The High Court has found a former accommodation provider in Western Australia breached sham contracting laws by trying to classify two employees as independent contractors.
The Fair Work Ombudsman took Quest South Perth Holdings to the Federal Court back in 2011 over allegations it was mischaracterising the employment of two housekeepers, Margaret Best and Carol Roden.
Get business news first
Sign up to SmartCompany’s daily newsletter
The Federal Court, along with the Full Court of the Federal Court, dismissed these claims.
However the employment watchdog appealed to the High Court, which this week ruled in its favour.
The High Court found Quest South Perth Holdings engaged in a “triangular contracting” arrangement.
This involved a separate labour hire business engaging the two housekeepers on behalf of Quest South Perth Holdings, despite the fact the two employees had worked for the accommodation provider for some time.
“Ms Best and Ms Roden continued to perform precisely the same work for Quest in precisely the same manner as they had always done,” the High Court ruled.
“In law, they never became independent contractors. At the time Quest represented that they were performing work for Quest as independent contractors of Contracting Solutions, they remained employees of Quest under implied contracts of employment.”
This is not the first time the courts have ruled against sham contracts
Andrew Douglas, principal at Macpherson Kelley, told SmartCompany this case is an important decision for businesses to familiarise themselves with.
Douglas says this is not the first time the courts have ruled against so-called sham contracts.
“The High Court has said ‘no’ to employers using employment devices to disguise a true underlying employment relationship to obtain financial and operational flexibility for the business,” Douglas says.
“This is the second decision in a matter of months where Australian courts have vigorously defended employee entitlements and penalised employers who seek to deploy methods of people engagement subterfuge to reduce employee entitlements.”
Quest South Perth Holdings no longer operates the Quest serviced apartments in Arlington.
Quest South Perth Holdings could not be contacted for comment.
Never miss a story: sign up to SmartCompany’s free daily newsletter.