Company directors held to be personally liable as accessories to corporate respondents’ underpayment of employees in the Federal Circuit Court of Australia

Authors: Emma Pritchard & Megan Prouatt

The Federal Circuit Court of Australia recently ruled that two company directors were personally liable as accessories to the corporate respondents’ contraventions because they were “involved”, within the meaning of section 550 of the Fair Work Act 2009 (Cth) (FW Act), in the underpayment of employees. The two directors were “involved” because, despite the fact that they relied on others to perform day to day human resources functions, they knew the employees were not being paid their wages or salaries as they should have been.

In Fair Work Ombudsman v Priority Matters Pty Ltd & Anor and Fair Work Ombudsman v Superlattice Solar Pty Ltd & Anor and Fair Work Ombudsman v Geneasys Pty Ltd (in liq) & Anor and Fair Work Ombudsman v Silverbrook & Anor and Fair Work Ombudsman v Mpowa Pty Ltd & Anor (No 4) [2019] FCCA 56, Judge Driver considered whether two individual respondents, Mr Silverbrook and Ms Lee, were personally “involved” in the corporate respondents’ underpayment of employees. At the relevant time, Mr Silverbrook was a director of each of the corporate respondents and Ms Lee was a director of one of the corporate respondents.

Judge Driver considered the level of knowledge required for an individual to be “involved” in a contravention under section 550 of the FW Act. His Honour found that it was not necessary for each individual respondent to know that his or her conduct was unlawful or constituted a contravention of the FW Act, or to know the existence or content of the relevant industrial instrument.

In determining whether Mr Silverbrook and Ms Lee were “involved” in the contraventions, Judge Driver considered, among other things, the following:

• that a corporate entity can only act through individuals and that the directors were the controlling minds of the companies;
• that Mr Silverbrook and Ms Lee continued to run the companies and attempted to source funds while declining to make the employees redundant or otherwise bring an end to their employment;
• that Mr Silverbrook and Ms Lee were aware that for a 10-month period there were a number of employees who were not receiving monthly payment in the normal course into their bank accounts for wages and entitlements as they had previously been receiving them;
• that Mr Silverbrook and Ms Lee had regular interactions with the employees, gave directions to the employees, and many of the employees reported to Mr Silverbrook; and
• that Mr Silverbrook was wilfully blind as to details of minimum wages and entitlements.

Ultimately, the Federal Circuit Court of Australia found that both Mr Silverbrook and Ms Lee were “involved”, within the meaning of section 550, in the corporate respondents’ contraventions of the FW Act. The question of penalties payable by Mr Silverbrook and Ms Lee is yet to be determined. This decision serves as a timely reminder of the potential personal liability that managers can face with contraventions to Australia’s workplace relations laws.