A company has been fined $100,000, and an individual director a
further $24,000, for using an artificial triangular arrangement to
avoid minimum entitlements under the Fair Work Act.
The starting position is clear: the Fair Work Act
prohibits sham contracting. That is, an "employer" must
not misrepresent employment as an independent contracting
arrangement when in fact the nature of the arrangement and work
they are performing is more consistent with an employee.
The reason? Employees are entitled to protections under the
Fair Work Act including minimum wages and leave
entitlements, or a loading to compensate them for the absence of
In Fair Work Ombudsman v Australian Sales & Promotions
Pty Ltd & Anor, the Court found that ASAP had engaged a
fundraiser – whose role was to solicit donations for
charities from members of the public – on a daily rate plus
commission. The fundraiser was not a genuine volunteer, nor was
ASAP a charity.
The fundraiser was required to obtain an ABN, invoice for his
services to an entity related to ASAP, and was also required to pay
for public liability insurance.
ASAP also required the fundraiser to work Monday to Friday from
8am to 5pm, directed him as to locations at which he would perform
work, and regularly contacted him to provide directions and
instructions and to check on his whereabouts and progress. In
short, he was subject to the day to day direction and control of
The pay deal was a daily rate of $50, plus commission. Of
course, commission is at risk. The fundraiser was receiving
considerably less than he would have received as an employee. The
Court found that ASAP had contravened a number of further
obligations under the Fair Work Act including not paying a
casual loading and not complying with its record keeping
In a staggering turn of events, it transpired that ASAP had been
pinged for this very conduct before and prosecuted in 2012. Indeed,
it seems that the interposed entity – an attempted labour
hire arrangement – may have been a deliberate device in
response to the 2012 prosecution.
Prior to the hearing, ASAP and its sole director co-operated
with the Fair Work Ombudsman, and repaid the underpayment. However,
that didn't help them. In dishing out significant penalties,
the Court noted "persons should understand that attempting
to evade the minimum employment conditions provided by the FW Act
by contriving to make employees independent contractors can have
serious financial consequences of an adverse kind".
A further tip for young players? The Fair Work Ombudsman is
increasingly flexing its muscle on the accessorial liability
provisions. Individuals involved in contraventions beware.
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.
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An employer's duty is very high and can include engaging experts to inspect things such as stairways for latent defects.
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