Understanding Section 550 Of The Fair Work Act: Employer’s Guide

As a business owner or manager, you’re focused on growing your business, supporting your team and staying compliant. One area that often raises questions is whether you can be personally liable for workplace law breaches committed by your company or others connected to your business.

That’s where Section 550 of the Fair Work Act 2009 (Cth) comes in. It sets out when individuals can be held responsible for a company’s contraventions - a concept called “accessorial liability”.

In this guide, we explain what Section 550 actually requires (in plain English), what types of breaches it can capture, where the limits are, and practical steps you can take to reduce risk - without slowing your business down.

What Is Section 550 Of The Fair Work Act?

Section 550 deals with accessorial liability. In simple terms, if a company breaches a workplace law, an individual can also be liable if they were “involved in” the contravention.

Being “involved” has a specific legal meaning. Under the Act, a person may be involved if they:

• aided, abetted, counselled or procured the contravention
• induced the contravention (for example, by pressure or encouragement)
• were in any way, by act or omission, knowingly concerned in or party to the contravention
• conspired with others to bring about the contravention

The key idea is knowledge and participation. Mere inaction or poor supervision, by itself, isn’t enough. However, if you know about a contravention (or it’s obvious) and you intentionally participate - including by directing, encouraging or helping it to occur - you may be exposed.

This provision prevents people from hiding behind the “corporate veil” when they knowingly help their business break workplace laws.

Who Can Be Liable And What Counts As Being “Involved”?

Section 550 can apply to a wide range of people connected with a business, depending on the facts. Common examples include:

• Owners and directors who make or approve decisions that result in a contravention.
• Managers and supervisors with operational control who knowingly implement unlawful directions.
• HR and payroll personnel who, knowing the correct position, still process non-compliant pay or terms.
• External advisors (for example, bookkeepers, accountants, consultants or franchisors) who knowingly assist a contravention.

Again, the touchstone is knowledge and involvement. For example, a payroll officer who innocently applies a wrong rate because they were given incorrect information and had no reason to suspect an issue is less likely to be “involved”. But if they’re aware minimum rates under the relevant award are higher and they still process underpayments, the risk rises.

It’s also important to distinguish different types of employment claims. “Unfair dismissal” is a separate regime. Conduct such as dismissing an employee because they exercised a workplace right generally falls under “adverse action” in the general protections provisions, not unfair dismissal - but those underlying contraventions can still give rise to accessorial liability where Section 550 is satisfied.

What Breaches Does It Cover (And What It Doesn’t)?

Section 550 doesn’t create new obligations. Instead, it attaches personal liability to existing contraventions of the Fair Work Act, the National Employment Standards (NES) and industrial instruments like modern awards or enterprise agreements.

Examples of contraventions that can attract accessorial liability include:

• Underpayments of minimum wages, penalty rates, loadings, overtime and allowances under the NES or an applicable award or agreement.
• Failure to comply with award conditions (for example, classification levels, breaks or overtime rules), which is why checking your position against the correct modern award matters.
• Record‑keeping and pay slip breaches required by the Fair Work Act and Fair Work Regulations.
• Adverse action (for example, taking action against someone because they exercised a workplace right).

A few important clarifications help avoid confusion:

• Employment contracts: There’s no legal requirement to have a written contract for every employee, and a failure to issue one is not a contravention on its own. That said, a clear Employment Contract is best practice and can help you comply with awards and the NES.
• Superannuation: The Australian Taxation Office (ATO) primarily enforces Superannuation Guarantee obligations. Super issues can still intersect with Fair Work obligations in some scenarios, but as a rule the ATO is the main regulator for unpaid super.
• Unfair dismissal vs general protections: Unfair dismissal claims are a separate pathway. Many “protected reason” issues are general protections/adverse action matters rather than unfair dismissal claims.

Put simply, Section 550 will look to whether there’s an underlying contravention - like an underpayment under an award - and then ask whether you were knowingly involved in that breach.

Penalties And Enforcement In Australia

If a court finds that you were involved in a contravention, you can face civil penalties personally. Maximum penalties are expressed as “penalty units” in the legislation and are adjusted from time to time. As a guide, for many standard civil remedy provisions the maximum for an individual is 60 penalty units per contravention (which was $18,780 when the penalty unit was $313). For companies, the maximums are higher, and for “serious contraventions” they can be significantly higher again.

In addition to penalties, courts can make orders such as compensation, injunctions and compliance orders. In practice, this may include rectifying underpayments or changing business practices.

Investigations in this area are commonly led by the Fair Work Ombudsman (FWO). The ATO enforces superannuation, while other regulators may be involved depending on the conduct. The takeaway is that penalties change over time, so it’s wise to treat penalty unit figures as indicative only and to focus on getting your systems right.

Practical Steps To Reduce Risk Under Section 550

The good news is that practical, proactive steps go a long way. Here’s a structured approach you can adopt straight away.

1) Map Your Legal Obligations

• Confirm which industrial instrument applies (for example, a modern award) and the correct classifications for each role. If you’re unsure, get help with award compliance.
• Check entitlements against the NES, your award or agreement, and any contractual promises.
• Review any “set‑off” approach carefully. Using an above‑award salary to cover allowances or overtime requires precise drafting and processes - see more on set‑off clauses.

2) Put Clear, Tailored Documents In Place

• Employment Contract: Use up‑to‑date terms that reflect your award coverage, seniority levels and rostering needs. A tailored Employment Contract helps prevent misunderstandings and supports compliance.
• Workplace policies and handbook: Document rules around conduct, leave, hours, overtime approvals, bullying/harassment and grievance handling. A practical, current staff handbook sets expectations and helps you respond consistently.
• Contractor paperwork: If you engage contractors, use a proper Contractors Agreement and ensure the relationship isn’t really employment in disguise.
• Privacy: If you collect or store personal information about staff or candidates, publish a compliant Privacy Policy and manage data securely.

3) Build Robust HR And Payroll Systems

• Use reliable awards data for rates and loadings, and keep it current. Automate where possible, but don’t “set and forget”.
• Record hours (including overtime and breaks) accurately and keep records for the required period.
• Issue correct, timely pay slips and reconcile payments against your obligations on a regular schedule.

4) Train Your Team And Escalate Early

• Train managers, HR and payroll on awards, the NES and red flags to watch for.
• Encourage staff to raise questions and concerns without fear of retaliation - early internal escalation often prevents a contravention.
• If you identify a potential breach, pause, seek advice and fix it promptly. Swift remediation reduces legal risk and protects your team.

5) Know The Higher‑Risk Scenarios

• Franchising and brand networks: Franchisors and head offices should monitor franchisees’ compliance and avoid facilitating non‑compliance. If you’re involved at a document level, consider a Franchise Agreement review and clear guidance for network compliance.
• Set‑off/annualised salaries: These arrangements can work well, but only with careful drafting, reconciliation and oversight (see set‑off link above).
• Rapid growth or change: New locations, new awards or new rostering models increase risk. Build in checkpoints before changes go live.

These steps don’t just reduce legal exposure - they also improve employee trust and operational consistency as your business grows.

Key Takeaways For Employers

• Section 550 allows individuals to be liable where they’re knowingly involved in a company’s workplace contraventions - it’s about knowledge and participation, not innocent mistakes.
• Common exposure points include underpayments, award non‑compliance, pay slip and record‑keeping breaches, and adverse action issues; “no contract” alone is not a contravention, but clear documents help you comply.
• Penalties are set in penalty units and change over time; serious contraventions can attract very significant penalties and compliance orders.
• Reduce risk by mapping your obligations, using tailored documents like an Employment Contract and workplace policies, and building reliable HR/payroll systems.
• Watch higher‑risk contexts such as franchising and salary set‑off arrangements, and seek help on award compliance or contractor engagement if you’re unsure.
• A proactive culture - where issues are escalated early and fixed quickly - is your best defence against accessorial liability.

If you’d like a consultation on Fair Work Act compliance or a review of your contracts, policies and payroll practices, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no‑obligations chat.