My business is run under a company structure. Am I protected from a personal attack?
Ummm no you’re not!
In a recent decision in the Federal Court, two directors who were ‘wilfully blind’ to the fact that employees were not being paid their entitlements were found personally liable for the underpayments in the amount of $1.9M to 43 employees.
In the original proceedings, the Fair Work Ombudsman had suggested that the directors had been ‘knowingly involved’, however, after hearing the matter, the Court was not convinced that the directors were actually involved. The directors had claimed that they relied on others to undertake the day-to-day management of HR within the business, however the Court found that it was unnecessary for the directors to have personal knowledge of each employee and the amount of their entitlements in circumstances where they knew the entitlements were insufficient.
The directors said that they had every intention of paying all of the entitlements and that they had done ‘everything humanly possible’ to ensure that the payments were made. Despite the director’s good intentions and efforts to ensure that payments were made, the Court found that the directors were liable as accessories pursuant to the Fair Work Act because they were knowingly involved in the contraventions. This was because the directors knew that the wages and entitlements were payable to the employees and that the employees did not receive them.
The Court also found that the directors had ‘intentionally participated in the contravention’ by offering staff bonuses to stay on and repeatedly telling employees that ‘payment was imminent’.
In assessing penalties, the Court found that the fact that employees had previously received payments that were greater than their entitlements, the underpayments had been caused by issues with the ATO and that the employees had ultimately received all of the money they should have received was irrelevant and imposed penalties of $115,000.
If you are a director of a company no matter how big or small, you can still be held personally liable for the acts and omissions of the employees of the company.