Legal Update

Senior Employees Personally Liable for Involvement in $3.89 Million Underpayment Penalty Case

Authors: Greg Robertson, Liz Baradan and Matthew Limanto

In a recent penalty decision arising from a FWO prosecution, a prominent international restaurant chain has been fined more than $3.89 million for underpayment and breach of payroll obligations. The General Manager and HR Manager were also both ordered to pay significant penalties for their roles in the payroll scam. 

The Initial Liability Decision

The Fair Work Ombudsman, Australia’s national workplace relations regulator, had commenced action in the Federal Court of Australia against two related companies operating restaurants in Sydney and Melbourne under the name “Din Tai Fung” (‘DTF’) for underpaying their employees and keeping false or misleading records with the apparent object of concealing those underpayments.

Two senior employees, Ms Handoko, the General Manager of the DTF Group and DTF (World Square), and Ms Parmenas, the HR Coordinator or Manager for the DTF Group, were also prosecuted for being involved in the contraventions. The Ombudsman argued that the two senior employees were liable as accessories as they aided, abetted or procured the contraventions or were knowingly concerned in, or party to, them.

In Fair Work Ombudsman v DTF World Square Pty Ltd (in liq) (No 3) [2023] FCA 201, Justice Katzmann held that the corporate respondents were liable for the contraventions of the Fair Work Act 2009 (Cth) and the Fair Work Regulations 2009 (Cth) and both senior employees were also liable as they knew or were knowingly concerned in the making and keeping of false or misleading payslips and records.

It was held that the HR manager was “at least knowingly concerned” in DTF’s multiple contraventions as she deliberately underpaid 17 workers by about $175,000 between late 2017 and mid-2018. Justice Katzmann criticised the deliberate nature of the contraventions, emphasising the seriousness of exploiting vulnerable migrant workers on temporary visas.

In determining whether the two senior employees were liable as accessories, Justice Katzmann considered evidence from a former payroll officer who stated that the HR manager told him to make “both accurate and inaccurate records” of hours worked and amounts paid to workers and to record that full-time employees worked 76 hours a fortnight at a set salary, regardless of the number of hours they actually worked. The former payroll officer also stated that the HR manager told him to make it look as though casual employees worked “less than the hours they actually worked at the hourly rates set out in the master payroll” and to ensure pay slips did not include cash payments.

Her Honour also considered evidence that DTF’s HR manager and its general manager told employees on temporary 457 visas to work at least 55 hours otherwise any hours not worked would be deducted from their annual leave entitlements.

Penalties Imposed  

In April 2024, in the penalty judgment, Justice Katzmann fined the two corporate respondents, which are part of the DTF Group, more than $3.89 million for the unlawful conduct, describing it as “extremely serious”, constituting “not merely deliberate wrongdoing”. Her Honour held that the payroll scam involved conduct that was “deceitful and unscrupulous” and “involved a calculated scheme to rob employees of their hard-earned wages and deceive the authorities”.

The DTF General Manager and the HR manager were both ordered to pay significant penalties for their roles in the payroll scam. Justice Katzmann held that the HR manager “did not simply act as a conduit”, but instructed and trained a colleague in a payroll scam.

Those senior employees had raised as a defence that they were not involved in setting up the system, were “mere onlookers” or “a cog in the wheel” and were answerable to Mr Harjanto, a director of DTF. The Court did not accept this excuse, stating at [274]:

The fact that Ms Handoko and Ms Parmenas were answerable to Mr Harjanto and participated in a system he may have established does not mean that they were not involved in the Employer’s contraventions. Neither of them was a “mere onlooker” or “a cog in the wheel”. To the extent that they were complicit in the continuing operation of the payroll system, they assisted in bringing about the contraventions and/or were knowingly concerned in or party to those contraventions.

Both senior employees were ordered to pay penalties, with Mrs Handoko, General Manager, ordered to pay $92,232 and Mrs Parmenas, HR Manager, ordered to pay $105,084.

Accessorial Liability

Justice Katzmann considered the following principles, amongst others, when determining whether the two senior employees were liable as accessories to the contraventions:

• An alleged accessory must have intentionally aided, abetted, counselled or procured the principal contravener and, in order to form the necessary intent, that person must have knowledge of the essential matters that make up the contravention.
• It is not necessary that the person knows that the essential matters or elements constitute a contravention.
• Mere knowledge is not enough. To be knowingly concerned in, or party to, a contravention, the alleged accessories must also have engaged in conduct that implicates or involves them in the contravention.
• It is not necessary that the alleged accessory physically did anything to bring about the contravention. It is sufficient if that person, by what they said and agreed to do, or omitted to say or do, became associated with, and in that way involved in, the conduct constituting the contravention.
• Where an alleged accessory is aware of a system producing certain outcomes that constitute contraventions, the person need not know the details of each of those outcomes in order to have the requisite knowledge. Thus, a person who knows that an employee worked on weekends but does not know which weekends or the number of hours worked can be knowingly concerned in the employer’s failure to pay weekend penalty rates.
• To be a knowing participant in the contravention that person need not have participated in all the essential elements of the contravention.

Key Action Points for Human Resources and Senior Employees

Employees in senior and managerial positions who have responsibilities in relation to payroll processes or other employee entitlements should:

• ensure that employees are paid in accordance with the terms of the correct awards, which prescribe minimum rates of pay and conditions;
• ensure that employees are provided with pay slips, which contained the information prescribed by the Fair Work Regulations 2009 (Cth);
• maintain proper and thorough management systems for employee records.
• not participate in the creation of false and misleading records such as false pay slips, timesheets, payroll journals and/or pay run summaries;
• not assume that they will not be liable just because they did not cause the wrongdoing. Senior employees can still be implicated without physically doing anything to bring about a contravention; and
• not ignore any wrongdoings or contraventions of workplace laws as a court may infer actual knowledge where an accessory is wilfully blind, has deliberately shut their eyes to what was going on, or has deliberately abstained from inquiring about wrongdoings or contraventions.

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