The operators of a Queensland real estate agency have been fined $27,720 by the Federal Circuit Court in Brisbane for paying a salesman just $100 for five months’ work.
Lovers of Property, which trades as Property Lovers, has been fined $19,800 and company directors and part-owners William Fraser and Diana Cartwright, both of Morayfield, have each been fined $3960.
The Fair Work Ombudsman investigated Property Lovers after it failed to pay an employee a total of $12,440 in wages and entitlements he was entitled to for five months’ work in 2010.
The underpayment was the result of Property Lovers “inadvertently” misclassifying the salesman as an independent contractor, rather than as an employee, and paying him on a commission-only basis.
This led to the salesman, who was in his late 50s and had no prior experience in the real estate industry, performing five months work for just $100, which he received in recognition of his assistance in concluding a sale.
His assigned tasks included letterbox drops, door-knocking, answering phone calls and offering free property appraisals and his usual rostered hours were 8.30am to 5pm, Monday to Saturday.
The acting Fair Work ombudsman, Michael Campbell, said the case sends a message that failing to ensure workers are classified and paid correctly is a serious matter.
“Successful legal actions such as this also benefit employers who are complying with workplace laws because it helps them to compete on a level playing field,” Campbell said in a statement.
Employment lawyer Peter Vitale told SmartCompany the arrangement Property Lovers had can be characterised as an “Odco” arrangement following the Odco High Court case which considered whether labourers were contractors or employees.
“Odco is a model for setting up an arrangement where people who do the work are not employees of anyone, those arrangements are still legitimate in the right circumstances. But in a case where someone is clearly working under the direction of the principal, then it is unlikely that trying to structure it as an Odco arrangement is going to be successful,” Vitale says.
He says employers thinking of converting employees to contractors probably need to think about it again.
“It’s a strategy that rarely works and the reason it rarely works is the courts will always look at the substance of the relationship and not simply rely on how the parties describe it,” Vitale says.
“The reality is you can’t fit a square peg into a round hole and if someone is an employee all the clever arrangements in the world won’t change that.”
Vitale warns employers need to be conscious the relationship they are entering into might still be an employment relationship and they should exercise care before they enter those arrangements.