Employment legislation can be hard to get your head around, especially if you’re an SMB hiring a variety of workers under different conditions.
However, it’s important to make sure each person you engage is working according to the relevant contract and is being paid accordingly, or risk being slapped with a hefty fine.
This week a Newcastle-based transport business was fined in excess of $280,000 for engaging in ‘sham contracting’ – whereby an employer incorrectly classifies an employee as an independent contractor, avoiding mandatory pay rates and other entitlements.
Fair Work Ombudsman Natalie James, said the misclassification of employees as contractors is an issue that persists across a range of industries.
“In many cases the misclassification is inadvertent and the result of business operators’ lack of awareness of workplace laws. However, in a minority of cases, the misclassification amounts to sham contracting,” James said.
Graeme Thomas Paff, operator of Happy Cabby Pty Ltd, admitted he was involved in sham contracting by classifying seven shuttle bus drivers as independent contractors despite knowing full-well they were employees.
This misclassifying of the drivers meant they were paid fixed rates per airport run to Sydney, regardless of the time taken to complete the trip or time spent waiting for passengers at the airport. The drivers were underpaid, missing out on minimum wages and weekend, overtime, and public holiday penalty rates, as well as superannuation and insurance coverage.
The fines handed down this week are a record for a Fair Work Ombudsman legal action in NSW, and one of the highest ever nationally.
In his judgement, Judge Driver stated that the fines should “deter other employers for not paying their workers for all hours worked.”
James said the case highlights the fact that sham contracting is taken very seriously because it denies employees their workplace rights and entitlements.
Though employment classifications can be difficult to understand, there are a variety of tools available to help business owners make sure they’re hiring the right way.
Fair Work explains that an independent contractor is someone who is self-employed and provides services to clients. More information on the differences between employees and contractors can be found here.
