The Fair Work Ombudsman (FWO) has secured a stay on an $800,000 costs order imposed by a judge who found in June that it had not acted in the best interests of workers when it pursued directors of the employer under the Fair Work Act’s accessorial liability provisions for underpayments of more than $1 million.

The stay followed a decision in June 2016 by Federal Circuit Court Judge Street ordering three related entities operated by inventor, Kia Silverbrook, and his partner, Janette Lee (Directors), to backpay $1.15 million, plus interest, to 43 underpaid employees, plus a $115,000 penalty. However, Judge Street rejected the FWO’s application for penalty orders against the Directors accepting evidence (from the Directors) that the steps taken by the FWO in pursuing the Directors were “not in the employees” best interests.

The FWO also made application for Judge Street to recuse himself and pursued a contempt finding against a director’s solicitor for allegedly seeking to encourage employees to resolve the underpayment dispute and withdraw their claims. Judge Street heavily criticised the FWO’s handling of the matter and rejected the contempt application and said, “This was extremely heavy handed conduct by [the FWO] and is a troubling matter in the conduct of these proceedings”, “Of even greater concern is the perpetuation of the application in a case until the close of the respondents’ evidence.”

The FWO subsequently lodged an appeal and sought a stay on the $800,000 costs order imposed against it by Judge Street. On 16 November 2016, Federal Court Justice Markovic froze the costs order until the FWO’s appeal is determined.

The FWO is appealing against parts of the Federal Circuit Court ruling on liability, penalty and costs. The appeal will assert that the court made legal and factual errors when it:

  1. Dismissed the FWO’s allegations against the two directors;
  2. Determined the quantum of penalties to be imposed; and
  3. Awarded costs against the FWO.

No further court dates have been set for the case at this stage.

This case (which is subject to an appeal) highlights the ever present need to be aware (and vigilant) that the FWO can commence proceedings against employers, utilising the accessorial liability provisions of the Fair Work Act, who contravene any of the civil remedy provisions (of the Fair Work Act), including their directors and anyone else who is “involved in” a contravention.

Fair Work Ombudsman v Priority Matters Pty Ltd ACN 089 759 973 & Anor, NSD1939/2016

Fair Work Ombudsman v Superlattice Solar Pty Ltd ACN 147 948 605 & Anor, NSD1940/2016

Fair Work Ombudsman v Kia Silverbrook & Anor, NSD1941/2016

Fair Work Ombudsman v Kia Silverbrook, NSD1942/2016

Fair Work Ombudsman v Mpowa Pty Ltd ACN 153 099 168 & Anor, NSD1943/2016