On this week’s You Legal TV, see how one decision of the Fair Work Ombudsman disregarded the separateness of the corporation and held the director responsible for its actions.

See below for complete transcript of this episode –

A recent decision of the Fair Work Ombudsmen in a matter involving contraventions of the Fair Work Act should be a big wake up call to directors. Yes, the penalties are significant but what is of even more consequence is the court’s piercing of the corporate veil. The two companies involved were fined $160,000 but the director was personally fined $35,000. All this for underpayments totally a mere, in comparison, $18,000.

So what happened? There are two elements that must be considered. First there’s a growing focus on holding directors to account that are involved in contraventions of the Fair Work Act. As in many instances the Act’s protections extend to some of the most vulnerable individuals. Secondly, the facts of this case were particularly egregious although this doesn’t mean that instances, which personal penalties and large fines apply will always be so unusual.

In this instance the employees had limited understanding of Australian law and they’d been underpaid. The company also failed to make superannuation payments, keep records, and in what is unfortunately a fairly common situation, tried to treat its employees as contractors. Further one of the employees was dismissed when she sought correct payment of wages.

The Court took into account the following when making its decision. That the contraventions were deliberate. A previous order by the Ombudsmen had clearly set out the company’s obligations. The director showed no contrition and attempted to avoid his liabilities through various means. The need for a deterrent’s effect. For both this director and others, not just to abide by the relevant laws but to discourage the use of corporate structures to avoid legitimate liability.

This is a timely reminder to directors and employees about the seriousness of obligations and also a warning about the limits of protection of the company structure that can be afforded to a director. Courts will and do disregard the separateness of a corporation and hold directors responsible for companies actions.

If you need any advice about the requirements of the Fair Work Act or your obligations as a director, especially where personal liability might be an issue, contact us here at You Legal, we wrote the book on it.

Confidence to Lead podcast

Episode 12 & 13 of the Confidence to Lead series have arrived. Head on over to www.youlegal.com.au/confidence and listen in. We explore two new issues: directors’ personal liability and proper financial reporting for companies and not for profits.

What Should I Do Next?

Contact us if you would like further legal advice on Fair Work Act. Our lawyers at You Legal will be happy to assist you in whatever way we can.

* This blog is for general guidance only. Legal advice should be sought before taking action in relation to any specific issues.