Accountant fined for failing to provide client payroll records to the Fair Work Ombudsman

Overview

The Federal Circuit and Family Court of Australia has fined an accountancy firm and its principal almost $70,000 for failing to produce employment records to the Fair Work Ombudsman, which related to a client of the firm. 

Background

The firm, Nicholas Accounting Management Service Pty Ltd (Nicholas AMS) had been engaged to provide the La La Bar Group, an operator of licenced venues on Melbourne’s renowned Chapel St,  with bookkeeping services, including maintaining payroll data and employee records.

As part of its investigation into La La Bar Group’s employment practices, the Fair Work Ombudsman (Ombudsman) issued a Notice to Produce on Nicholas AMS (the group’s accountant), compelling production of relevant employment documents and records.

The Ombudsman has the power under section 712 of the Fair Work Act 2009 (Cth) to compel a person to produce documents, where those documents are (or are likely to be) relevant to determining whether a person is (or has) engaged in a contravention of the Fair Work Act or a fair work instrument.

Nicholas AMS failed to respond to the notice by its due date, resulting in the firm receiving an unannounced site visit from staff of the Ombudsman and the Australian Taxation Office, during which searches were conducted and documents seized.

After seizing the documents, the Ombudsman commenced proceedings against La La Bar Group for breaches of the National Employment Standards, as well as Nichols AMS and its principal for failing to comply with the Ombudsman’s notice to produce.

What did Nicholas AMS say?

In Court, Nicholas AMS argued that its failure to respond was due to it not having its clients’ consent, and that the documents the subject of the notice to produce did not exist. Both arguments were disproven on the evidence, with the Court finding the firm and principal’s contraventions were deliberate.

In considering the appropriate penalties, Judge Heather Riley noted that as an accounting firm and provider of bookkeeping services, the firm and its principal, “should have had the basic professional competence to comply with legal requirements of the [Ombudsman]." 

The court noted that both failed to take any corrective action by providing the documents after the Ombudsman’s deadline, and that there was no evidence of contrition from the firm or the director.

Conclusion: Importance for Accountant’s and payroll service providers

This matter is an important reminder to accountancy firms and professional firms in general, about the Ombudsman’s powers to compel the production of client documents, where those documents relate to a suspected contravention of the Fair Work Act or a fair work instrument.

To avoid any client concerns or disputes around confidentially of data, firms should also consider recognising this obligation to comply with lawful notices to produce issued by entities such as the Ombudsman or ATO as part of its client engagement agreements.