When are advisors held accountable for underpayment of wages by clients?

Published 14 March 2017

The role of accountants and bookkeepers has been in particular focus following this month’s Court decision holding an accounting practice responsible for underpayments by a client for whom it was providing payroll services. The decision follows a series of prosecutions and decisions in which principal contractors, franchisers, and human resources professionals have been found to be legally “involved” in breaches by an employer of the Fair Work Act and therefore liable for penalties and compensation.

Natalie James, the Fair Work Ombudsman, has been unequivocal that the FWO has and will continue to adventurously test the limits of the accessorial liability provision in the Fair Work Act. The FWO’s drive to bring accessories within the scope of prosecutions is, in part, because many of the employers they prosecute are no longer solvent. Speaking in July last year, Ms James reported that in the 2015/16 financial year 92% of prosecutions brought by the FWO included accessorial liability.

The recent Court decision in Fair Work Ombudsman v Blue Impression Pty Ltd & Ors [2017] FCCA 810, involved a firm of accountants who provided payroll services for a takeaway food outlet in Melbourne. The Court’s findings included that:

  • The firm’s principal knew that the Fair Work Ombudsman had previously audited the business and there had been previous underpayments.
  • The firm was issuing pay slips for employees and so knew that a flat rate was being paid for all work regardless of when the hours were worked.
  • Despite these “suspicious” circumstances, the principal did not make any further enquiries regarding whether the Award obligations had been met and allowed his staff to simply continue to process the pays.
  • In finding that, at the very least, the principal was guilty of ‘wilful blindness’, the Court noted that he was a CPA and an experienced businessman and could easily have found information regarding the proper Award rates from a variety of sources if he had chosen to do so.

The approach of the FWO and the Court decision have been surprising and troubling for many advisors. Professional advisors are trained to focus primarily on the interests of their client. The law is now, however, that advisors (particularly where they are providing outsourced payroll services) also have significant obligations to their client’s employees.

In practical terms what can accountants, bookkeepers, and payroll consultants do to try to protect themselves from accessorial liability for underpayment of wages?


  • Do ensure that the terms of engagements for payroll clients include your client warranting that the rates being paid are lawful.
  • Do advise clients in writing that the client should contact the Fair Work Ombudsman or an independent advisor to obtain Award information if the client has any doubt whatsoever of the applicable rates.
  • Do investigate if you have any grounds to suspect your client may not be paying correctly (eg: Has a former employee complained?
  • Do the rates being paid seem too low to you? Is the client using flat rates including for weekend work?).
  • Do ensure the payroll software you use to process pays is up to date at all times.


  • Don’t view your engagement narrowly as merely processing payments and deducting PAYG. A payroll provider (as a result of issuing the pay slips) will have information within its corporate knowledge of hours worked and pay rates paid.
  • Don’t continue to process pays for a client if you believe the client is or may be underpaying its staff and the client refuses to get Fair Work Ombudsman or independent advice.
  • Don’t ever be involved in reconstructing or revising payroll records for a client.

The Fair Work Ombudsman sees its role, among other things, as an advocate for vulnerable employees. The recent Court decision seems unfair to many advisors given their traditional focus on the client’s interests and following client instructions. However, advisors should be in no doubt that the FWO will not hesitate to prosecute individuals (particularly those with tertiary qualifications and business experience) who they believe have assisted employers in underpaying workers.

This content is general in nature and provides a summary of the issues covered. It is not intended to be, nor should it be relied upon, as legal or professional advice for specific employment situations.

Olexo Workplace Law recommends that specialist legal advice should be sought about specific legal issues.