An HR professional was found personally liable for illegal decisions the business made. This is how you can avoid the same fate.

Picture this scenario. A Human Resources manager – let’s call her Sarah – works for a restaurant business. Her duties include processing payroll and arranging for the payment of wages, arranging for the advertisement of staff positions, and responding to employee queries.

Sarah diligently follows the directions of her boss, including in relation to the employees’ rates of pay. In order to work out the employees’ weekly wages, Sarah plugs their hours into a spreadsheet where the wages data has already been pre-filled.

One day, Sarah realises that the wages being paid to the staff are below the award rates. Concerned, she speaks with her boss and tells him, “You need to pay the proper amount pursuant to the award. You are legally required to do so”.

Sarah’s boss rebuffs her advice, and says “I will talk no more about this. You will do the payroll as I have told you”.

Sarah is worried about the underpayments, but feels as though she has no power to do anything about it. She cannot pay the employees the correct rate of pay because she does not have the authority to change the rates of pay, or have access to the Company bank account. Sarah also thinks she could lose her job if she speaks up again. She asks herself, “What more can I do?“

To resign or not to resign?

The above scenario is based on a recent case about a Human Resources manager, who according to the Federal Court, ultimately made the wrong call. Sarah decided that she couldn’t do anything further about the underpayments and let the issue slide. When the Fair Work Ombudsman came calling following an employee complaint, Sarah followed her boss’s directions to help create false pay records.    

When the matter ended up in Court, Sarah was found culpable as an accessory to breaches of the Fair Work Act, and personally fined $21,760.

The Court accepted that Sarah was in a different position to her boss and did not have the same level of control or culpability. However, the Court did not want to be seen as endorsing the course of action that Sarah took in raising contraventions, being rebuffed, and then continuing to participate in the wrongdoing for a considerable period of time (e.g. 18 months) before being detected by the regulator. The Court said:

“There is nothing wrong with sending the message that an employee should indeed resign if that is the only alternative to continuing to participate knowingly in illegal activity, ideally coupled with reporting the conduct, in a case such as this, to the FWO.”  

So how can HR managers avoid liability?

Regular workplace health checks

Knowing your legal obligations and taking positive, proactive steps to reduce your risk is a good strategy to protect your business, and avoid the firing line. Regular workplace “health checks” on minimum legislative and award/agreement requirements will help you to ensure that you’re meeting your obligations.

Act fast, keep a record, and seek advice

If you do suspect something is wrong, act fast and keep a record of the action you take. If the issue is complicated, seek advice. Among other things, consider whether legal professional privilege is a relevant consideration before taking further steps.

Escalate the matter — don’t let a breach continue once detected

Keep in mind that simply notifying a senior manager about a known or suspected breach may not be enough to avoid liability under the accessorial liability provisions of the Fair Work Act. If, after notifying a senior manager, breaches of the Fair Work Act or industrial agreements persist, consider escalating the matter internally, externally, and potentially resigning.

Report the Fair Work Ombudsman

Sarah’s case suggests that it is appropriate for HR managers (and other business advisers) to report persistent and ongoing breaches to the Fair Work Ombudsman in order to discharge their statutory duty to ensure that the Fair Work Act, awards, and industrial agreements are not contravened.

Enjoy the peace of mind that AHRI ProCover professional indemnity insurance brings, by becoming an AHRI member.

Aaron Goonrey is a Partner and Sara Wescott is a Lawyer in Lander & Rogers’ Workplace Relations & Safety practice. Aaron can be contacted at agoonrey@landers.com.au