- A Melbourne accountant was fined $53,880 under accessorial liability laws.
- The Fair Work Ombudsman has put accountants on notice that they can and will be penalised for client breaches of which they are aware.
- NOCLAR rolled out on 1 January in Australia. Accountants can now safely report criminal activity, setting aside client confidentiality.
Accountants be warned. In a new tougher anti-crime climate, Australian authorities have made it clear that accountants will be fined and prosecuted for being knowingly concerned in misdealings carried out by their clients – especially those which underpay workers.
“We are in a new era of accountability in which organisations and the actions of their suppliers are inextricably linked — whether it’s wages compliance, safety or an environmental breach,” warn Clayton Utz lawyers Hilary Searing and Shae McCartney. “Think 7-Eleven, Coles and Dominos, to name a few. Turning a blind eye or pleading ignorance does not wash.”
Acting Fair Work Ombudsman Kristen Hannah has made it clear that accountants are among those being targeted. “External business advisers need to understand that they must put compliance with the law above their own personal interests – or face serious consequences,” she warned in November last year.
The warning comes after legal action by the Fair Work Ombudsman resulted in $53,880 in fines being imposed on a Melbourne accountant by a court, which found the firm knowingly facilitated underpayment of a Taiwanese worker by its client, a fast food operator.
Related: Webinars on NOCLAR
Watch the webinars for an introduction to the new Code of Ethics provisions.
The Federal Circuit Court fined Ezy Accounting 123 after ruling the accountant as an accessory to worker exploitation by providing payroll services to Japanese client, fast-food operator Blue Impression. The client was separately fined $115,706 over underpayment of two Taiwanese workers.
It’s the first time the Fair Work Ombudsman has used accessorial liability laws to penalise a professional services firm for knowingly helping one of its clients exploit a vulnerable worker.
The laws extend not only to culpable in-house managers at businesses that exploit staff, but also to external advisers who facilitate worker underpayment, says Ms Hannah. Lawyers say that accessories to Fair Work Act breaches can include directors, human resources advisers, accountants, recruiters, head franchisors and potentially lawyers.
What are the penalties?
Personal financial penalties for a finding of accessorial liability include up to $10,800 for an individual and $54,000 for a corporation, plus enforcement investigations and legal proceedings with costs and reputational damage, says Clayton Utz.
The Fair Work Amendment (Protecting Vulnerable Workers) Act 2017 has now come into effect, increasing maximum penalties for deliberate exploitation of workers and false records.
“The Courts have made it clear that if you are knowingly involved in the exploitation of workers, you can face significant penalties,” says Ms Hannah. “These types of trusted advisers must explain the rules to their clients, make it clear when they are in danger of breaking them and not become involved in breaches of the law themselves.”
Related: Preparing to respond to NOCLAR
Accountants need to prepare for the introduction of the new requirements when they encounter non-compliance with laws and regulations (NOCLAR).
The Ezy Accounting judgement also comes after the Fair Work Ombudsman last year used accessorial liability laws to secure a $21,760 penalty against the HR manager of the New Shanghai restaurant in NSW for her role in facilitating exploitation of overseas workers.
So as regulators put accountants and others on notice that they need to step up and be more vigilant in the fight against crime, what recourse do CAs have to dealing with such problematic situations? And what resources are out there?
NOCLAR came into force in Australia 1 Jan 2018
Under new NOCLAR requirements that took effect in Australia on 1 January, all accountants are permitted to report to officials any suspicious criminal activity they see in the affairs of their clients or employers. This can include:
- Fraud, corruption and bribery
- Money laundering, terrorist financing and proceeds of crime
- Securities markets and trading
- Banking and other financial products and services
- Data protection
- Tax and pension liabilities and payments
- Environmental protection
- Public health and safety
Accountants are not required to proactively seek out NOCLAR or have a level of knowledge of laws and regulations than is greater than that expected for their role.
Under Australia’s Code of Ethics for Professional Accountants, NOCLAR (non-compliance with laws and regulations) allows accountants to now set aside their duty of confidentiality when they come across non-compliance. NOCLAR allows accountants to report illegal acts which are suspected or uncovered during the course of their professional work.
“There is no longer an option to turn a blind eye and simply withdraw from the engagement or resign from the employing organisation,” Zowie Pateman, Senior Policy Advisor, Leadership and Advocacy at CA ANZ, told Acuity.
“The amendments take the unprecedented step of allowing accountants to set aside the principle of confidentiality in the Code of Ethics and speak up when it appears that laws and regulations are not being followed by a client or employer.” NOCLAR came into effect in New Zealand on 15 July 2017.
What to do if problems are detected
Members need to follow the framework steps in the Code of Ethics, decide on a course of action and on whether to disclose the matter to an appropriate authority, says Pateman. Any non-compliance reported must have a direct and material effect on financial statements of a client or employer. Or the non-compliance must be fundamental to the business and its operations.
“Clearly, non-compliance is a sensitive issue with the potential to create situations that are inherently challenging and stressful for accountants,” she says. However, under NOCLAR, accountants will have the surety of a clear pathway to raise concerns without fears of breaching ethical standards.
“This may not make dealing with non-compliance any easier, but it will go a long way to ensuring accountants are protected when they have acted in good faith, exercised due caution and documented any steps taken when responding to suspected or actual non-compliance,” adds Pateman.
In considering whether to disclose the matter to an appropriate authority, the process may begin by consulting on a confidential basis with others within the firm, a professional body, or with legal counsel, or informing a superior.
Fair Work Resources
When it comes to Fair Work issues, help is at hand. Fair Work last year held presentations to about 500 CA ANZ members in Melbourne, Hobart, Adelaide and Brisbane and reports there was considerable interest in accessorial liability. Fair Work believes that with the introduction of NOCLAR in early 2018, CA members need to become more aware of their workplace relations obligations and urges members to check resources on their website.
A Pay and Conditions tool can be used to calculate employee entitlements across 122 Modern Awards. And an Employer Newsletter is published every two months for those seeking to keep up-to-date with issues such as pay and award updates. The Fair Work Ombudsman’s My Account portal also allows users to store and receive personalised workplace information such as online enquiries for priority support and information from FWO calculators. Finally, CAs can call the Fair Work InfoLine on 13 13 94 for help too.
Related: Presentation on NOCLAR
See a presentation to CA ANZ by the Accounting Professional and Ethical Standards Board on responding to non-compliance with Laws and Regulations.