In the case of Fair Work Ombudsman v Happy Cabby Pty Ltd & Anor [2013] FCCA 397 a shuttle bus company was fined record amounts for breach of the sham contracting provisions of the Fair Work Act 2009 (Cth) and other contraventions including underpayment and failure to issue payslips.
Happy Cabby Pty Ltd (the Company) carried on the business of offering airport shuttle services. The Company wrongly represented to six of its 22 drivers that they were independent contractors and not employees.
This classification resulted in a loss to the drivers as they were paid fixed rates of pay per run, which meant the Company avoided paying the drivers' entitlements to minimum hourly rates of pay, casual loadings, minimum engagement periods, payments for waiting time, overtime rates of pay and penalties. The Company also avoided paying superannuation contributions and relevant workers compensation insurance.
Earlier this year the Federal Circuit Court made declarations by consent that the Company had contravened the FW Act. The Federal Circuit Court handed down its decision in relation to the appropriate penalties in July. The Company received a total penalty of $238,920. The sole director was fined $47,784.
The "shams" were found to be the result of "willful blindness". The FWO raised the facts that the Company had been the subject of previous complaints and the Company refused to take action when served with a Letter of Caution from the FWO.
Judge Driver found the sole director was responsible for all operating decisions and was "extensively involved" in the events leading to the contraventions.
Driver J rejected submissions on behalf of the director to the effect that the fine imposed on him as an individual should be limited because of the close connections between him and the company, that is by punishing both the respondents the same conduct was being punished twice. Driver J quoted the decision of FWO v Ramsay Food Processing Pty Ltd (No 2) [2012] FCA 408 to the effect that no reduction in penalty was warranted as the respondents were jointly, as well as individually, culpable.
In another Federal Circuit Court decision, penalties are yet to be decided but Judge Barnes found that the sham contracting provisions were breached by a retailer, that entered into independent contractor agreements in circumstances that clearly pointed to an employment relationship.
In Fair Work Ombudsman v Northern Enterprises Pty Ltd [2013] FCCA 216 Judge Barnes found that although the agreements were labeled as independent contractor arrangements, she was satisfied "...that the complainants were under the control of the Respondent in significant respects, both directly in the manner in which they were directed to perform the tasks of a sales consultant and were supervised overall in the performance of their work, as well as indirectly through the suggested use of Metro scripts and instructions as to what they 'should' do,"
Judge Barnes rejected arguments that the sales representatives were free to enter into either an employment agreement or independent contractor agreement as they chose. It was found that the consequences were not adequately explained to the representatives and Judge Barnes noted the inequality in the bargaining positions of the representatives as compared to the company. In particular Judge Barnes referred to the job advertisements, which she said lured the representatives into thinking they were to enter into an employment relationship.
Avoid FWO Prosecutions
Act on any correspondence or warnings received from the FWO immediately.
If unsure, always obtain legal advice before entering into an independent contractor agreement.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
