In the case of Fair Work Ombudsman v Happy Cabby Pty Ltd
& Anor  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
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)  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
 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'
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
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.
Kemp Strang has received acknowledgements for the quality of
our work in the most recent editions of Chambers & Partners,
Best Lawyers and IFLR1000.
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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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