Why Ignoring the Unlawful Conduct of Clients is a Bad Idea

stevekugelIn the Media

Advisors who ignore unlawful conduct of clients may be exposed to penalties.

In a recent case, Fair Work Ombudsman v Blue Impression Pty Ltd & Ors [2017] FCCA 810, it was found that the external accountant knew of, but ignored, the underpayment of wages by their client. Consequently, the advisor was found to be an accessory to breaches of Section 550 of the Fair Work Act and now faces a potential liability of $378,000.

The problem involved a Fair Work audit of a restaurant business that found significant underpayments to employees.

The restaurant sought assistance from its accountant who calculated the correct pay rates, but the client did not update their systems with the correct rates.

A subsequent audit of the same business found the restaurant had not rectified the situation and had actually made further underpayments of wages, loadings, penalty rates, and allowances to its international workers.

As a result, Fair Work commenced legal action against the restaurant and its accountant on the basis that any third party involved in a contravention of the Fair Work Act, can also be taken to have breached the Act.

Naturally, the accountant claimed its role was that of a service provider processing payments in accordance with instructions and further, that it had no knowledge of employee duties or award rates that should be applied.

However, the Court determined that the accountant, with knowledge of the breach from the earlier audit, chose to ignore the underpayment and this was sufficient to be found an accessory to breaches of section 550. Doing nothing when you have knowledge of a client’s unlawful conduct is not a defence.