A recent ruling offers a timely reminder that external advisors can be held individually liable, as well as employers. An employment lawyer unpacks the ruling and shares how individuals can reduce their risk of liability.

When an employer falls short of its Fair Work obligations, responsibility doesn’t always stop with the organisation. 

A recent case heard by the Federal Circuit and Family Court shows how easily accountability can extend to the individuals involved in the breach – including external consultants and advisors.

In this case, both a company director and an external consultant were found personally liable for a series of breaches, including unpaid annual leave, unpaid superannuation, failing to provide notice of termination and failing to issue Fair Work Information Statements. Compensation amounts have yet to be determined.

While employers are ultimately responsible for Fair Work breaches, individuals can hold accessorial liability – meaning they can be treated as legally responsible for the breach if they were knowingly involved in it, says Emma Lutwyche, Partner at Pinsent Masons.

“There are four ways that the Fair Work Act frames how someone can be involved,” she says. 

1. The person could have aided, abetted, counseled or procured the contravention; 
2. They could have induced the contravention by threats or promises; 
3. They could have been knowingly concerned in or a party to the contravention; or
4. They could have conspired with others to affect the contravention.

In this case, the court was satisfied that both individuals were knowingly concerned in the breaches, given their roles in the business and evidence that they were aware of essential elements of the contraventions.

AHRI recently published an article outlining the circumstances where HR can be held individually liable for a breach of workplace law. This case offers a real-world view of how those risks can play out in practice.

Below, Lutwyche unpacks the factors that led to this ruling, and how HR can manage the risk of personal liability.

What led to the finding of personal liability?

This is not the first ruling where individuals have been held responsible for breaching Fair Work obligations. 

One of the most notorious examples occurred in 2024, when a restaurant chain was found to have deliberately and systematically underpaid vulnerable migrant workers and falsified its records. 

The company’s Group General Manager and its HR Coordinator were both held personally liable for the breach, and were each fined around $100,000. 

However, what makes this recent case stand out is that liability extended beyond the company’s internal leadership to an external consultant. Contrary to popular belief, personal liability isn’t limited to employees within the business, says Lutwyche.

“The Fair Work Act doesn’t draw a distinction between the type of role or way that a person is engaged when considering whether they are involved in a contravention,” she says. “There’s been cases about whether accounting firms, external HR firms, consultancy firms and external payroll providers – so totally separate companies – are accessorially liable.

“[For example], if you’re engaging a payroll company that entirely manages your payroll, and that payroll company fails to input the modern award rates properly, then they may be [considered] involved and liable.”

“There’s been cases about whether accounting firms, external HR firms, consultancy firms and external payroll providers – so totally separate companies – are accessorially liable.” – Emma Lutwyche, Partner at Pinsent Masons

A key reason why the two individuals were held liable in this case was that the company itself went into liquidation after the legal proceedings had begun. This meant the employer was no longer a viable respondent, shifting attention to the individuals involved.

“Cases where there’s personal liability are often in one of two categories: either the personal conduct by the individuals involved is really flagrant, or the company itself can’t be prosecuted because it’s insolvent,” says Lutwyche.

Another crucial factor was that neither the director nor the consultant properly engaged with the legal process. They failed to file defences, missed deadlines and did not comply with court orders.

How the courts assess “involvement”

In the eyes of the law, accessorial liability hinges on whether someone was “involved” in a breach. But what does “involvement” actually look like in practice?

Rather than relying on job titles or formal responsibilities, says Lutwyche, courts assess involvement by looking at the reality of how decisions were made and who was part of them.

“They would look at documents, email trails and records that might establish who knew what at the time, who was involved and who was copied in,” she says. 

“They would also interrogate the evidence with the person themselves at the hearing. And when, like in this case, the person refuses to engage at all, an inference may be drawn that they did do what was alleged.”

Involvement isn’t limited to those making the final call. Individuals who participate in conduct they know is non-compliant can also be exposed even if the orders are coming from elsewhere.

“If the person was [involved in] a contravention, saying, ‘I was told to keep doing the contravention’ will not be good enough,” says Lutwyche. “Once they are aware of what’s going on, if they sweep it under the rug, then they’re more likely to be liable.”

However, it may help their defence if they’ve taken steps to address it, she says.

“If they escalate it to the board of directors, for example, and say, ‘This is happening. It can’t happen anymore, and this is what I recommend [to address it],’ and the company says no, then they’ve probably done what they needed to do to escalate it.”

However, she adds, this may not necessarily be determinative if the individual’s broader conduct points to ongoing involvement.

“They would look at documents, email trails and records that might establish who knew what at the time, who was involved and who was copied in.” – Emma Lutwyche, Partner at Pinsent Masons

How can HR steer clear of personal liability?

The idea of personal liability can be confronting for HR, particularly given how closely many practitioners sit to key decision-making processes.

Lutwyche suggests a number of practical steps HR can take to reduce their exposure:

1. Escalate issues early

Once a potential breach is identified, doing nothing is the riskiest option. Concerns should be formally escalated, with clear recommendations for remediation, she says.

That may involve raising the issue with senior leadership or the board, documenting the concern and outlining clear steps to address it, such as conducting an internal review or engaging external advisors.

2. Cover investigations by legal professional privilege

If an organisation is investigating a potential issue, it’s a good idea to do so through legal counsel, so the work may be protected by legal professional privilege, says Lutwyche.

“[Conducting] an audit under legal professional privilege will mean those documents may not later have to be produced to the court,” she says.

3. Keep detailed records of due diligence

Documentation can be critical in demonstrating what an individual knew and what actions they took, says Lutwyche.

“If you have concerns, do your due diligence and make sure you’re confident that anything you are involved in is compliant.”

HR might document things like when concerns were identified, who they were escalated to, what advice was sought and what actions were taken in response.

Taking these steps can help individuals demonstrate that they took reasonable action when issues arose, and reduce their risk of being seen as knowingly involved in a breach.

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