The recent decision of Fair Work Ombudsman v Centennial
Financial Services  FMCA 459 has highlighted that human
resource managers can be held responsible for sham contracting
practices, even if they are following the instructions of senior
Federal Magistrate Cameron imposed a fine of $3750 against the
HR manager for his role in the company's sham contracting
The former HR manager unsuccessfully argued that he should not
be held responsible for the company's sham contracting
he held a minimal position within the company and that any
decision concerning the changing of worker's employment status
from employees to contractors to avoid paying relevant wage and
other entitlements was a decision that did not involve his direct
he had been effectively been put in a position where he had no
choice but to carry out the wishes of the company's owner in
relation to the change of status and as a result should not be held
liable for the sham contracting practices that followed.
In making his decision, Federal Magistrate Cameron acknowledged
that although the company owner was the "controlling
mind" of the business and instigator of the sham contracting
practices, the HR manager was responsible for implementing the
Federal Magistrate Cameron determined that by virtue of his
position, the HR manger was responsible for ensuring the company
complied with relevant workplace relations law, and accordingly was
"centrally involved" in the unlawful activity. Federal
Magistrate Cameron said that at a minimum, the HR manager should
have attempted to advise the company about its legal obligations to
Lessons for HR Managers
This case demonstrates that HR managers:
may be personally responsible for their company's
compliance with workplace relations law and can be held liable and
fined for implementing sham contracting practices;
cannot rely on the fact they were merely carrying out the
instructions of senior management to avoid personal liability in
sham contracting proceedings; and
should advise their employer of the operation of relevant
workplace relations law concerning sham contracting practices and
legal obligations owed to employees.
Cooper Grace Ward was named Best Australian Law Firm in the BRW
Client Choice Awards 2010 - Revenue < $50m. Joint Best
Australian Law Firm in the BRW Client Choice Awards 2009 - Revenue
The firm has also been named as the fastest growing law firm in
Australia for 2009 by The Australian.
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Long experience representing many of Australia's leading employers has taught us that in employment litigation the identity of an employee's representative is a major factor in how employee litigation runs.
Australian employees receive certain entitlements (such as annual leave and superannuation) where contractors do not.
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