Employment Law Update: Fair Work Ombudsman v J.D. Chapen Nominees Pty Ltd (in liq) [2024] FedCFamC2G 85

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A recent employment law matter in the Federal Circuit and Family Court saw the Fair Work Ombudsman rely on the accessorial liability provisions of the Fair Work Act 2009 (Cth) to bring claims against the individuals (a former director, general manager and accountant) as well as the employing entity involved in contraventions of the Act.

Background to the matter

The matter involved the determination of penalties for those involved in breaches of the Act by a group of companies referred to in Riley J’s decision as the “La La entities”. The La La entities underwent surprise audits in August 2019 after allegations that they were underpaying workers, denying workplace entitlements and paying workers cash-in-hand.

Prior to proceedings being commenced, the La La entities all entered liquidation and so no penalties were sought against any of the companies. Instead, the Ombudsman sought penalties directly against individuals involved in the contraventions, being a former director/shareholder of a number of La La entity companies (Mr Taiaroa), a former general manager of a number of La La entity companies (Mr Sanger), an accounting firm which provided accounting services to the La La entities (Nicholas Accounting Managers Services Pty Ltd) and the sole director of the accounting firm (Mr Nicolaou).

During the proceedings all parties reached separate agreements with the Ombudsman and admitted liability to breaches of the Act, so Riley J’s decision was limited to the applicable penalties.

Section 550 of the Fair Work Act

The Ombudsman relied on section 550 of the Fair Work Act, which allows for it to pursue anyone directly involved in contraventions of the Act. Being “involved in” a contravention occurs if a person has:

  1. aided, abetted, counselled or procured the contravention; or
  2. induced the contravention whether by threats or promises or otherwise; or
  3. been in any way, by act or omission, directly or indirectly, knowingly concerned in or party to the contravention; or
  4. has conspired with others to effect the contravention.

As was the case in this matter, these provisions are often used when the employing entity has gone into liquidation to allow the Ombudsman to pursue individuals (although the provisions are not limited to such a scenario).

Penalties

Mr Taiaroa and Mr Sanger both admitted to a failure to maintain records of hours worked by casual or irregular part-time employees and for failing to keep records of their entitlements to loadings, allowances or penalty rates. In determining the penalties, the court noted that the failure to maintain records was deliberate[1]. However, discounts were applied in accordance with the totality principal (this reduces penalties when there is a significant overlap in the conduct that caused the contraventions[2]) and in acknowledgment that both parties had admitted liability.

As such, Mr Taiaroa was ordered to pay a penalty of $41,368.00 and Mr Sanger a penalty of $26,893.00.

Nicholas Accounting Managers Services Pty Ltd and Mr Nicolaou admitted to a failure to comply with a written notice to produce issued and served by the Ombudsman to produce various documents and information in relation to its investigation into the La La entities. In determining their penalties, the court made mention of specific deterrence given both the company and Mr Nicolaou were still operating.

As such, Nicholas Accounting Managers Services Pty Ltd was ordered to pay a penalty of $34,020 and Mr Nicolaou a penalty of $35,154.00.

For employers

It is important that employers understand their obligations to comply with the Fair Work Act and note that the Ombudsman can pursue individuals involved with any contraventions.

If you are an employer or an employee and have concerns in relation to underpayment or any employment law matter, Brockhill & Usherwood offer a free 30-minute consultation which can be booked here.

Author: Blair McNamara (assisted by Katy Gale)

This article is a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.


[1] Fair Work Ombudsman v J.D. Chapen Nominees Pty Ltd (in liq) [2024] FedCFamC2G 85, 113.

[2] Ibid, 123.

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