A New South Wales transport business has been fined a record-breaking $286,704 for sham contracting, in the harshest crackdown yet in the regulator’s crusade against businesses which are misclassifying employees.
The Newcastle-based company Happy Cabby and its operator and sole director, Graeme Paff, have been fined $238,920 and $47,784 respectively for underpaying seven workers $26,082.
The seven employees worked as shuttle bus drivers, taking passengers between Newcastle and Sydney airport, and were misclassified by the company as contractors.
Get daily business news.
The latest stories, funding information, and expert advice. Free to sign up.
The total fine imposed by the Federal Circuit Court in Sydney is a record for the FWO nationally.
In January 2011 the FWO issued Happy Cabby with a letter of caution, but the misclassification and consequent underpayments continued between January 2011 and November that year.
Paff admitted his wrong-doing, but in what the court considered a likely move to try and avoid financial consequences for his actions, earlier this year he transferred the shuttle component of the business to another company he controls, Happy Cabby Shuttles.
Prior to this case, the classification of the workers as employees had been confirmed by the Australian Taxation Office and a decision by Administrative Appeals Tribunal.
Judge Rolf Driver found in his judgement of the case high penalties were appropriate because of a history of prior similar conduct and because, in this case, Paff and his company had been “put on notice” on multiple occasions.
“The Company and Mr Paff could have been in little doubt of the true legal position following the AAT proceedings, and any lingering doubt should have been removed by the Letter of Caution. Their refusal thereafter to change their position was deliberate, based on wilful blindness,” Driver said.
SmartCompany contacted Happy Cabby, but received no response prior to publication.
M+K Lawyers Partner Andrew Douglas told SmartCompany the deliberate nature of the action resulted in the high penalties.
“Once you’re put on notice by the FWO that the method of engagement being the use of contractors is wrong and you’re paying them less than they’d otherwise be paid, this becomes a fairly wilful act.
“Clearly the court found unequivocally what he did was wrong,” he says.
Douglas says Paff “buried his head in the sand”, effectively “closing his eyes” to the wrongdoing.
Record-keeping and pay slip laws were also breached, which resulted in additional concerns about the workers safety.
“There is a well-established link between fatigue and poor road safety; as a result, there is significant public interest in keeping track of the hours worked by drivers of public vehicles to ensure that the drivers do not undertake excessive shift lengths and are granted appropriate breaks to ensure they are alert and responsive when in the road,” Driver found.
Newly appointed Fair Work Ombudsman Natalie James said in a statement this case highlights the serious nature of sham contracting.
“In cases where we suspect sham contracting is occurring, we look behind the often carefully drafted legal documents to determine what the correct classification for workers is under workplace laws.”
“A business operator cannot automatically convert an employee who is clearly not operating their own business into an independent contractor simply by directing the worker to obtain an Australian Business Number,” she says.
Happy Cabby is just one of many transport businesses to be targeted by the FWO this year, as the agency continues its crackdown on the industry.
Earlier this month a Victorian transport business, Foure Mile, was fined $42,075 for underpaying a truck driver and then restructuring the business to avoid paying it back.
In June this year the FWO launched legal action against Doble Express Transport for allegedly underpaying three employees in Dubbo and Orange almost $250,000.