The Fair Work Ombudsman (‘FWO’) conducted an investigation into a cleaning business called Grouped Property Services (‘GPS’). The investigation revealed numerous failures to pay minimum entitlements and to comply with the Fair Work Act 2009 (Cth) (‘FW Act’), the Cleaning Services Award 2010 (Cth) and the Clerks Modern Award 2010 (Cth). Many of these failures were revealed as a result of 170 complaints made on behalf of employees, many of whom were from non-English speaking backgrounds.
The FWO commenced proceedings against GPS for 35 of those alleged failures. The result was Katzmann J’s recent decision in Fair Work Ombudsman v Grouped Property Services Pty Ltd [2016] FCA 1034. Her Honour’s reasoning sheds light on the circumstances in which directors and executive employees will be personally liable for contraventions of the FW Act.
Personal liability of directors and executive employees
The FWO sought orders against a director and a shareholder under s 550 of the FW Act. These orders were sought on the basis that the director and the shareholder were ‘involved’ in an unlawful adverse action because they were ‘knowingly concerned in’ it.
Katzmann J held that this required the FWO to prove that the director and the shareholder intentionally participated in the adverse action with knowledge of each of its factual elements. It was not necessary to prove that the director and the shareholder knew that those factual elements amounted to a contravention or were unlawful. It was sufficient to prove that the director and the shareholder had knowledge that the conduct which constituted the adverse action was going on.
Katzmann J also suggested said that it would not be necessary to show that the shareholder was aware of the details of each particular contravention if he was aware of a system that tended to produce or lead to contraventions.
Penalties and compensation payments
Grouped Property Services Pty Ltd has faced penalties amounting to $370,000 and is required to backpay $223,244 to 49 employees whom it exploited during the period from 2011 to 2013.
The bottom line
Those of you who have been following my LinkedIn profile know that the FWO is making increasingly frequent use of s 550 to pierce the corporate veil and hold directors liable for contravention of the FW Act.
As Katzmann J’s reasoning makes clear, directors, human resources managers and executive officers can be held liable under s 550 even if they do not know that what they are doing is illegal.
It is more important than ever for executive employees and directors to understand their obligations under the FW Act and to take a proactive approach in ensuring compliance. A failure to do so will expose the executive employees and directors to personal liability, as well as creating massive reputational and legal risks for employers.
How can JFM Law help?
If you are an employer looking to enforce a restraint of trade clause or an employee concerned about a restraint of trade clause in your employment contract, contact JFM Law on (02) 9199 8597 for a no obligation chat. If you would rather get in contact through email, send your question through or by email at wehelp@jfmlaw.com.au
The information contained in this post is current at the date of editing – 28 November 2023.
