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You can’t hide behind the corporate veil: says Fair Work Ombudsman

June 28, 2016

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You can’t hide behind the corporate veil. That is the message that is being blasted across Australia by the Fair Work Ombudsman after the Federal Circuit Court ordered a director to pay $51,400 personally, with the offending company being penalized a further $257,000.

An audit by Fair Work Ombudsman revealed that employees were paid a flat rate of pay, rather than the penalties and loadings that apply to casual employees in the security services industry. As a result, eight casual security guards were found to have been underpaid $22,779 between May and August 2014.

The staggering penalties were ordered by Judge Michael Jarrett, the same Federal Circuit Court judge who recently imposed a record breaking penalty of $408,348 against a 7-Eleven store.

Director held personally responsible

Under the Fair Work Act 2009 (Cth), any person who has been ‘involved in’ a contravention is taken to have contravened that provision and can be held personally responsible for his or her actions.

The case revealed that the director previously had extensive dealings with the Fair Work Ombudsman and had been investigated for alleged underpayments involving another security company before it was wound up.

The director acknowledged that he was responsible for ensuring that the company complied with its legal obligations under the Act. Having regard to the deliberate nature of the breaches, the fact that there was no expression of remorse and the need for deterrence, both general and specific, the Court considered that significant penalties were appropriate.

Lifting the corporate veil

Recognising that an order against the company would not be enforceable, the Judge ordered the director to personally back-pay the amounts outstanding.

While the company involved in the underpayments has since been wound up, the director is currently operating yet another security company out of the same premises.

The Fair Work Ombudsman says that it has referred the matter to ASIC for further investigation.

For more information on this decision and what this means for you, clients should contact the HR Assured team. If you’d like more information about the benefits of becoming an HR Assured client contact us today for an informal chat.