Who is responsible for checking that the payroll system you use ensures that employees are paid correctly and proper records are kept in accordance with the provisions the Fair Work Act, any applicable award and any applicable enterprise agreement?

A recent judgement in the Federal Circuit Court indicates that it is not sufficient to leave this task to the persons undertaking the payroll function and that corporate governance requires oversight by others, including to the board level.

Consider the comments of the judge in this regard:

“The contraventions in the present case arose from a defective and deficient system designed by human resources department without proper attention to the terms of the Act and the Award. The defect and deficiency should have been apparent to a reasonably competent employment lawyer spending 30 minutes or less reading the relevant award and being informed of the nature of the steps that were being taken in respect of the different entitlements under the Award and under the National Employment Standards (“NES”) by the respondent in respect of the relevant employees, the method of identification on payslips of purported compliance with the Act and the Award as well as the terms of the contracts of employment for the relevant employees. …. This exercise should not have involved much more than 2 hours of input by a reasonably competent employment lawyer. Moreover, the human resources department should have been the subject of proper and adequate supervision systems by the board to ensure compliance with workplace laws. In that regard those responsible for the inadequate system simply had to consider whether the BCR model complied with the respondent’s payment obligations under the Act and the Award in respect of the relevant employees. The very simple question for the corporate governance of all employers is are the relevant employees being paid in accordance with the Act and the applicable award. The compelling inference is there was no such question properly addressed by the respondent’s systems during the relevant period of the contraventions.

There is no ability to contract out of the requirements of the Act and, whilst the Award did provide mechanisms by which there may have been steps taken by the respondent consensually to reach an agreement to depart from certain provisions of the Award, it is relevant that no such step was taken by the respondent. This is a reflection of the defective and deficient system that ultimately the board of the respondent were responsible for as a matter of corporate governance.

The making of the declarations of contraventions are, of course, of significance in themselves. However, the absence of evidence at the corporate mind level by the respondent was an issue raised by the Court and upon which the respondent was given an opportunity, if the respondent saw fit, to put on affidavit evidence. Despite that opportunity no such evidence was put on by the respondent.”

Arundell & Ors v Macquarie Bank Limited (No.2) [2020] FCCA 3313 at [18] to [20]