FWBC successful in first Qld sham contracting case

Fair Work Building & Construction has secured an $11,800 penalty in its first sham contracting proceeding to be filed in a Queensland court.

The Federal Magistrates Court ordered building company, Supernova Contractors Pty Ltd (Supernova) and its director, Steven Long, to pay penalties of $9,990 and $1980 respectively for misrepresenting to an employee that he was an independent contractor.

The parties had signed an agreed statement of facts in which Supernova and Mr Long admitted to contravening s357(1) of the Fair Work Act 2009 (FW Act).

FWBC Chief Executive Leigh Johns said the relationship was a contract for casual employment, and not a contract for service, as Mr Long had represented to the 18-year-old worker.

“The purpose of s357(1) of the FW Act is prevent sham contracting – a practice which involves employers disguising an employment relationship as an independent contracting relationship,” Mr Johns said.

“This practice allows employers to avoid paying payroll tax, workers’ compensation and employee entitlements. Workers are also denied protections such as sick, holiday and long service leave, public holidays, maximum weekly hours and unfair dismissal rights.

“This judgment should encourage anyone with concerns or allegations regarding sham contracting to bring them to FWBC. We will fully investigate and prosecute if warranted.”

Mr Long represented to the employee that he would need to be an independent contractor, get an Australian Business Number and invoice Supernova for his work.

However, the employee was not an independent contractor because he used Supernova’s tools, worked solely for Supernova, did not operate a company himself or advertise his services and did not have his own insurance or make contributions towards superannuation.

In his judgment, Federal Magistrate Jarrett stated:

“…there is a strong argument that general deterrence is particularly important in cases such as this. For the reasons set out above there is a significant risk that an employee who has been misled as to the nature of his or her legal relationship with their employer might be significantly prejudiced.”

Judgment, point 27

FM Jarrett published his reasons on 8 November 2012. He handed down the penalty on 9 October 2012.