Directors would be wise not to turn a blind eye to workplace law infringements because these can harm their organisation’s reputation and directors can be personally liable for breaches. Criminal charges may even apply.
Key workplace laws include the Fair Work Act (FWA) 2009, Work Health and Safety (WHS) Act 2011, anti-discrimination legislation and superannuation guarantee laws.
“Directors don’t need to be experts in all the laws, but they should have a good understanding of the key provisions, the duties owed by a corporation under these laws and any personal liability of officers,” says Brigid Clark, a partner at Addisons law firm.
“They should pay particular attention when there is a positive duty in place that means organisations and directors must be proactive and not reactive.
For example, there is a positive duty to eliminate sexual harassment under the Sex Discrimination Act 1984 and a positive duty to eliminate psychosocial risks under the WHS Act.
”In addition to personal liability, breaches of some laws, such as the WHS Act, are considered criminal offences, especially when they put workers' health and safety at serious risk or result in injury or death.
“A real issue is that if directors do not understand these laws, they may fail to identify key risks within an organisation or know what questions need to be asked to assess and proactively mitigate risks,” adds Clark.
Stay informed
Not keeping up with WHS laws can also lead to reputational harm. Worryingly, notes Clark, recent examples in the media show that reputational damage can arise whether or not it’s proven a company has engaged in breaches of workplace laws.
On the human level, she says, “Employees expect more of their employers and directors than ever before. If directors are not leading by example, it can result in a lack of worker engagement and affect the attraction and retention of high-performing staff. In my job, I often see the worst in workplaces and can think of several examples where talented staff, including senior executives, have left because of poor governance practices or a tolerance of poor behaviour such as bullying or sexual harassment.”
Beware Underpayments
From 1 January 2025, intentional underpayment of wages or entitlements became be a criminal offence. The FWC advises this doesn’t include honest mistakes. In its submission to the Senate Inquiry into the Closing Loopholes Bill in 2023, the AICD argued that it was important to make a clear distinction between a business model which systematically and deliberately underpays employees, and unintended wage underpayment caused by navigating a complex IR system.
Clark says there are plenty of examples of underpayments stemming from a misunderstanding of modern award or enterprise agreement provisions, or the absence of regular review and auditing of payroll processes.
Highly publicised large underpayments by the likes of Woolworths and Commonwealth Bank show the need for diligence in this area.
“Our industrial relations system in Australia is complex and underpayments are far more common than many might think,” she says. “While many underpayments are inadvertent, this is not an area where [companies] can simply turn a blind eye to non-compliance.”
Failure and negligence
In terms of governance failures, Clark cites Boeing as an interesting example where the company’s focus on profitability and stock value led to claims of negligence in ensuring the safety of its aircraft.
“WiseTech is a more recent example of the reputational damage caused due to perceived governance failures,” she adds. “While the company reported that an external investigation did not find evidence of co-founder Richard White engaging in sexual harassment, the public perception and the board’s response to concerns about White have certainly impacted the company’s reputation and share price.”
Workplace laws you can’t ignore
Clark advises directors to be across the FWA because it contains the National Employment Standards (NES), which provide minimum entitlements for employees. These include maximum weekly hours, flexible working arrangements, parental leave, annual leave, personal/carer's leave, community service leave, long service leave, public holidays, notice of termination and redundancy pay, and information statements.
Charles Power, a partner at Holding Redlich, explains the FWA is primarily concerned with employment relationships, but it also regulates relationships with trade unions and independent contractors.
“This legislation creates both civil and criminal liability for underpayment of employees. In some circumstances, liability extends to the company’s directors, officers and other managers. There are also provisions regulating discipline, discrimination, sexual harassment, workplace bullying, restructuring and dismissal.”Power says superannuation guarantee legislation underpins obligations in the FWA to make compulsory superannuation contributions for employees.
“Many directors are not aware, for example, that if a corporate employer does not pay (or short-pays) PAYG withholding to the Australian Taxation Office by the due date, its directors may become personally liable for these sums,” says Power.
“Similarly, if a superannuation guarantee charge liability is owed by the company because it didn’t pay or short-paid SG contributions by the due date, the directors may become personally liable for this debt owed by the company.”
Work health and safety
Most Australian states and territories have adopted the model WHS laws developed by Safe Work Australia. These laws provide a nationally consistent framework, but each jurisdiction has its own WHS Act, regulations and codes of practice that directors need to have some understanding of. Victoria is the only state that has not adopted the model WHS laws. Instead, it operates under its own Occupational Health and Safety Act 2004.
New developments
Clark says understanding WHS laws and the Sex Discrimination Act is vital as there is an increasing focus by regulators and well-published research on the growing financial and reputational risk arising from workplace bullying and harassment.
In July 2022, Safe Work Australia changed the WHS regulations to formally recognise psychosocial hazards as risks that need to be eliminated or minimised in the workplace so far as is reasonably practicable. A positive duty was also introduced requiring organisations to take proactive and meaningful action to prevent unlawful conduct that could cause psychosocial harm in the workplace or in connection to work.
Positive duty
Separate to WHS laws, the Sex Discrimination Act was amended to include a positive duty on employers to take reasonable and proportionate measures to eliminate sex discrimination and sexual harassment in the workplace.
This means employers are now proactively responsible for preventing harassment, rather than solely responding to complaints.
Power says understanding the WHS legal landscape and how it operates in a workplace will enable directors to assess and verify that appropriate systems are being implemented by management to ensure compliance with these laws.
“In order to avoid accessorial liability, directors should not turn a blind eye to legal compliance. If they receive information that suggests compliance issues exist, they should be proactive and request relevant information to establish whether there is any basis for their concern.”
Keep learning
To improve their understanding, Power notes directors can obtain information on the Fair Work Commission (FWC) or Fair Work Ombudsman (FWO) websites. “If the company has an internal audit service, this will usually include a legal and compliance update,” he says.
Clark’s advice is to be curious and never stop learning about these laws. “There are many ways in which this can be done, whether by engaging experts for briefings, attending seminars, reading articles or listening to podcasts,” she says. “An easy way to stay informed is to subscribe to free industry publications issued by regulators such as SafeWork NSW or follow them on LinkedIn for news updates.”
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