Personal liability in the workplace: Should you be afraid?

Editors Note: This is a guest post written by Edward Mallett, Managing Director of Employsure. His opinions are his own.

I don’t want to be a scaremonger, but did you know that directors can be held personally liable for breaches of the Fair Work Act 2009?

Perhaps more worryingly, the personal liability provisions are so broad you need not even be a director to trigger them. Staff could also be personally liable for contraventions, as could external advisers. This startling provision is tucked away towards the end of the Fair Work Act and, it is fair to say, has not been well publicised.

The relevant section provides that a person “involved in” the contravention of certain sections of the Fair Work Act is taken to have personally contravened that provision. The definition of what amounts to being “involved in” a contravention is then so broad that any person who has offered their opinion on how to comply with the Fair Work Act is then personally liable.

Here are some examples of the consequences of the provision. If an HR manager provided their opinion to a managing director on how an award should be interpreted and that view was then discussed and approved at board level, then every single person in that chain of events could be found personally liable if the view turned out to be wrong.

Even more simply, if an employee asked their boss or manager what their leave entitlement under the National Employment Standards was and the manager responded incorrectly, s/he could then be held personally liable for that error.

This is amazing when you think about it. It completely circumvents the contractual relationship between an employer and employee, meaning that the buck does not stop with the employer when something goes wrong.

The exposure is not hypothetical. In a recent case, an HR manager was found personally liable for a sham contracting arrangement at work. More usually, directors find themselves in the firing line for penalties when their companies have been wound up and a claim is made under the Fair Work Act.

All of this comes against a background of a piece of legislation that is so complex that even the Fair Work Ombudsman, who is responsible for enforcing the provisions of the Fair Work Act, is failing to accurately interpret the provisions. It was recently exposed that the Fair Work Ombudsman has been providing incorrect pay rates to employers, which led to them underpaying staff. Notably, the Fair Work Ombudsman was not found to be personally liable for this advice.

 

Edward Mallett is a specialist employment law barrister, and Managing Director of Employsure. Employsure is a total risk management solution for employers, protecting them against workplace relations issues such as unfair dismissal, discrimination, breach of contract and harassment in the workplace – all for a fixed annual fee. Follow them on twitter.

 

About Michael Overell

Cofounder and CEO at RecruitLoop. Previously with McKinsey. Passionate about startups, health and technology. Surf when I can; ride a bike most days. Follow me @mboverell.