By Kate Boyd -
Snapshot
- Section 545 of the Fair Work Act allows a court to make orders that an accessory, not just an employer, is personally liable to back-pay employee entitlements.
- Making accessories personally liable for their corporate entity’s obligations under the Act has the effect of piercing the corporate veil.
- The recent decision of the FCCA in FWO v Step Ahead demonstrates the broad powers available to courts under s 545 of the Act and provides guidance as to the factors courts will consider in making compensation orders against accessories.
The recent case of FWO v Step Ahead Security Services Pty Ltd & Anor [2016] FCCA 1482 (‘FWO v Step Ahead’) has confirmed that under the Fair Work Act 2009 (Cth) (‘FW Act’), a court can make orders to the effect that accessories (such as directors) are personally liable to back-pay underpaid employees their workplace entitlements.
This is a significant development in respect of Fair Work Ombudsman matters. Previously, only employers (usually corporate entities) were ordered to rectify employee underpayments, while accessories were only liable to pay civil penalties.
As a result of this development in the law, accessories, such as directors, should be aware that:
- the corporate veil can be pierced so that they become personally liable to back-pay employees, as well as to pay civil penalties;
- winding-up an employing entity will not mean that back-payments do not need to be rectified. It will only make it more likely that the accessory involved in the underpayments will become personally liable to rectify the payment;
- personal liability to rectify underpayments may result in an accessory being liable to pay a significant amount. Frequently, the amount required to rectify any underpayments is higher than the maximum amount of the civil penalties under the FW Act.
