Employee Record Keeping – Accountant Responsibilities
By Chloe Boike, Workplace Relations Advisor
On 7 February 2024, the Federal Circuit and Family Court ordered an accountancy firm, Nicholas Accounting Management Services Pty Ltd, and its principal to pay $70,000 in civil penalties for failure to comply with notices from the Fair Work Ombudsman (‘FWO’) to produce documents linked to its client’s employee record-keeping.
The accounting firm provided bookkeeping services to a group of eight companies called the La La entities which were liquidated and deregistered, so no penalties were being sought against them.
Record Keeping Requirements?
Employers are required to keep time and wage records for 7 years. These records have to be readily accessible to a FWO Inspector, legible and in English. The time and wage records cannot be false or misleading and cannot be changed unless it is to correct an error. There is specific information that needs to be kept for each employee.
The types of records an employers must keep, include, but is not limited to:
- Employee’s pay rate
- Details of incentive-based payment, bonus, loading, penalty rate, or other monetary allowance or separately identifiable entitlement amount.
- The hours the employee works if the employee is casual or irregular part-time who is paid based on time worked
- Any leave taken or cashed out if applicable
- Superannuation contributions
- Individual flexibility arrangements
- How the employment was terminated.
Where an employee is paid an annual wage under a Modern Award, employers must keep extra records for these employees.
Further details of an employer’s time and wage record keeping requirements obligations can be found in Business Chamber Queensland’s titled Business Record Keeping and Pay Slips.
Employee records are private and confidential so only the employer, payroll staff, the employee and authorised individuals such as accountants can access the records.
Even if an employee has ceased employment with the employer, if they ask to see their records, the employer must make them available. If employment records aren’t made or kept correctly, FWO Investigators can issue employers with an infringement notice.
If an employer does not keep the appropriate records, they may have to also prove to the court that they have not underpaid the employee.
Case Breakdown
The FWO pursued financial penalties against the owner or part owner and director of six of the La La entities as well as the general manager of the same six entities for failing to make and keep employment records for seven years under section 535(1) of the Fair Work Act 2009 (Cth). The entities did not keep a record of the hours worked for casual and irregular part-time employees or records of the employee entitlements to loadings, allowances and penalty rates. Between 33 and 87 employees were impacted by the failure to keep employment records.
In October 2019, the Fair Work Ombudsman issued Nicholas Accounting with a written notice to produce documents relating to La La entities. The court was told by Nicholas Accounting that it had no authority to produce the requested documents without the consent of La La entities and that the documents in question did not actually exist. Both these arguments were rejected by Judge Heather Riley and found the firm’s contravention to be deliberate.
In an unannounced visit in January 2020, the Fair Work Ombudsman managed to obtain a number of documents. The initial failure to comply with the notice to produce essentially “undermined the Fair Work Ombudsman’s ability to investigate contraventions of the Fair Work Act 2009, such as the record-keeping contraventions in this matter, leading to a loss to the public for the extra resources to establish those contraventions, including the site visit involving multiple Fair Work Ombudsman and Australian Taxation Office staff”. It was noted that Jude Riley found no evidence that indicated the accounting firm or its directors felt any remorse in their failure to take corrective action by providing the documents after the due date. Judge Riley ordered Nicholas Accounting to pay a penalty of $34,020. The firm’s principal was also alleged to have contravened section 712(3) of the Fair Work Act 2009 through his involvement in the failure to produce records. The principal contravened section 712(3) an additional eight times and was ordered to pay a penalty of $35,154 for the nine breaches. A further $41,368 penalty was imposed on the La La entities owner and the general manager received a penalty of $26,893.
It was discussed in court that as an accounting business, Nicholas Accounting “may be easily distinguished from other types of businesses that might not be expected to have the same level of knowledge of regulatory and statutory requirements”. It was agreed that Nicholas Accounting “should have had the basic professional competence to comply with legal requirements of the Fair Work Ombudsman”.
It is important for employers to be aware that breaching the laws around record-keeping as well as failing to comply with lawful requests from the Fair Work Ombudsman, which is found to be deliberate, will not be tolerated and significant penalties may apply.
Case Ref: Fair Work Ombudsman v J.D. Chapel Nominees Pty Ltd (in liq) [2024] FedCFamC2G 85
How can Business Chamber Queensland help?
Business Chamber Queensland members with HR services as part of their membership are invited to contact the Workplace Advisory Services team:
P: 1300 731 988
Businesses who do not have a HR membership may also seek assistance however a competitive consultancy fee will apply for any advice and assistance provided.
For membership enquiries, please contact our membership team on 1300 731 988.