Liability for Employee Claims: HR Managers can be in a precarious position

Elizabeth Ticehurst, Special Council, Tax
Elizabeth Ticehurst, Special Counsel, Tax
HR managers can be in a precarious position. As employees they are obliged to follow their employer’s directions and implement decisions that affect the workforce. They are also expected to manage the employer’s compliance with laws that govern the workplace. Increasingly, HR managers are being held personally liable when their employers do not comply.

In a speech delivered to the Australian Labour and Employment Relations Association National Conference in May this year, the Fair Work Ombudsman Natalie James indicated that the Ombudsman was increasing its focus on making individuals liable for breaches of the Fair Work Act, including not only directors, but accountants and HR managers.

A number of recent cases demonstrate the importance of HR managers making an independent assessment of what they are being asked to do, and inquiring as to whether those actions may breach the law. Choosing to remain uninformed, or blithely ignoring the employer’s actions, will rarely protect the HR manager from liability.

In February this year the Federal Circuit Court found that an HR manager was liable for being “knowingly concerned” in a number of breaches by his employer when they made unlawful deductions from employee wages and provided falsified records to the Fair Work Ombudsman after a targeted audit. The HR manager admitted that he knew about the practices of the company in making deductions from wages, but denied that he was involved or knew that the practice was unlawful. Despite these denials, the court found that the HR manager should have known that the deductions were unlawful through his interactions with various Fair Work Inspectors. Although he may not have known which section of the Fair Work Act was being breached, his knowledge was sufficient for him to be held liable for involvement in the employer’s breaches of the law.[1]

In another example, an employer came under pressure to change the working conditions of an employee who held the office of Safety Officer when the employee resigned his union membership. Two HR managers persuaded the employee to sign documents that changed his status to a wages employee under the employer’s workplace agreement. One of the reasons given for the change was that his status as a salaried employee was incompatible with the position of Safety Officer, and that if he became a wages employee he would receive more money. By the time the matter came before the court, both HR managers had ceased working for the employer, but the court still found them each liable for making false or misleading representations to the employee about his workplace rights. In the court’s view, despite the HR managers being directed to do what they did, they still had a choice in whether to carry out those directions.[2]

HR managers can also find themselves the target of litigation when they are involved in the termination of an employee’s employment. HR managers are often delegated with difficult tasks like performance management or informing employees when they are terminated. It is not uncommon in those circumstances for a dismissed employee to file a claim not only against the employer, but also against the HR manager and/or their supervisor. Depending on the attitude of the employer, the HR manager could find themselves shouldering significant legal costs just to defend themselves.

 What can HR professionals do to protect themselves?

HR managers can limit their exposure to liability by:

  • gaining enough of an understanding of the employer’s legal obligations that they are able to identify potential issues
  • seeking further advice when required
  • keeping knowledge up to date
  • conducting an audit of pay and conditions to ensure that the organisation’s practices are compliant
  • when warranted, making suggestions in writing to obtain legal advice
  • speaking up when the organisation’s proposed actions or practices cause concern
  • if directed to do something that causes concern, put the reasons for that concern in writing to the appropriate person (such as the CEO or board of directors) and advise that they obtain legal advice before proceeding

HR professionals hold important and responsible positions in companies. Taking these responsibilities seriously by keeping up to date with legal responsibilities will ensure everyone, including employees, stays safely within the law.

[1] FWO v Oz Staff Career Services Pty Ltd & Ors [2016] FCCA 105 (12 February 2016)

[2] Director of the Fair Work Building Industry Inspectorate v Baulderstone Pty Ltd & Ors [2014] FCCA 721

Elizabeth Ticehurst

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