Sham Contracting Update – Class Actions
A new class of class actions is hitting the Australian courts and creating headaches for putative employers. The Federal Court has four class actions now where employee entitlements are being claimed for contracted workers using the sham contracting and general protections provisions of the Fair Work Act.
It was only 3 years ago that we reported on the High Court cutting through an interposed labour hire company to impose liability on a “true employer”:
In the case, the High Court said that two contracted housekeepers were really employees of Quest serviced apartments, making Quest liable for the penalty rates that they had tried to avoid by paying the staff a higher flat hourly rate as independent contractors through a third party labour hire company.
Since then, it seems that contracting has proceeded apace. The problem is that “Sham” contracting is prohibited. It occurs when an employer misrepresents employment as independent contracting, usually to avoid minimum employee entitlements to hourly rates, overtime, penalty rates, allowances, sick leave and annual leave.
In the 2015 High Court Case, the court said that parties "cannot create something which has every feature of a rooster, but call it a duck and insist that everybody else recognise it as a duck. Employees in disguised employment relationships…should have appropriate remedies available to them".
Roosters can’t fly but some ducks can, and now Ms Catherine Duck has started a class action against Air Services Australia on behalf of ground staff supplying their services at Australian airports.
The issue is whether two Enterprise Agreements cover Ms Duck and the other staff included in the case. The case is launched under the class action provisions of the Federal Court Act (Part IVA) and could cover up to 1200 persons. Thus far, 76 members have signed a funding agreement, and the Federal Court ordered that the case proceed on a common fund and open class basis, so that the applicant can keep getting people to join the case and they will share the costs unless a member of the class opts out of the litigation.
Chugging Class Action
A class action case has also been started by Mr Bywater against Appco Group Australia,a marketing company that contracted him and 900 other individuals to engage in direct marketing to the public. In March last year Bywater successfully held off an attempt by Appco to have his class action struck out and his case is listed for further case management this March:
Union Chugging “Class” Action
Another two cases are both launched by a trade union, the National Union of Workers (NUW), relying on the general protections in the Fair Work Act. The NUW has launched cases for sales and charity fundraisers against Aida Sales and Marketing and Credico Australia. It is thought the action might extend to up to 1500 workers and, if successful, recover up to $150 million in unpaid entitlements. The NUW relies on breaches of the Fair Work Act under section 539.
It will be an interesting year if these cases get heard. The combined fire power of individuals may make some new law to put employers on guard about trying to get around workplace protections. In the meantime, the gig economy continues to grow, in some cases, providing individual contractors with entitlements inferior to those that they would enjoy under employment laws. Employers, get your house in order. Ms Duck and class flock is winging her way in your direction… You don’t want to be a rooster crowing today about your profits built on workforce efficiencies to be found tomorrow as a feather duster, hopelessly looking for solutions to your financial problems.
Partner at CML Lawyers