Fair Work Ombudsman v Quest South Perth Holdings Pty Ltd 
Ms Best and Ms Roden were employed as housekeepers by Quest
South Perth Holdings Pty Ltd (Quest) in their
business of providing serviced accommodation. Quest later entered
into a labour hire agreement (the Agreement) with
Contracting Solutions Pty Ltd (Contracting
Solutions) that purported to employ Ms Best and Ms Roden
as independent contractors.
Following the Agreement both Ms Best and Ms Roden continued to
perform precisely the same work in precisely the same manner as
they had always done as housekeepers for Quest, however Quest
represented to them that they were now independent contractors who
were employed by Contracting Solutions.
The Fair Work Ombudsman brought a proceeding in the Federal
Court claiming, among other things, pecuniary penalty orders
against Quest for contraventions of s 357(1) of the Fair Work Act
2009 (Cth). Section 357 seeks to prevent an employer from
misrepresenting an employment relationship as a contract for
services with an independent contractor (often referred to as sham
Contravention of s 357
The previous, more constrained position, as applied by the Full
Court of the Federal Court of Australia in this matter, was that to
contravene s 357 an employer must mischaracterise the contract of
employment that exists between the employer and the employee
"as a contract for services between the employee and the
employer." This limited the application of the section to
mischaracterisation of arrangements only between the employer and
Here, the mischaracterisation occurred between Quest, as a
purported third party business, and the employees, thus arguably
falling outside the scope of s 357.
The High Court of Australia (HCA) set aside the
decision of the Full Court of the FCA and held that contravention
of s 357 extends to cover connected entities and held that in this
situation it operated to protect employees from sham
The HCA also held that Ms Best and Ms Roden were note
independent contractors and that they remained employees of Quest
under implied contracts of employment. HCA remitted determination
of penalties to the FCA.
Key learnings from this decision
Third parties assisting former
employers in contracts for services with purported independent
contractors are now at risk of contravening the Fair Work Act 2009
Penalties can be imposed for breaches
of the Fair Work Act 2009 (Cth). Penalties are currently AUD 54,000
for a body corporate and AUD10,800 for an individual per
An employee that refused a reasonable offer of settlement was ordered by the FWC to pay his ex-employer's legal costs.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).