Accountants’ Liability for Payroll Discrepancies Under Recent Federal Circuit Court Decision

July 19, 2017

Accountants and payroll managers are now under an obligation to report discrepancies in employee payment rates following what is being referred to as a ‘landmark’ decision in the Federal Circuit Court.

The Fair Work Ombudsman found that Blue Impression, which operates a Melbourne based Japanese fast-food outlet, was significantly underpaying staff in addition to withholding penalty rates, loadings and allowances. However, it was not only the company that found themselves in hot water, but also their accounting firm.

It was found that Ezy Accounting 123 Pty Ltd was also liable for the underpayments as it administered the payroll with what the Court described as ‘wilful blindness.’ The judge stated that the accountant had failed to make the necessary inquiries into the underpayment of staff, despite being ‘well aware’ of the correct rates.

In addition, this ruling also states that whether or not payroll workers have direct knowledge of contraventions may be irrelevant. It was found that any person working in the area should have the knowledge of the necessary industry rates and speak up if they suspect any contraventions of workplace laws. If they fail to do so, they risk being deemed ‘third party accessories’ to the breaches and risk significant penalties under the Fair Work Act.

The accountant in this case argued that it was not up to her to ensure minimum payment standards were being met as her role for the company was limited to data entry and bookkeeping. However, her accounting firm now face fines of up to $357,000 for not reporting the breaches.

The Fair Work Ombudsman states that this case should serve as a warning to all accountants, advisers and pay roll managers. Following this ruling, persons in these roles are now obliged to investigate and ensure that the minimum standards for payment are met.

If you have any concerns regarding your company’s payroll obligations, please contact us on 9870 9870.

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