Employers be warned: Record fine for sham contractor arrangement

The Federal Circuit Court has imposed a record $238,920 penalty on a company providing an airport shuttle service from Newcastle to Sydney airport, for underpaying its drivers. 

Interestingly, the Fair Work investigation arose not from an employee complaint, but as part of a national compliance campaign focussed on sham contracting. The penalty imposed was made up partly of breaches relating to misrepresentation of employees as contractors, and partly for failing to meet award requirements.

The employer in this case was the owner of the vehicles being driven, and had a high degree of control over the work being done. The Court also noted that the company had a history of being challenged on its classification of its workers, and that the Fair Work Ombudsman had issued a letter of caution in 2011.

We have previously published information about the crack-down on sham contracting and suggested tips for employers to classify their workers properly.

This recent decision sends a loud and clear signal that the courts will penalise employers where sham contracting arrangements are found to be in place. In light of this and other recent decisions about this matter, employers should ensure they are well-informed about their obligations and make every attempt to classify and treat their workers according to the law.

Christine Broad, Solicitor, BlandsLaw

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