Director’s Duties – Your Responsibilities for Managing Employees (part 4)

December 8, 2016

Employment law is a broad and complex area but for directors of companies with employees it is critical that you are aware of your responsibilities.

Under the Fair Work Act 2009 adverse action and award entitlements are just two areas where proceedings can be brought against both the company and directors “knowingly concerned” in a breach of these laws.

To be liable as a director for company contraventions of the Fair Work Act you must have knowledge of the essential facts of the breaches and be knowingly concerned and intentionally participate in the breach. However you do not need to know that it is actually a contravention for you to be considered as involved.

The Fair Work Ombudsman, Natalie James, recently provided company directors with a warning in relation to breaches of workplace law by their employees. In a recent case two directors were found to have breached the Fair Work Act by knowingly allowing the company (via an employee) to underpay employee entitlements resulting in the directors being personally liable for $58,850.

If an employee’s termination is a contravention of the Fair Work Act, including an adverse action for discriminatory reasons, you as a director may also be personally liable for this contravention. Directors were found liable in the case of a female employee being dismissed when she complained about her treatment on return from sick leave after suffering a miscarriage. She was told her pregnancy was an ’inconvenience’ for the company.

Your actual level of involvement in the day-to-day decision-making relating to the staff of the company will be relevant in determining your knowledge of any employment law contravention. However, deliberate or careless ignorance is not a defence. Even if you are not involved in staffing decisions you should take steps to reduce the risk to the company and yourself from Fair Work Act contraventions.

As a director you can limit your risk by being informed of your obligations and implementing human resources (HR) systems to ensure compliance by all employees with the Fair Work Act. This system may include policies and procedures around:

1. termination of employees;
2. employment of new employees and relevant award requirements;
3. undertaking regular audits to check staff entitlements are paid correctly and adjusted with any award changes; and
4. staff training.

It is also worth discussing this issue with all employees involved in the HR activities of the business. Employees who are “knowingly concerned” in the contravention, for example general managers, HR employees and payroll staff, may also be personally liable for company breaches in this area.

Should you have any questions, please do not hesitate to contact one of our lawyers today.

Read Part 5 here

Read Part 3 here