The Fair Work Ombudsman has fined a Sydney-based cleaning company $447,300 for underpaying workers in sham contract arrangements.
McDonald Murholme Principal Andrew Jewell discusses the importance of regularly reviewing the nature of contractual arrangements with workers.
See the below article for more information.
Sydney company ordered to pay $447,300 for underpaying workers but says it will challenge the penalties – SmartCompany
The Federal Court has handed down penalties of $447,300 and ordered 49 workers be back-paid $223,000 in a case involving a Sydney-based facility management company that the Fair Work Ombudsman has described as one of its most complex litigations to date
However, the company says it intends to challenge the penalties.
On May 24, Federal Court Justice Anna Katzmann handed down a decision on compensation, penalties and costs after finding in August 2016 that Grouped Property Services and its current and former director were involved in failing to adhere to minimum employment standards and not paying awards and entitlements to workers, in addition to other breaches of the Fair Work Act.
Grouped Property Services denied the claims, and “it disputed that it was the employer of any of the employees in respect of whom the allegations had been made, claiming that they were either independent contractors or employees of another company established by the Pucci family — National Contractors Pty Limited,” according to Justice Katzmann’s decision.
But the Federal Court decided the staff members Group Property Services had insisted were independent contractors were in fact employees of the company. Justice Katzmann’s decision includes orders for the company to pay $370,000 in penalties, and for $223,244 in backpay to be given to 49 employees for underpayments during between 2011 and 2013.
It also includes penalties of $74,300 for the company’s former owner-operator Rosario Pucci, and $3000 in penalties for company’s current owner and sole director Enrico Pucci.
Fair Work Ombudsman Natalie James said in a statement today that freezing orders obtained against the company in 2014 will “also play a critical role in ensuring these workers receive their unpaid wages and the court penalties are paid”.
However, speaking to SmartCompany this morning, Enrico Pucci says Grouped Property Services still believes the workers, who were employed to do work through labor-hire company National Contractors Pty Ltd, are not employees of the Grouped Property Services.
Pucci maintains the staff in question were clearly not employed by Grouped Property Services, and all their paperwork including group certificates show this.
The business is currently seeking legal advice about challenging the penalties, which Pucci tells SmartCompany are “uncommercial”.
Independent contractors vs employees
Workplace lawyer Peter Vitale tells SmartCompany that over the years, a significant body of case law has been developed around when a staff member is an independent contractor and when they are an employee.
He says the courts consider a number of elements when deciding how a worker should be classified, and these cannot be overridden by what an employee or their employer labels the working relationship.
“The case law over a very long period of time has made very clear that just because the parties might call the relationship a contractor relationship, that doesn’t mean that is what it is,” he says.
SME owners should keep in mind that a court will look at the amount of control the worker has over their activities, whether the employer gives directions to the worker or if they are left to complete their own projects, and whether the individual engaged in the work provides their own tools.
“The important take out is it’s all a question of degrees — there’s no clear line that employers are able to rely on,” Vitale explains.
However, there are some simple questions small business owners would benefit from asking to prevent disputes being raised in future.
“You’re looking at are you paying them for a result, or are you paying them for the amount of time they spend working,” he says.
Principal at McDonald Murholme Andrew Jewell agrees there are a number of factors that get taken into consideration, but says the courts will consider whether a worker is “conducting their own business” or not when deciding if they are a genuine contractor.
SMEs should take care to regularly review the nature of their relationships with workers, Jewell says, to make sure nobody who is initially brought on as a contract worker starts to act like an employee down the line.
“I think businesses can fall into a bit of a trap where they might start out with a contract relationship, that might in the eyes of the law turn into an employment relationship. Any sort of contractor who is engaged and it goes over the three- to six-month period, perhaps review that,” he says.
Reference: ‘Sydney company ordered to pay $447,300 for underpaying workers but says it will challenge the penalties’, Smart Company, 8th June 2017.