Directors found personally liable

A Fair Work Ombudsman v Step Ahead Security Services Pty Ltd & Anor [2016] FCCA 1482, (“the Company”) found the director Mr Jennings, personally liable for the Company’s failure to pay their employees in accordance with the relevant modern award. Relevantly, the Company failed to rectify underpayment issues despite receiving several warnings from the Fair Work Ombudsman.

The Company failed to pay their employees in line with the Security Services Industry Award 2010 (“Award”), by paying them below the minimum rate of pay under the Award, and failing to pay them the required penalty rates, which included Saturday, Sunday, public holiday and overtime rates.

Section 550 of the FWA provides that a person who is involved in a contravention of a civil remedied provision is taken to have contravened that provision.

The decision

The Company admitted to contravening the Award. Mr Jennings also admitted that he was involved in the contraventions. As such, the court was then required to determine the appropriate remedy and ordered that:

• The Company pay penalties for its contraventions of the Award and breach of the FWA totalling $257,000;
• Mr Jennings pay penalties for his involvement in the Company’s contravention of the Award and breach of the FWA of $54,400.00; and
• The Company and Mr Jennings, jointly and severally, pay the underpayment amount of $22,779.72 to the Ombudsman, who is to distribute this amount to the relevant employees.

Significantly, the order was made on a “joint and several” basis. In making the orders, Judge Jarrett confirmed that that a Court has the power to require a person to pay an underpayment amount, even if the person is a director and is not actually the employer.

Judge Jarrett imposed personal liability on Mr Jennings to pay the $22,779.72 in underpayments and substantial financial penalties.

Now, this an extreme case of the corporate veil NOT protecting the Director, however, it drives home that people need to do the right thing and protect their Capital.

Pat Mannix, Partner, Paris Financial

Follow me on Twitter @mannix_pat

Source: Moores

Image courtesy of digitalart at FreeDigitalPhotos.net