Knowledge of Underpayment Enough for Accessorial Liability

21 July 2017

Accountancy firm, Ezy Accounting 123 Pty Ltd (“Ezy Accounting“) has recently been found accessorily liable for restaurant operator Blue Impression’s underpayments.

In the decision, the Federal Circuit Court held that Ezy Accounting had intentionally failed to maintain current award rates of pay in its payroll system, despite only providing outsourced payroll duties.

Ezy Accounting claimed that it was simply a service provider and that its role was limited to entering data provided by Blue Impression. Accordingly, it denied any liability.

Federal Circuit Court Judge John O’Sullivan held that Ezy Accounting’s principal had been aware of the underpayments, evidenced by emails to industrial relations advisor Employsure in 2014 about a Taiwanese working holiday visa-holder he suspected was being underpaid.

Judge O’Sullivan stated that Ezy Accounting and its principal “had at their fingertips all the necessary information that confirmed the failure to meet the award obligations by Blue Impression and nonetheless continued with the maintenance of its system with the inevitable result that the award breaches occurred”.

Judge O’Sullivan criticised the “blasé” and “deliberately obtuse” evidence provided by the principal in advancing the position that he “wasn’t cognisant” of issues he had previously assisted the employer with, or acted on its behalf to resolve.

Although Ezy Accounting had framed its involvement as mere ‘data entry’, the firm’s awareness that the rates being paid were incorrect was enough to justify a finding of accessorial liability.

This decision should come as a harsh reminder to employers who provide ancillary or support-based services to third parties – in limited situations such as this, knowledge of a breach of any relevant legislation may be enough to prompt a claim of accessorial liability.