals’ liabilities in a termination situation could also arise in relation to the giving of notice under the National Employment Standards (or the applicable industrial instrument) and also in the payments that must be made in relation to accrued annual leave, and if applicable, redundancy. Any involvement in relation to these entitlements could trigger section 550 but Kathryn described how an individual’s lack of involvement (for which evidence must be adduced) would exonerate them as occurred in Guirguis v Ten Twelve Pty Ltd & Anor.6
Restraints of Trade
While not specifically an area in which individuals were likely to be prosecuted, Nichola discussed this “last stage” of the work relationship to bring the Briefing full circle as the enforcement of any contractual restraints in relation to activity and relationships post-termination depend on the reasonableness of the restraint which was determined at the beginning of the relationship. It was a timely reminder to individuals that such clauses being held to be unenforceable by virtue of being uncertain or unreasonable whilst not rendering them liable for prosecution could leave them open to criticism if they did not seek advice and/or properly consider and draft such a clause.
The journey through the work relationship demonstrated that at each significant step an individual’s actions, be it in characterising a worker, hiring them, being responsible for their terms and conditions including environment and payment or terminating their employment, could result in that individual being prosecuted for various breaches, usually where the organisation was also liable. As a result of drawing these matters to our guests’ attention, PCS trusts that its clients and supporters are now armed having been forewarned.
-  FMCA 935;  FCA 499.
-  FMCA 131.
-  FMCA 191.
- Lee v Smith & Ors (No.2) (2007) EOC 93-465; Kraus v Menzie  FCA FC 144.
- (2005) EOC 93-366.
-  FMCA 307.