The Fair Work Ombudsman has cracked down on yet another sham contracting case, with businesses in Adelaide fined a total of $36,630 for improperly categorising employees and then underpaying them.
Two separate Adelaide businesses have been fined. Michael Wright, who owns Labour Contracting Solutions, has received a personal fine of $5,940 while his company has been fined $14,850.
The Ombudsman said Wright was working for Daryl Lenkic, who owned Blue Steel Corporation which operated a pretzel fast food outlet. Lenkic has been fined $2,640 and his company $13,200.
Get business news first
Sign up to SmartCompany’s daily newsletter
In 2007-08, the FWO said Lenkic hired Wright and Labour Contracting Solutions to employ staff for his fast-food outlet.
It was found two teenage girls had been hired, but Wright classified them as “independent contractors” and then paid below Award rates.
In a statement, Ombudsman Nicholas Wilson said the case wasn’t just misclassification – the employer intentionally claimed the girls were independent contractors.
“It is difficult to see how any employer in such a situation could believe that it was lawful and appropriate to represent to such teenage workers that they are self-employed and are conducting their own businesses,” he said.
The FWO found the girls performed work that could be deemed as employee responsibilities, including food preparation, customer service and cleaning duties.
“The court found that Wright and the labour-contracting companies had used a contracting system that was not suitable for use with minors,” it said.
“Wright, Lenkic, Labour Contracting Solutions and Blue Steel Corporation have admitted the conduct breached the sham contracting provisions of workplace laws because the teenagers were not self-employed contractors running their own businesses and should have been classified as employees.”
Wilson said the case provides a warning for SMEs, “that sham contracting is a serious matter and will not be tolerated”.
The Fair Work Ombudsman has been cracking down on sham contracting, including a number of recent cases.