August 2013
A company and its director have been fined more than $286,000 for breaches of the Fair Work Act, stemming from the incorrect classification and payment of its employees as independent contractors.
The fines are a record for Fair Work Ombudsman (FWO) proceedings in NSW and is one of the largest ever obtained by the FWO nationally.
Background
Happy Cabby Pty Ltd was the operator of a business offering airport shuttle services. The FWO commenced proceedings against Happy Cabby for contraventions of the Fair Work Act relating primarily to Happy Cabby's incorrect classification of its bus drivers as independent contractors rather than casual employees.
Decision
Happy Cabby admitted to 17 contraventions of the Fair Work Act relating to sham contracting, breaches of a modern award and record keeping/pay slip requirements. Its director also admitted his involvement in the 17 contraventions under the "involvement in a contravention" personal liability provisions of the Fair Work Act (he was personally fined approximately $48,000).
The Federal Circuit Court heard that Happy Cabby continued to classify and pay its employees as independent contractors in breach of the sham contracting provisions of the Fair Work Act, despite being issued with a letter of caution by the FWO and determinations made by the Australian Taxation Office, Administrative Appeals Tribunal and Fair Work Australia.
The Court found that Happy Cabby's refusal to acknowledge the drivers as employees was deliberate and based on wilful blindness and further that the Court will not tolerate "attempts to disguise employment relationships and thus deny employees their required minimum entitlements".
Happy Cabby was also ordered to pay its employees approximately $26,000 plus interest in underpayments. The Court stated that had a full set of records been available, the amounts owing to drivers could have been significantly higher.
Lessons for business
While there were aggravating factors resulting in the record fines, the case serves as an important reminder to businesses to correctly engage and remunerate employees and the perils associated with sham contracting arrangements.
There is no single test to determine whether a relationship is truly one of employment or that of an independent contractor. The courts look at a range of factors to determine the issue and while what the parties call themselves and the contractual arrangements entered into are relevant, they are not determinative. As the Court has previously held:
"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".
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