Quack, quack – sham contracting just keeps coming back!
Posted on January 29, 2015
In The Director of the Fair Work Building Industry Inspectorate v Robko Construction Pty Ltd & Anor [2014] FCCA 2257, yet another employer has been found liable for breaching the sham contracting provisions of the Fair Work Act 2009 (the Act).
Robko Construction Pty Ltd (Robko) carried on business in the building and construction industry, with Everette Robbins being the company’s sole director.
In November 2010, Rebecca Simmons responded to an employment advertisement placed by Robko for an Excavator Operator. During their preliminary discussions Mr Robbins raised the possibility of engaging Ms Simmons as an independent contractor, however she rejected this idea saying that she “needed regular work”. Mr Robbins subsequently offered the role to Ms Simmons on a full-time basis with a pay rate of $30 per hour, plus penalty rates, and her employment commenced on 11 November 2010.
In early 2011, there were a number of occasions when Mr Robbins told Ms Simmons that there was no excavation work for her to do. Ms Simmons took some annual leave. However, because she had only been working for Robko for a short period of time, she soon ran out. This caused Mr Robbins some pressure as the Building and Construction General On-Site Award 2010 required Robko to pay Ms Simmons whether there was work to do or not.
On 22 February 2011, Ms Simmons was provided with a 12-page document on Robko letterhead titled “Contract for Services”. She was also handed a letter which explained:
“Robko does not have enough work to keep you employed as a full time employee…
We would like to continue to utilise your labour, however, it would have to be on a sub-contractor basis, working on an ABN, as from Monday 28th February.”
Ms Simmons rejected this proposal. As a result, later that day, her employment was terminated with 1 days’ notice.
Leaving aside the inadequate provision of notice (an additional breach of the Act which formed part of this case), the Fair Work Building Inspectorate commenced proceedings against both Robko and Mr Robbins in his personal capacity for breaching the sham contracting provisions of the Act.
Section 358 of the Act prohibits an employer from dismissing, or threatening to dismiss an employee in order to engage the individual as an independent contractor to perform the same, or substantially the same, work under a contract for services.
We have previously written about the Court’s approach to determining whether a worker is truly an employee or an independent contractor: “…the parties cannot create something which has every feature of a rooster, but call it a duck and insist that everybody else recognise it as a duck” (Re Porter). This is precisely what Robko and Mr Robbins attempted to do in the current case.
Judge Simpson of the Federal Circuit Court found that:
“Mr Robbins, on behalf of Robko, was doing exactly what s.358 of the Act was designed to prevent… The fact that the respondents’ unlawful purpose was not ultimately achieved (ie Ms Simmons did not enter into an independent contract with Robko) does not need to be established for the case against Robko to be made out.”
To sum up, there is no trick to the sham contracting provisions of the Act: if it is found that an employer has engaged or re-engaged a worker as a contractor, but for all intents and purposes that worker is actually an employee, you can expect that liability and penalties will flow.
If you require advice in relation to the status of your employees or contractors, please contact a member of Lynch Meyer’s Workplace Relations team.
