Expert Advice

Parlous attention to payroll procures penalty

B2B Editor15 May 2017

Parlous attention to payroll procures penalty

Airport lounges, once a haven of the elite and well-heeled travellers, are now most often the province of business types. So, whilst awaiting the departure of a flight recently and patronising such an establishment, I happened across a copy of that revered publication, The Australian Financial Review, open at an article headed “Accountancy firms liable for underpayments“. As an accountant and liquidator, I was naturally intrigued.

What followed in that article was a brief analysis of a recently decided Federal Circuit Court case1 in which an accounting/bookkeeping firm was found liable for being ‘involved’ in a contravention of the Fair Work Act 2009 (FWA). It’s offence? Wilfully turning a blind eye to the failings of its client to properly pay the wages and entitlements of the client’s employees, and thus falling foul of the ‘involvement’ provision of section 550.

Clearly the journalist was not understating the position to call the decision ‘precedent-setting’, if only perhaps for want of a higher jurisdiction.

However, the judgement immediately started me thinking about its application in all matters winding up. For those unfamiliar, section 550 of the FWA is a direct lift of section 79 of the Corporations Act 2001 (CA), which itself sets out the preconditions for a person to be considered ‘involved’ in a particular breach of that Act. One might well imagine circumstances not dissimilar to those that befell the hapless accounting firm, in which an accounting firm for a client that enters liquidation knew, or could reasonably be expected to be aware of, the non-payment of employee entitlements by that client.

The relevant entitlement in question in a winding up context is superannuation which, under the CA, ranks equally with wages in a liquidation (and so presumably attracts similar importance), yet remains alo of from coverage under any form of government compensation scheme. Would this FWA decision perhaps apply under the CA, in assessing the culpability of the accountants of insolvent companies that had neglected to pay superannuation? If so, what might that mean for the profession at large, especially those accountants that work to a fee?

The jury, as they say, is ‘out’ (or perhaps not?). What appears probable is that from the ashes of this decision will arise a line of argument that focusses interest on those who would act as advisors to insolvent clients, where they know of the insolvent’s misdeeds. Pay attention or pay the price seems the message.

1 Fair Work Ombudsman v Blue Impression Pty Ltd & Ors [2017] FCCA 810

Tony Lane is a Registered Liquidator at Vincents
For more information, contact Vincents on (02) 6274 3402

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